Q1 2025 TAL Education Group Earnings Call
Yeah.
Unknown Executive: Ladies and gentlemen, good day and thank you for standing by.
Operator: Ladies and gentlemen, good day, and thank you for standing by. Welcome to TAL Education Group's Fiscal 2025 First Quarter Earnings Conference Call. Please be informed that today's conference is being recorded.
Ladies and gentlemen, good day. Thank you.
Speaker Change: So first standing by and welcome to tell education groups fiscal 'twenty 25 first quarter earnings Conference call.
Unknown Executive: Welcome to TAL Education Group's fiscal 2020-25 first quarter earnings conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be informed that today's conference is being recorded.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: After the Speakers' presentation, there'll be a question and answer session.
Speaker Change: Please be informed that today's conference is being recorded.
Fang Liu: And I'd like to hand a conference of it to Ms. Fang Liu, Investor Relations Director. Thank you. Please go ahead. Thank you all for joining us today for TAL Education Group's first quarter fiscal year 2025 earnings conference call. The earnings release was distributed earlier today, and you may find a copy on the company's IR website, also the newswires. During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer, and Mr. Jackson Ding, Deputy Chief Financial Officer. Following the prepared remarks, Mr. Peng and Mr. Ding will be available to answer your questions.
Speaker Change: I'd now like to hand, the conference over to MS phone Lille Investor Relations director. Thank you. Please go ahead.
Operator: Thank you all for joining us today for TAL Education Group's First Quarter Fiscal Year 2025 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 newswire.
Speaker Change: Thank you all for joining us today for Tau Educational Corp, first quarter fiscal year 2025 earnings conference call.
Speaker Change: The earnings release was distributed earlier today and you may find a copy on the company's IR website or through the newswires.
Operator: During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer, and Mr. Jackson Ding, Deputy Chief Financial Officer. Following the prepared remarks, Mr. Peng and Mr. Ding will be available to answer your questions. 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 our public filings with the FCC.
Speaker Change: During this call you will hear from Mr. Alex <unk>.
Speaker Change: President and Chief Financial Officer.
Speaker Change: Mr. Jackson thing Deputy Chief Financial Officer.
Speaker Change: Following the prepared remarks, Mr. Palmer at Mr team will be available to answer your question.
Fang Liu: Before we continue, please note that today's discussion will contain four looking statements made under the safe harbor provisions of the U.S. private securities litigation reform act of 1995. Four 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 our public filings with the FCC. For more information about these risks and uncertainties, please refer to our filings with the FCC.
Before we continue.
Speaker Change: Please note that today's discussion will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 90 95.
Speaker Change: Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Speaker Change: Potential risks and uncertainties include but are not limited to those outlined in our public filings with the FCC.
Speaker Change: For more information about these risks and uncertainties. Please refer to our filings with the FTC.
Fang Liu: Also, our earnings release and this call include 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.
Speaker Change: Also our earnings release and this call include discussions of certain non-GAAP financial measures.
Speaker Change: You should refer to our earnings release, which contains a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.
Alex Peng: I'd like to turn the call over to Mr. Alex Peng. Alex, please go ahead.
Operator: For more information about these risks and uncertainties, please refer to our filings with the FCC. Also, our earnings release and this call include discussions of certain non-gap financial measures. Please refer to our earnings release, which contains a reconsideration of the non-gap measures to the most directly comparable gap measures. I'd like to turn the call over to Mr. Alex Poon. Alex, please go ahead.
Mr. Alex: I'd like to turn the call over to Mr. Alex.
Alex: Alex Please go ahead.
Zhuangzhuang Peng: Thank you, Fang. I'd also like to thank all of you for participating in today's conference call. During this call, we'll discuss our financial performance and business progress and review some key results for the first quarter of fiscal year 2025. Following that, I'll briefly update you on our business strategy. So throughout the fiscal quarter, we remain dedicated to operating and managing our core business lines while actively exploring new initiatives and capitalizing on emerging opportunities.
Alex Peng: Thank you, Phan. I'd also like to thank all of you for participating in today's conference call. During this call, we'll discuss our financial performance in business progress and review some key results for the first quarter of fiscal year 2025. Following that, I'll briefly update you on our business strategy outlook. Throughout the fiscal quarter, we remain dedicated to operating and managing our core business lines while actively exploring new initiatives and capitalizing on emerging opportunities. First, we further refined our online and offline offerings within our learning services businesses to better meet user preferences. In the physical quarter, we further expanded our learning center network strategically for our pay you enrichment learning programs at the measured pace.
Alex: Thank you for them I'd also like to thank all of you for participating in today's conference call.
Alex: During this call, we'll discuss our financial performance and vessels progress and review some key results for the first quarter of fiscal year 2025.
Alex: Following that I'll.
Alex: Briefly update you on our business strategy outlook.
Alex: So thrilled the fiscal quarter, we remain dedicated to operating and managing our core business lines, while actively exploring new initiatives and capitalizing on emerging opportunities.
Zhuangzhuang Peng: First, we further refined our online and offline offerings within our learning services businesses to better meet user preferences. Our focus on product offerings and operational capabilities has resulted in sustained user value creation through our products and services. Our endeavor is reflected in feedback from our learners and their parents. For our content solutions, we are committed to continuously upgrading our hardware, software, and content of our learning devices to meet the needs of our users.
First we further refined our online and offline offerings, what's in our learning services businesses.
Alex: Better meet user preferences.
Alex: In the physical quarter, we further expanded our learning center network strategically for our pay you enrichment learning programs at a measured pace.
Alex Peng: Our focus on product offerings and operational capabilities has resulted in sustained user value creation through our products. Our endeavor is reflected in feedback from our learners and their parents and is also reflected by our operating metrics, such as retention rates. For our content solutions, we are committed to continuously upgrading our hardware, software, and content of our learning devices to meet the needs of our users. During the quarter, we remain focused on developing our learning device product offerings and go-to-market capabilities to serve more learners with our high-quality learning resources. We integrated learning content, AI technology, quality hardware and software into our content solutions to deliver better learning experiences for learners.
