Q3 2025 TAL Education Group Earnings Call
Okay.
Speaker Change: Ladies and gentlemen, good day and thank you for standing by and welcome to tell educations group's fiscal 2025 third quarter earnings Conference call.
At this time all participants are in the east.
Speaker Change: And only mode. After the speaker's presentation there'll be a question and answer session between Com. Today's conference is being recorded I would now like to hand, the conference over to MS. Fang Liu.
Speaker Change: Investor Relations director.
Speaker Change: Please go ahead.
Speaker Change: Thank you all for joining us today for Tal education groups third quarter of fiscal year 2025 earnings conference call the earnings.
Speaker Change: Earnings release was distributed earlier today and you may find a copy on the company's IR website or through the newswires.
Speaker Change: On this call you will hear from Mr. Alex <unk>, President and Chief Financial Officer, and 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.
Speaker Change: Before we continue please note that today's discussion will contain forward looking statements made under the provisions of the U S. Private Securities Litigation Reform Act of 1995.
Speaker Change: Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations potential.
Speaker Change: Potential risks and uncertainties include but are not limited to those outlined in our public filings with SEC for more information about these risks and uncertainties. Please refer to our filings with the FTC.
Speaker Change: So our earnings release and this call include discussions of certain non-GAAP financial measures.
Speaker Change: Please refer to our earnings release, which contains a reconciliation of GAAP measures to the most directly comparable GAAP measures.
Alex Alex: Like to turn the call over to Mr. Alex Alex. Please go ahead.
Speaker Change: Thank you Paul.
Speaker Change: And I would also like to thank all of you for joining today's conference call I'll provide an overview of our business progress and financial performance for the third quarter of fiscal year 2025, followed by Jackson's review of our operational advancements and key business.
Speaker Change: And then I'll finish up with a brief update on our future strategy and outlook.
Speaker Change: We remain committed to delivering high quality learning experiences and services throughout the last fiscal quarter.
Speaker Change: More students and parents are choosing our products and services to enhance their children's learning.
Speaker Change: These users provide valuable feedback throughout their journey, what trial empowering our ongoing innovation as we refine product features and formats based on actual user needs.
Speaker Change: As always we aim to improve the learning experience.
Speaker Change: Support students holistic development.
Speaker Change: This quarter, we provided more engaging learning experiences through our learning services programs.
Speaker Change: With our offline and online and enrichment learning programs continued to receive positive feedback from users.
Speaker Change: One thing the quality of our products and services.
Our enrichment learning programs are designed to elevate learners abilities.
Speaker Change: Fostering well rounded development across a range of competencies.
Speaker Change: As we recognize that to learning extends beyond just acquiring knowledge.
Speaker Change: At how we prioritize the growth of skills, such as reading comprehension critical thinking and problem solving.
Speaker Change: Quantitative recently.
Speaker Change: These competencies equip learners was the tools to navigate real world challenges.
Speaker Change: We believe this product market fit positioning alliance, what the needs of a new generation of parents were seeking in depth.
Speaker Change: This preliminary educational opportunities for their children.
Speaker Change: So take or pay you enrichment small classes as an example.
Speaker Change: Market demand for enrichment of learning and our consistent delivery of high quality services drove continued growth of this business line during the fiscal quarter.
Speaker Change: For content solutions, we remain dedicated to creating and Curating high quality content.
Speaker Change: Ports, our users' diverse learning journeys.
Speaker Change: Our goal is to empower learners and enrich their learning experience with inspiring and impactful resources that enable them to thrive.
Speaker Change: So this quarter, we continue to refine our content solutions product offerings and bolster our go to market strategies.
Speaker Change: In late August 2024, we launched a new learning device the X box a tablet targeting customers what practice focused learning needs as features a colored paper display with three malls.
Speaker Change: Turning processing and recruiting.
Speaker Change: We received some initial user feedback on the product this quarter.
Speaker Change: Pleased to report that has proven to be a valuable tool.
Speaker Change: Market focused learning scenarios.
Speaker Change: Our efforts to enhance our product capabilities are yielding positive results for the learning device business.
Speaker Change: Key metrics, such as weekly active rates and average weekly usage time for the entire user base.
Speaker Change: <unk> stable and healthy as our product lineup and user base continues to expand.
Speaker Change: The average weekly active rate for our entire learning device user base was at around 80%.
Speaker Change: With an average daily user time of one hour per device throughout the quarter.
Speaker Change: What's more.
Speaker Change: Half of these active users engaged with the device for five or more days per week.
Speaker Change: In addition to these achievements are ex Pat recently received a twice picks award at the consumer Electronics show 2025.
Speaker Change: This annual award recognizes the year's influential consumer technologies, underscoring expats market recognition and innovative features.
Speaker Change: Execution across services and products.
Speaker Change: Seniors to drive our financial growth, our net revenues for the quarter reached <unk>.
Speaker Change: 606, 4 million U S dollars.
Speaker Change: War 4 billion $323 2 million RMB, reflecting year over year growth of 62, 4% and 69, 2% in U S dollar and RMB terms, respectively.
Speaker Change: Our non-GAAP loss from operations and non-GAAP net income attributable to tell stood at 1.9 million U S dollars and $38 6 million U S dollars respectively.
Speaker Change: So with that overview I will.
Speaker Change: I'll turn the call over to Jackson to discuss the operational advancements we've made in our core business lines.
Jackson: And review our financial performance for the third fiscal quarter Jackson over to you.
Jackson: Thank you Alex.
Before I get started was my review.
Jackson: Please note that all financial data for the quarter.
Jackson: Audited.
Speaker Change: Let me begin with our learning services and others business.
Speaker Change: Which encompasses a wide range of learning programs.