Alex: Our focus on product offerings and operational capabilities has resulted in sustained user value creation through our products and services.
Alex: Our endeavor is reflected in the feedback from our learners and their parents and is also reflected by our operating metrics such as retention rates.
Alex: Okay.
Alex: For our content solutions, we are committed to continuously upgrading our hardware.
Alex: Elsewhere and content of our learning devices to meet the needs of our users.
Zhuangzhuang Peng: During the quarter, we remained focused on developing our learning device product offerings and go-to-market capabilities to deliver better learning experiences for Learn. As our proprietary math GPT large language model evolved, as a result of our product capabilities, we've witnessed a steady level of user engagement for our learning devices on an expanded user base. Efforts such as the above are driving our financial growth. Our net revenues were 414.2 million U.S. dollars or 2.99 billion RMB for the quarter, representing year-over-year increases of 50.4% are non-GAAP income from operations, and non-GAAP net income attributable to TAL for the quarter, or $0.9 million US dollars and $29.6 million US dollars, respectively. TAL Education Group sponsored ADR Class A
Alex: During the quarter, we remain focused on developing our learning device product offerings and go to market capabilities to serve more learners with our high quality learning resources, we integrated learning content.
Alex: <unk> technology.
Alex: Quality of hardware and software into our content solutions.
Alex: Deliver better learning experiences for learners.
Alex Peng: As our proprietary math GPT-large language model evolves, the AI-driven features incorporated into our learning devices provide learners with accessible and reliable learning aids. As a result of our product capabilities, we've witnessed a steady level of user engagement for our learning devices on an expanded user base. Our learning devices empower children to engage in self-directed learning, enabling their personal development. Efforts such as the above are driving our financial growth, our net revenues, or $414.2 million US dollars, or $2.99 billion RMB for the quarter. Representing year-over-year increases of 50.4%, 50.4%, and 56.9% in US dollars and RMB terms respectively.
Alex: S. Our proprietary math GPT large language model evolves.
Alex: AI driven features incorporated into our learning devices provide learners with accessible and reliable learning AIDS.
Alex: As a result of our product capabilities.
Alex: We witnessed a steady level of user engagement far alerting devices on an expanded user base.
Alex: Our learning devices.
Alex: Power children's engage in self directed learning, enabling their personal depot.
Speaker Change: Efforts such as the above are driving our financial growth. Our net revenues were 414.2 million U S dollars or 2.99 billion RMB for the quarter Rep.
Speaker Change: Representing year over year increases of 34% 50.
Speaker Change: 54% and 56, 9% in U S dollar and RMB terms, respectively.
Alex Peng: Our non-GAAP income from operations, a non-GAAP net income attributable to tile for the quarter, or $0.9 million US dollars, and $29.6 million US dollars respectively.
Speaker Change: Our non-GAAP income from operations.
non-GAAP net income attributable to <unk> for the quarter or point 9 million U S dollars and $29 6 million U S dollars respectively.
Jackson Ding: So, with that overview, I will hand the call to Jackson for an update on some of the operational advancements we've made in our core business lines, and to review our financial performance for the first physical quarter. Jackson, please go ahead.
Speaker Change: So with that overview I will.
Speaker Change: The call to Jackson for an update on some of the operational advancements we've made in our core business lines.
Speaker Change: And to review our financial performance for the first physical quarter Jackson. Please go ahead.
Jackson Ding: Thank you, Alex. I'm pleased to share some details about the progress we made in the first quarter across our core business lines, including Pale, shares.com, and our learning devices. Please note that all financial data for the quarter are unobited.
Jackson: Thank you Alex.
Zhuangzhuang Peng: I'm pleased to share some details about the progress we made in the first quarter across our core business lines, including Payo, Shares.com, and our learning devices. Please note that all financial data for the quarter are unaudited.
Jackson: I am pleased to share some details about the progress we've made in the first quarter across all core business lines.
Speaker Change: Including payroll sure so dot com and our learning devices.
Jackson: Please note that all financial data for the quarter.
Jackson: Audited.
Jackson: Yeah.
Jackson Ding: I'll start with our learning services and others' business, which include a broad range of learning programs for customers. Learning services maintained its growth momentum in the first quarter of fiscal year 2025. Given by advancements in multiple product lines, this sector's revenue grew year-over-year. The largest revenue contributor within learning services and others remains our pay-o-small class offerings, which the thanked their growth trajectory. Pay-o's performance was predominantly attributed to enrollment growth as we expanded our offline learning center network. In response to customer demand and incorporation for the summer vacation period, we scaled our operational capacity during the first quarter while managing our operating efficiency.
Zhuangzhuang Peng: I'll start with our Learning Services and Others business, which includes a broad range of learning programs for customers. Learning Services maintained its growth momentum in the first quarter of fiscal year 2025. Driven by advancements in multiple product lines, this sector's revenue grew year over year. The largest revenue contributor within learning services and others remains our PAYO small class offerings, which sustains their growth trajectory. Feiyou's performance was predominantly attributed to enrollment growth as we expanded our offline learning center network in response to customer demand and in preparation for the summer vacation period. Efficiency indicators, such as retention rate and utilization rate, were relatively stable quarter over quarter.
Jackson: I'll start with our learning services and others business.
Jackson: Which include a broad range of learning programs for customers.
Jackson: Learning services maintained its growth momentum in the first quarter of fiscal year 2025.
Jackson: Driven by advancements in multiple product lines.
Jackson: This sector's revenue grew year over year.
Jackson: Sure.
Jackson: The largest revenue contributor within learning services and others remains our payroll small class offerings.
Which sustained growth trajectory.
Jackson: <unk> performance was predominantly attributed to enrollment growth as we expanded our offline learning Center network.
Jackson: Yes.
Jackson: In response to customer demand and in preparation for the summer vacation periods.
Jackson: We scaled our operational capacity during the first quarter, while managing our operating efficiency.
Jackson Ding: Efficiency indicators such as retention rate and utilization rate were relatively stable quarter over quarter. As for online enrichment learning, we have been refining our offerings by focusing on all content, user interaction, and engagement. By steadily introducing new online enrichment learning programs aimed at diverse user groups, we continue to create value for learners, providing them with the learning efficacy and experience they desire. Going forward, we'll continue to optimize our product offerings, elevate the user experience, and refine our operational efficiency.
Jackson: Efficiency indicators, such as retention rate and utilization rate.
Jackson: Were relatively stable quarter over quarter.
Jackson: Okay.
Zhuangzhuang Peng: As for online enrichment learning, we have been refining our offerings by focusing on our content, user interaction, and engagement by steadily introducing new online enrichment learning programs aimed at diverse user groups. We continue to create value for our learners, providing them with the learning efficacy and experience they desire. Going forward, we'll continue to optimize our product offerings, elevate the user experience, and refine our operational efficiency. Driven by our product development and go-to-market capabilities, In particular, At the same time, we introduce new SKUs, bringing users a wider range of learning device products. In May this year, we launched the XPAT Classic Model 2024, designed to offer a comprehensive and interactive learning experience and the hardware for overall operating performance.
Jackson: As for online enrichment learning, we have been refining our offerings by focusing on our content user interaction and engagement.
Jackson: By steadily introducing new online enrichment learning programs aimed at diverse user groups.
Jackson: We continue to create value for our learners, providing them with the learning efficacy and experience they deserve.
Jackson: Higher.
Jackson: Yes.
Jackson: Going forward, we will continue to optimize our product offerings.
Jackson: The user experience.
Jackson: And refine our operational efficiency.
Jackson: Okay.
Jackson Ding: Next is our content solutions business. Our learning devices business recorded year-over-year growth in this quarter, driven by our product development and go to market capabilities. In particular, we have continued to enrich our content and integrate additional AI features, creating value for users. At the same time, we introduced new SKUs, bringing users a wider range of learning device products. In May this year, we launched the Expat Classic Model 2024, designed to offer a comprehensive and interactive learning experience. Compared with the Expat Classic 2023, the upgraded Classic Model features a new version of hardware design, including features to protect users' vision and the hardware for overall operating performance.
Speaker Change: Next is our content solutions business.
Jackson: Our learning devices business recorded year over year growth in this quarter.
Jackson: Driven by our product development and go to market capabilities.
Okay.
Jackson: In particular.
Jackson: We have continued to enrich our content and integrate additional AI features creating value for users.
Jackson: At the same time, we introduce new Skus brainy users a wider range of learning device products.
Jackson: Okay.
Jackson: Yes.
Jackson: In May this year, we launched the ex Pat Classic model 2024.
Jackson: Designed to offer a comprehensive and interactive learning experience.
Jackson: Compared with the expat.
Jackson: <unk> 2023.
Jackson: Upgraded classic model features a new version of hardware design <unk>.
Jackson: Including features to protect users of mission.
Jackson: And the hardware for overall operating performance.
Jackson: Yes.
Jackson Ding: In the fiscal quarter, we also upgraded our Classic models with software across multiple use cases to bring users personalized learning experiences.
Zhuangzhuang Peng: In the fiscal quarter, we also upgraded our classic models with software across multiple use cases to bring users personalized learning experiences. With that overview, I would like to share our key financial results for the first fiscal quarter, an increase of 50.4% and 56.9% year-over-year, in U.S. dollar and RMB terms, respectively. Cost of revenue increased by 43.4% to 200 million U.S. dollars from 139.5 million U.S. dollars in the first quarter of fiscal year 2024. Gross margin increased to 51.7% from 49.3% for the same period last year.
Jackson: In the fiscal quarter, we also upgraded our classic models with software across multiple use cases to bring users personalized learning experiences.
Jackson Ding: With that overview, I would like to share our key financial results for the first fiscal quarter. Our net revenues were $414.2 million US dollars, or $2.99 billion RMB, an increase of 50.4% and 56.9% year over year in US dollar and RMB terms, respectively. The increase was attributable to the growth in both our learning services business and our counter-solutions business. The cost of revenue increased by 43.4% to $200 million US dollars from 139.5 million US dollars in the first quarter of fiscal year 2024. Non-GAAP cost of revenues, which excludes share-based compensation expenses, increased by 44.2% to $197.6 million US dollars from $137.1 million US dollars in the first quarter of fiscal year 2024.
Zhuangzhuang Peng: Selling and marketing expenses for the quarter were 122.4 million U.S. dollars. Selling and marketing expenses as a percentage of total net revenues decreased from 35.5% to 29.6% year-over-year. General and administrative expenses increased by 4.5% to 109.7 million U.S. dollars from 104.9 million U.S. dollars in the same period of last year. Non-GAAP general and administrative expenses, which exclude share-based compensation costs. Non-GAAP general administrative expenses as a percentage of total revenues decreased from 32.4% to 23.7% year-over-year.
Jackson: With that overview I would like to share our key financial results for the first fiscal quarter.
Speaker Change: Our net revenues were $414 $2 million or $2 99 billion RMB.
Jackson: An increase of.
Jackson: 54% and <unk>.
Jackson: <unk> 56, 9% year over year.
Jackson: In U S dollar and RMB terms, respectively.
Jackson: The.
Jackson: <unk> was attributable to the growth in both our learning services business and our content solutions business.
Jackson: Sure.
Jackson: Cost of revenue increased by 43, 4% to $200 million.
Jackson: $139 5 million U S dollars in the first quarter of fiscal year 2024.
Jackson: Sure.
Jackson: non-GAAP cost of revenues, which excludes share based compensation expenses.
Jackson: Increased by 44, 2% to 197 6 million U S dollars from $137 1 million U S dollars in the first quarter of fiscal year 2024.
Jackson Ding: Growth profit increased in the first quarter of fiscal 2025, rising by 57.6% year over year to 214.2 million US dollars from 135.9 million US dollars for the same period last year. Growth margin increased to 51.7% from 49.3% for the same period last year. Selling a marking expenses for the quarter were $122.4 million US dollars, representing an increase of 25.4% from 97.7 million US dollars for the same period last year. Non-GAAP selling and marketing expenses, which excludes share-based compensation expenses, increased by 30.8% to $118.1 million US dollars from $90.2 million US dollars for the same period last year.
Jackson: Okay.
Jackson: Gross profit increased in the first quarter of fiscal 2025, rising by 57, 6% year over year to $214 $2 million from a $135 $9 million for the same period last year.
Jackson: Gross margin increased to 51, 7% from 49, 3%.
Jackson: For the same period last year.
Jackson: Yeah.
Jackson: Selling and marketing expenses for the quarter were $122 4 million U S dollars.
Jackson: Presenting an increase of 25, 4%.
Jackson: $97 $7 million for the same period last year.
Jackson: non-GAAP, selling and marketing expenses, which excludes share based compensation expenses increased by 38% to $118 1 million U S dollars.
Jackson: 92 million U S dollars.
Jackson: For the same period last year.
Jackson Ding: Selling a marking expenses as a percentage of total net revenues decreased from 35.5% to 29.6% year over year. General and administrative expenses increased by 4.5% to $197 million US dollars from $104.9 million US dollars in the same period of last year. Non-GAAP general and administrative expenses, which excludes share-based compensation costs, increased by 10% year over year to 98.2 million US dollars from 89.2 million US dollars for the same period of last year. Non-GAP general administrative expenses as a percentage of total revenues decreased from 32.4% to 23.7% year-over-year. Total share-based compensation expense allocated to related operating costs and expenses decreased by 28.6% to $18.2 million in the first quarter of fiscal year 2025 from $25.5 million in the same period of last year.
Jackson: Okay.
Jackson: Selling and marketing expenses as a percentage of total net revenues decreased from 35, 5% to <unk>.
Jackson: 29, 6% year over year.
Jackson: General and administrative expenses increased by four 5% to $109 7 million U S dollars from $104 9 million in U S dollars in the same period of last year.
Jackson: non-GAAP general and administrative expenses, which exclude share based compensation costs.
Jackson: Increased by 10% year over year to $98 2 million U S dollars from $89 two many U S dollars for the same period of last share.
Jackson: Okay.
Jackson: non-GAAP general and administrative expenses as a percentage of total revenues decreased from 32, 4% to 23, 7% year over year.
Jackson: Yes.
Jackson: Okay.
Jackson: Total share based compensation expense allocated to related operating costs and expenses decreased by 28, 6% to eight.
Jackson: $18 $2 million in the first quarter of fiscal year 2025 from $25 $5 million in the same period of last year.
Zhuangzhuang Peng: Loss from operations was 17.3 million U.S. dollars in the first quarter of fiscal year 2025, compared with a loss from operations of US$57.8 million in the same period of last year, and a net loss attributable to TAL of 45.0 million U.S. dollars in the same period of last year. Non-gap net income attributable to TAL, which excludes share-based compensation expenses, was 29.6 million U.S. dollars compared to a non-gap net loss attributable to TAL of 19.5 million U.S. dollars in the same period of last year. Moving on to our balance sheet, as of May 2024, $1,196,000,000. That concludes the financial section.
Jackson Ding: Laws from operations was $17.3 million in the first quarter of fiscal year 2025 compared with a loss from operations of $57.8 million in the same period of last year. Non-GAAP income from operations, which excludes share-based compensation expenses, was $0.9 million US dollars compared with a non-GAAP loss from operations of $32.3 million in the same period last year. Net income attributable to Tau was $11.4 million US dollars in the first quarter of fiscal year 2025 compared to net loss attributable to Tau of $45.0 million in the same period of last year. Non-GAAP net income attributable to Tau, which excludes share-based compensation expenses, was $29.6 million US dollars compared to a non-GAAP net loss attributable to Tau of $19.5 million US dollars in the same period of last year.
Jackson: Yes.
Jackson: Loss from operations.
Jackson: $17 3 million U S dollars in the first quarter of fiscal year 2025.
Jackson: Compared with a loss from operations.
Jackson: $57 8 million U S dollars in the same period of last year.
Jackson: Yeah.
Jackson Ding: Moving on to a balance sheet as of May 2024, we had $2.2 million in cash and cash equivalents, $1.196 million in short-term investments, and $355.8 million in current and non-current restricted cash. Our deferred revenue balance was $641.9 million US dollars as of the end of the first fiscal quarter.
Jackson: Okay.
Jackson: Moving on to our balance sheet.
Jackson: As of May 2024.
Jackson: We had 2 billion $222 6 million in cash and cash equivalents.
Jackson: $1.196 billion.
Jackson: Short term investments and $355 8 million and current and non current restricted cash.
Jackson: Our deferred revenue balance.
Jackson: Was.
Jackson: $641 9 million U S dollars.
Jackson: As of the end of the first fiscal quarter.
Jackson Ding: Now, turning to a cash flow statement, net cash provided an operating activities for the first quarter of fiscal 2025 was $246.8 million US dollars.
Jackson: Now turning to our cash flow statement net cash provided in operating activities for the first quarter of fiscal 2025 was.
Jackson: $246 8 million U S dollars.
Jackson Ding: That concludes the financial section.
Jackson: Okay.
Jackson: That concludes the financial section.
Alex Peng: On now, hand the back call back to Alex to briefly update you on our business outlook. Alex, please go ahead.
Jackson: I'll now hand, the call back to Alex to briefly update you on our business outlook. Alex. Please go ahead.
Alex Peng: Thanks, Jackson.
Zhuangzhuang Peng: Thanks, Jackson. Now, I'd like to share some thoughts on our outlook for the next quarter. Q2 traditionally represents a peak season for us, with seasonal factors to our benefit. As we look ahead to the next quarter, we anticipate that our growth momentum will continue for Learning Services. Our core focus remains on delivering high-quality products and managing our online and offline operations efficiently to serve learners effectively. We're committed to ongoing investments in learning services to provide our users with quality learning experiences, both online and in person.
Alex Peng: So now I'd like to share some thoughts on our outlook for the next quarter. Q2 traditionally represents a peak season for us, with seasonal factors in our benefit. As we look ahead to the next quarter, we anticipate that our growth momentum will continue, driven by the summer vacation and increased e-commerce activities during the 618 festivals. For learning services, our core focus remains on delivering high quality products and managing our online and offline operations efficiently to serve learners effectively. We're committed to ongoing investments in learning services to provide our users with quality learning experiences both online and in person.
Alex Peng: So looking forward, we'll expand our services to reach more customers with our product offerings while leveraging our robust online and offline capabilities. Our business model combined with our brand and operational efficiency positions us to capitalize on market opportunities and deliver long-term value to our customers and shareholders alike. We believe that enrichment learning not only aligns with user demand and societal trends, but also enables learners' long-term development. The path we have chosen in this regard has been consistently validated in recent quarters.
Zhuangzhuang Peng: So looking forward, we'll expand our services to reach more customers with our product offerings while leveraging our robust online and offline capabilities. Our business model, combined with our brand and operational efficiency, positions us to capitalize on market opportunities and deliver long-term value to our customers and shareholders alike. We believe that enrichment learning not only aligns with user demands and societal trends but also enables learners' long-term development. We remain dedicated to refining our approach moving forward.
Alex: Has been consistently validated in recent quarters, we remain dedicated to refining our approach moving forward.
Alex Peng: We remain dedicated to refining our approach moving forward.
Alex Peng: And beyond learning services, we're also focused on providing learning content solutions. We believe integrating technologies such as artificial intelligence will enhance our content solutions offerings. We will continue to improve our learning devices and their functionality while expanding our learning content library and exploring new product developments. At the same time, we'll continue optimizing our go-to-market strategies to better serve our customers. So, with our expanded product matrix and go-to-market capabilities, we really aim to reach more users and empower them with self-directed learning in their discretionary time.
Alex: And beyond learning services, we're also focused on providing learning content solutions.
Zhuangzhuang Peng: We believe integrating technologies, such as artificial intelligence, will enhance our content solutions offerings. We will continue to improve our learning devices and their functionality while expanding our learning content library and exploring new product developments. At the same time, we'll continue optimizing our go-to-market strategies to better serve our customers. So, with our expanded product matrix and go-to-market capabilities, we really aim to reach more users and empower them with self-directed learning in their discretionary time. So that concludes my prepared remarks. Operator, I think we are now ready to open the call for questions.
Alex: We believe integrating technologies, such as artificial intelligence will enhance our content solutions offerings.
Speaker Change: We will continue to improve our learning devices and their functionality, while expanding our learning content library and exploring new product developments.
Alex: At the same time, we'll continue optimizing our go to market strategies to better serve our customers.
Speaker Change: So with our expanded product matrix and go to market capabilities, we really aim to reach more users and empower them with self directed learning in their discretionary time.
Alex Peng: So that concludes my prepared remarks.
Speaker Change: So that concludes my prepared remarks, operator, I think we are now ready to open the call for questions.
Unknown Executive: Operator, I think we are 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 11 on your telephone. You would end here in automated message. Revising your hand is raised. So we draw your question, please press star 11 again.
Operator: We will now begin the question and answer session. Please stand by while we compile the Q&A. Our first question comes from the line of Felix Liu from UBS. Please, that's your question, Felix.
Speaker Change: Thank you.
Unknown Executive: Please stand by while we compile the Q&A session.
Unknown Executive: Our first question comes from the line of Philix Liu from UBS. Please add your questions for links.
Felix Liu: Good evening, Alex and Jackson. Congratulations on the strong quarter. My question is on your pay you in Richmond learning program.
Felix Liu: Could you share any color regarding the recent operating metrics and demand for the upcoming summer peak season? Thank you.
Jackson Ding: So thanks for the question. This is Jackson. I'll take this one. You asked about user demand and user preference. You know, that's something we we we spend a lot of time focused on as we develop of products and services as well as when we operate our business.
Jackson Ding: Maybe instead of just commenting on on-demand and operating metrics for the summer, which we will save for next quarter, let me provide you with more color on what we are seeing for user demand and operating metrics for the last few quarters and the transparency. You know, when we talk to this generation of learners and their parents, we really see this set of multi-dimensional development and the developmental needs their presenting, right. This generation of learners and their parents not only focus on any school performance but also focus on well-rounded development and overall kind of poor competencies of the learners. You know, they they they they also focus on underlying skills such as critical thinking, such as cultural appreciation.
Zhuangzhuang Peng: When we talk to this generation of learners and their parents, we really see this set of multi-dimensional developmental needs they're presenting, don't we? This generation of learners and their parents not only focus on in-school performance but also focus on well-rounded development and overall core competencies of the learners. They also focus on underlying skills such as critical thinking, such as cultural appreciation. And that's the trend we're seeing happening real time, and it's in process.
Speaker Change: A school performance, but also focus on wall around the development and overall kind of core competencies of the learners.
Speaker Change: They also focus on in the life skills, such as critical thinking such as cultural appreciation.
Jackson Ding: And that's the term we're seeing happening real-time, and it's the end process. And, and that's what enrichment learning or enrichment learning programs are trying to address. We offer comprehensive learning programs to aid learners with their overall development, and doing so we hope to capture some of the market opportunities presented by this broader trend.
Speaker Change: And that's the trend, we're seeing happening real time and it's in process.
Zhuangzhuang Peng: And that's what Enrichment Learning, or Enrichment Learning Programs, are trying to address. We offer comprehensive learning programs to aid learners with their overall development. In doing so, we hope to capture some of the market opportunities presented by this broader trend. You also asked about operating metrics; we see operating metrics more as a result of both market demand and our own operating capability. So, when we manage our business, our priorities have always been, one, delivering products and services that create user value and address market demand, and two, delivering our services in an operationally efficient way.
Speaker Change: And thats, what enrichment learning or enrichment learning programs.
Speaker Change: Are trying to address.
Speaker Change: We offer a comprehensive learning programs to a learners with their overall development.
Speaker Change: In doing so we hope to capture.
Speaker Change: Some of the market opportunities presented by this broader trend.
Jackson Ding: You also asked about operating metrics; you know, we see operating metrics more as a result of both market demand and our own operating capabilities. So when we manage our business, our priorities have always been on one, delivering products and services that create user value and address market demand, and to delivering our services through an operationally efficient way. So when you're looking at when you combine those two factors and account for operating metrics, such as retention rates, such a utilization rate that they all have been fairly stable over the last few quarters. I hope that answers your question, Felix.
Speaker Change: You also asked about operating metrics we.
Speaker Change: We see operating metrics more as a result.
Speaker Change: Both market demand and our own operating.
Speaker Change: Capabilities.
Zhuangzhuang Peng: So when you combine those two factors and look at our operating metrics, such as retention rate, such as utilization rate, they all have been fairly stable over the last few quarters. I hope that answers your question, Felix.
Felix Liu: That's clear. Thank you very much.
Unknown Executive: Thank you.
Yiwen Zhang: I'll make a question comes from a line of you and Chong from Chinarenises. Please go ahead.
Operator: Our next question comes from the line of Yiwen Zhang from China Renaissance. Please go ahead. Hi.
Yiwen Zhang: Hi, good evening, Management. Thanks for taking my question. So my question is regarding our learning center. So how many centers are we added during the quarter? And how should we think about the pace of the remaining of the quarters? And also over the longer term, what sort of expansion rate are we looking at? Thank you.
Yiwen Zhang: Hi, good evening management. Thanks for taking my question. So my question is regarding our learning center. So how many new centers have we added during the quarter? And how should we think about the pace of the remaining quarters? And also, over the longer term, what sort of expansion rate are we looking at? Thank you.
Jackson Ding: Yiwen, thanks for the question.
Jackson Ding: Yiwen, thanks for the question. This is Jackson. I'll take this one.
Jackson Ding: This is Jackson. I'll take this one. First, I'd just like to say an offline learning center network; we think it's critical to our overall user experience. When we think about how to manage our learning center network, as we've discussed during the last three quarters, we take a measured approach, where we take into consideration market demand from certain areas that we're considering opening up new learning centers, and also balancing that with our own operating capabilities. So, as you see in the last couple of quarters, it's a dynamic and measured approach when we think about our offline footprint.
Jackson Ding: First, I'd just like to say an offline learning center network that we think is critical to our overall user experience, right? When we think about how to manage our learning center network, as we've discussed during the last few quarters, we take a measured approach where we take into consideration market demand from certain areas that we're considering opening up new learning centers in and also balance that with our own operating capabilities, right? So, as you've seen in the last couple quarters, it's a dynamic and measured approach when we think about our offline footprint.
Jackson Ding: In this quarter, the number of our learning centers expanded, and that's partially in preparation for the upcoming summer vacation. So, we don't expect the same level of growth for offline learning centers in the future for every single quarter. I hope that answers your question, Yiwen.
Jackson Ding: In this quarter, we did the number of our learning centers expanded, and that's partially in preparation for the upcoming summer vacation. So we don't expect the same level of growth for our offline learning center in the future for every single quarter. I hope that answers your question, Yiwen.
Speaker Change: Centers expand it.
Speaker Change: And thats, partially in preparation for the upcoming summer vacation. So we don't expect the same level of growth for <unk>.
Speaker Change: Center.
Speaker Change: In the future for every single quarter.
Speaker Change: I hope that answers your question.
Yiwen Zhang: That's helpful. Thank you.
Yiwen Zhang: Yeah, that's helpful.
Speaker Change: Okay. That's helpful. Thank you.
Unknown Executive: Thank you.
Speaker Change: Thank you.
Timothy Zhao: The next question comes from the line of Timothy Zhao from Goldman Sachs. Please ask your question, Timothy.
Operator: Our next question comes from the line of Timothy Zhao from Goldman Sachs. Please ask your question, Timothy.
Speaker Change: Question comes from the line of Timothy Zhao from.
Speaker Change: From Goldman Sachs. Please ask your question Timothy.
Timothy Zhao: Great. Good evening, Alex Jackson, and thank you for taking my question. And congrats on the very strong set of results. My question is regarding the artificial intelligence, just wondering if Magin can provide us with an overview on whether or how the AI technology has changed your business operations strategy. And I do notice that, as you put in the prepared remarks, you are integrating more AI features into the current solutions.
Timothy Zhao: Great. Good evening, Alex, Jackson, and Feng. Thank you for taking my question and congrats on the very strong set of results. My question is regarding artificial intelligence. Just wondering if Meijun can provide us with an overview of whether or how AI technology has changed your business operation strategy. And I do notice that, as you put in the prior remarks, you are integrating more AI features into the content solutions. And the company also released some AI-driven apps over the past quarter. I was wondering if the company can share more specific product plans in the future in terms of AI power products. Thank you.
Speaker Change: Great.
Timothy Zhao: Evening Alex.
Timothy Zhao: Thank you for taking my question and congrats on the very strong set of results.
Timothy Zhao: My question is regarding the artificial intelligence just wondering if management can provide us with that overview on weather.
Speaker Change: How the AI technology has changed to your base operation strategy and I do notice that you as you put in the prepared remarks, you are integrating more features into the content solutions and the company also released some pie.
Timothy Zhao: And Akami also released some AI-driven apps over the past quarter, just wondering if the company can share more specific product plans in the future in terms of the AI power products. Thank you.
Alex Peng: Hey, Timothy. This is Alex.
Alex Peng: Let me take this one on. And I think for all the friends on the call, as you can recall, in the last year and a half, we've been discussing the topic of artificial intelligence in education. So it's a topic that's very near and dear to our hearts. And let me try to unpack those questions at a few different levels. So first of all, I think we really, and we've been really looking forward to the power unleashed by the large language model in this next generation of artificial intelligence to really help us reimagine the future of education.
Alex Peng: And I think either, you know, either. Broadest level, you know, and at a societal level beyond ourselves as a company and our industry is really to think about redefining the goals of education and how do we help the next generation of youth, children to grow up with artificial intelligence and develop into, you know, whole persons for the future. And that's an effort that we've really been working with a broad array of stakeholders, you know, across many different sectors of society. At the second level, I think it's really already reshaping how we develop products and services.
Zhuangzhuang Peng: for the future. And that's an effort that we've really been working on with a broad array of stakeholders, you know, across many different sectors of society. As we look forward, I think we'll continue to, you know, embrace large language models, and with our own effort on, versus the student has an active question that is putting to the AI versus some of the other scenarios we're looking at along the learning journey. That also needs the model to be very situational and scenario-awake.
Alex Peng: And I think I discussed this in a previous call. We really think there is a huge opportunity to now make it possible to have high quality teaching, individualized learning, and affordable cost all together in our product and services. And the third level, it's been theory effective in terms of helping us improve operational efficiency in terms of how we develop education content. And in terms of how we provide human to human services, either by AI, as well as the internal, you know, coding and development. As we look forward, I think we'll continue to, you know, embrace large language models and with our own effort on, you know, fine tuning and enhance data quality in terms of model training to really make these models, I would say, appropriate in three regards.
Speaker Change: And three regards the first thing is they need to be age appropriate. If you think about the key 12 pyramid really a one or two years what do.
Alex Peng: The first thing is they need to be age appropriate. If you think about the K-12 period, really one or two years would define a major developmental milestone. So, you know, what's the right age-appropriate way to align the model with a five-year-old, versus a 10-year-old, versus a 15-year-old? So that's the first age-appropriate alignment for the model.
Speaker Change: Define a major developed mental.
Speaker Change: <unk>. So you know, what's the right age appropriate way to align the model with a five year old versus a 10 year old versus a 15 year old. That's that's the first age appropriate alignment for the model. The second thing is really subject and constant.
Alex Peng: The second thing is really subject and content appropriate. You know, we've already had this experience in the last year and a half: for the model to tackle a mathematical problem, versus for the model to answer questions about the humanities. These are required very different approach, right? So this is a subject and content appropriate.
Speaker Change: Appropriate you know we've already have experience in the last.
Speaker Change: Year and half that for the model to tackle a mathematical problem versus for the model to answer our questions about the humanities these or require a very different approach right. So this is a subject and content appropriate.
Alex Peng: And the third one, I would say, it's scenario appropriate. You know, if it's a scenario while the student is consuming content, are learning to buy it. Versus the student has an active question that is putting to the AI versus some of the other scenarios we're looking at along the learning journey that also need the model to be very situational and scenario aware.
Speaker Change: And the third one I would say it's scenario appropriate you know if it's a scenario while the student is consuming content are learning devices versus the student has an act of fashion.
Alex Peng: So, in the end, we really hope to bring a truly personalized experience to the students along the entirety of their learning journey.
Alex Peng: So, in terms of examples on products, in this fiscal quarter, we launched a new mathematical search and Q&A tool which helps students solve difficult math problems through guided inquiry. The artificial intelligence driven features incorporated into our learning devices are also providing learners with accessible and reliable learning aids.
Alex Peng: In the future, we really look forward to enhancing the productization of AI and leveraging different sorts of different forms of products to reach a broader user base. As I mentioned before, we'll continue to train models to be age, subject content, and scenario appropriate by utilizing larger and more diverse and higher quality data sets. So this comprehensive approach, we think, will really help our artificial intelligence solutions to be more reliable and capable of addressing a wider range of user needs across different scenarios.
Zhuangzhuang Peng: In the future, we really look forward to enhancing the productization of AI and leveraging different sorts of different forms of products to reach a broader user base, will, you know, as I mentioned before, will continue to train models to be age subject content and scenario appropriate by utilizing larger and more diverse and higher quality data sets.
Alex Peng: So, Timothy, I hope that answers your question.
Operator: The next question comes from the line of Xiaodan Zhang from CICC. Please go ahead, Xiaodan.
Sheldon John: Next question comes from the line of Sheldon John from CICC. Please go ahead, Sheldon.
Sheldon John: Hi, thanks, Alex Jackson, and sound for taking my question, and congrats on the solid quarter. So my question is regarding your cash usage plan. Could you give us some color on your future investment strategy as well as a shareholder returns games? Thank you.
Jackson Ding: Hey, Sheldon, thanks for the question. This is Jackson. I'll take this one. Just to recap, as of May 31st, 2024, the company had 3.8 billion US dollars in cash and cash equivalents, short of investments and restricted cash, both current and non-current combined. When we think about areas of investment, we're interested in investment areas that could further improve our existing project services that could supplement our capabilities or advance our business expansions. Meanwhile, as our industry is evolving, and as new technologies are developing, we'll seek opportunities to make strategic investments into adopting new technologies in our business.
Jackson Ding: Hey, Xiaotan, thanks for the question. This is Jackson. I'll take this one.
Jackson Ding: Just to recap, as of May 31st, 2024, the company had $3.8 billion in cash and cash equivalents, short-term investments, and restricted cash, both current and non-current combined. When we think about areas of investment, we're interested in areas that could further improve our existing products and services, that could supplement our capabilities or advance our business expansions. Meanwhile, as our industry is evolving and as new technologies are developing, we'll seek opportunities to make strategic investments in adopting new technologies in our business.
Jackson Ding: When we think about our investment strategy, we'll aim to adopt a balanced and prudent approach. Xiaotan, you asked about shareholder return. We're always looking for ways to create value for long-term shareholders. In the past, we have taken diversified measures to generate shareholder returns, and we'll continue to seek opportunities to generate returns for our shareholders.
Jackson Ding: When we think about our investment strategy, we'll aim to adopt a balanced and prudent approach.
Jackson Ding: Sheldon, you asked about shareholder returns. We're always looking for ways to create value for long-term shareholders. In the past, we have taken diversifying measures to generate shareholder returns, and we'll continue to seek opportunities to generate return for all our shareholders. I hope that answers your questions out there.
Sheldon John: That's helpful. Thank you.
Alice Type: Our next question comes through the line of Ellis type from City. Please ask your question, Alice.
Operator: Our next question comes from the line of Ellis Tait from Citi. Please ask your question, Ellis.
Alice Type: Good evening, management team. I'm Alex Granity. I have a question.
Alice Type: First of all, congratulations on your strong result. I have a question.
Alice Type: I'm wondering if you could provide an update on the X-pad current strategy and your outlook for the business. What are the key opportunities and challenges you foresee?
Alice Type: Thank you so much.
Speaker Change: Yeah.
Alex Peng: Hey, this is Alex. Let me take this question about X-pad. So, you know, as I mentioned in the earlier part of this call, the fundamental value our learning devices provide is this ability for students to have a self-directed learning experience at home in their discretionary time, at their own pace.
Zhuangzhuang Peng: Hey, this is Alex. Let me take this question about XPAD. As I mentioned in the earlier part of this call, the fundamental value our learning devices provide is this ability for students to have a self-directed learning experience at home, in their discretionary time, at their own pace, so I think that's just the basic grounding I'd like to start with. What we also see is that with a device that integrates hardware and software. So, in terms of how we look at the business strategy going forward, we continue to improve the functionality of our devices.
Speaker Change: Hey, This is Alex let me take those questions about ex pod so.
Alex: I as I mentioned in the earlier part of this call.
Alex: The fundamental value are learning devices provide is this ability for students to have a self directed learning experience.
Alex: At home.
Alex: In their discretionary time in their own pace.
Alex Peng: So, I think that's really the grounding I'd like to start with. What we also see is that with a device that integrates hardware, software, content, and artificial intelligence features, we're really providing a much more personalized experience, focused on the personal development of the children. And also, it really fits much more seamlessly with the learning journey. With this integrated approach, the device is much more aware of the situation, of where the student is on the learning journey, what types of challenges and issues we need to help solve at that moment on demand from the students. So, we really think that's a huge opportunity.
Speaker Change: So I think that's the really the grounding unlike to Star Wars.
Speaker Change:
Speaker Change: What we also see is that with a device that integrates hardware software.
Speaker Change: Content and artificial intelligence features.
Speaker Change: We're really providing a much more.
Alex Peng: And I think we're just starting to scratch the surface of the future potential of this. So, in terms of how we look at the business strategy going forward, we continue to improve the functionality of our devices. And this is an ongoing effort. We provide those updates regularly to all the install base, to all the users who are currently using XPAD. We're increasing the learning content library. And we've been doing that in the last six quarters. We'll also expand our go-to-market capabilities. And we really aim to reach more users and empower them with the self-directed learning synapse.
Zhuangzhuang Peng: And this is an ongoing effort. We provide those updates regularly to all the installed base, to all the users who are currently using XPAD. We're increasing the learning content library. And we've been doing that for the last six quarters.
Alex Peng: So in May, I think Jackson mentioned earlier, in May, we introduced new SKUs, and so now we have a number of different SKUs on the market. We think this is really bringing users a wider range of options and choices in terms of learning device products. The Xpad Classic Model 2024, which we brought out a couple of months ago, it really features a new version of hardware design, the vision protection, powerful processor for overall performance and especially AI features.
Zhuangzhuang Peng: So in May, as Jackson mentioned earlier, we introduced new SKUs. And so now we have a number of different SKUs on the market. We think this is really bringing users a wider range of options and choices in terms of learning device products. The XPAD Classic Model 2024, which we rolled out a couple of months ago, really features a new version of hardware design. The vision protection, a powerful processor for overall performance, and especially AI.
Zhuangzhuang Peng: So when you look at where things are, and the key metric that we always look at is really user engagement and learning outcomes, and you know, since we've been a year and a half, our user base has really been expanding. This is from an install base perspective.
Alex Peng: So when you look at where things are in the key metric that we always look at, it's really user engagement and learning outcome. And you know, since we've been on the market for a year and a half, our user base has really been expanding. This isn't just doll base perspective, it's really been expanding. And even with that expanded user base, I think we've witnessed a study level of user engagement, and I think that's a validation that the product is providing the value to the customers, and we're really looking forward to continue to work on this user experience in the future.
Zhuangzhuang Peng: It's really been expanding. And even with that expanded user base, I think we've witnessed a high level of user engagement. And I think that's a validation that the product is providing value to the customers. And we're really looking forward to, you know, continuing to work on this user experience in the future. So I hope that answers your question.
Alex Peng: So I hope that answers your question.
Alice Type: Thank you so much for all the tail sharing.
Unknown Executive: Great, we have reached the end of the question and answer session. Thank you all very much for your questions.
Unknown Executive: I'll turn the conference back to the mentioned team for tools and comments. So again, thank you all for joining the call today, and we'll look forward to seeing you next quarter.
Zhuangzhuang Peng: So again, thank you all for joining the call today, and we'll look forward to seeing you next quarter. Thank you. Bye-bye.
Unknown Executive: Thank you, bye bye. Thank you for your participation in today's conference.
Unknown Executive: This does conclude the program.
Unknown Executive: You may now disconnect.