Speaker Change: This business line maintained its growth momentum for the third quarter of fiscal year 2025.
Speaker Change: Achieving year over year revenue growth, thanks to the development of multiple product lines.
Speaker Change: Okay.
Speaker Change: Notably our payoff small class enrichment programs remain the largest revenue contributor within the learning services and others business.
Speaker Change: Yes.
Speaker Change: Under the tailwind of increasing customer acceptance of enrichment learning.
Speaker Change: <unk> enrichment small class continues its development momentum.
Speaker Change: And for this business our priority is to provide quality in person learning experience for our users.
Speaker Change: We take a dynamic and methodical approach.
Speaker Change: Managing our learning Center network.
Speaker Change: Each decision is based on careful evaluation of factors such as market demands user acceptance.
Speaker Change: <unk> capability and efficiency.
Speaker Change: Okay.
Speaker Change: Our online enrichment learning business continues to progress in line with our strategic objectives.
Speaker Change: We have differentiated our online programs from offline offerings by integrating smart interactive features that.
Speaker Change: That cater to online learning habits.
Speaker Change: Boosting user motivation.
Speaker Change: Deepening engagement.
Speaker Change: By consistently innovating and refining our online products, we strive to meet the growing demands for dynamic and impactful digital learning experiences.
Speaker Change: For learning devices.
Speaker Change: Our goal is to support users self learning journeys with a diverse product selection.
Richard: And Richard features and learning resources.
Richard: This fiscal quarter, we expanded our offerings to reach a broader user base.
Richard: Helping more users find learning solutions that suit their unique needs.
Yes.
Richard: It has been two years since the launch of our first generation learning device.
Richard: Last year, we offered only one product.
Richard: Now we are featuring a lineup of four.
Richard: Bolstered by the E Commerce event season in the third fiscal quarter of 2025.
Richard: Our learning device revenue increased both year over year.
Richard: And quarter over quarter.
Richard: Yes.
Richard: Yes.
Richard: We remain committed to enhancing product capabilities.
Richard: As we expand our product portfolio.
Richard: During this fiscal quarter, we upgraded our existing ex Pat learning devices.
Richard: Optimizing the precision learning pro feature to better align with the needs of at home learning.
And support personalized learning journeys for users.
Richard: Additionally, we introduced a split screen functionality that allows learners to use two apps.
Richard: Simultaneously on the same interface.
Richard: Further enhancing the learning devices usability.
Richard: Okay.
We also rolled out a customization feature.
Richard: Virtual avatars to deepen user engagement.
Richard: Designing and personalizing avatars makes the learning process more interactive boosting children's motivation and enthusiasm for learning.
Richard: In terms of product expansion.
Richard: As Alex mentioned in late August we further enriched our product lineup with the launch of X book.
Richard: X book allows learners to seamlessly seamlessly switch between learning practicing and reading modes using a built in toggle.
Richard: Hansen, the overall learning experience.
Richard: It also features an eye protective screen and a smooth riding stylus.
Richard: Okay.
Speaker Change: We have closely observed Xbox user habits over the past quarter and we're pleased to see ex books practice related features being utilized frequently.
Richard: Yes.
Richard: Powered by our larger language model.
Richard: X books AI driven features include.
Richard: Intelligent grading aero tracking and personalized recommendations to comprehensively support users and their guided practice sessions.
The ongoing development of AI technology is.
Richard: Is also advancing Xbox intelligent grating capabilities.
Richard: X book can generate detailed profiles of students' performance.
Richard: Capturing metrics such as response time accuracy rates in Aero patents.
Richard: Enabling students to more effectively evaluate their learning progress and.
Richard: Focus on targeted study.
Richard: Okay.
Richard: This not only allows us to better support user growth.
Richard: But also provide insight for content development and optimization.
Richard: We will continue to monitor experts performance and refine its features to ensure alignment was user needs.
Richard: Now, let's move on to our key financial results for the third fiscal year fifth third fiscal quarter excuse me of 2025.
Richard: Our net revenues were $606 4 million U S dollars.
Richard: Or.
Richard: $4 billion $323 2 million RMB.
Richard: An increase of 62, 4% and 59, 2% year over year in U S dollar and RMB terms, respectively.
Richard: Okay.
Richard: Cost of revenue increased by 65, 5% to.
Richard: 286, 7 million U S dollars.
Richard: 173 point to many of US dollars for the same periods of last year.
Richard: non-GAAP cost of revenues, which excludes share based compensation expenses.
Richard: Increased by 67, 2%.
Richard: Two $285 4 million U S dollars from $177 million for the same period last year.
Richard: Sure.
Richard: Yes.
Richard: Profits increased for.
Richard: For the third quarter of fiscal year 2025.
Rising by 59, 6% year over year to 319 aimed many U S dollars from 200 203, many of US dollars for the same period last year.
Richard: Growth margin.
Richard: Kris to 52, 7% from 53, 6% for the same period last year.
Richard: Selling and marketing expenses for the quarter for $226 4 million U S dollars.
Richard: Representing an increase of 85, 6% from 122.0, many U S dollars for.
Richard: For the same period last year.
Richard: non-GAAP, selling and marketing expenses, which excludes share based compensation expenses.
Richard: <unk> increased by 91.0%.
Richard: Two $222 $4 million from.
Richard: $116 for many U S dollars for the same period last year.
Richard: Okay.
Richard: Selling and marketing expenses as a percentage.
Richard: Total net revenues increased from 32, 7% to.
Richard: 37, 3% year over year.
Richard: Okay.
Richard: The uptick in selling and marketing expenses was primarily driven by increased selling and marketing activities from some online channels.
Richard: Okay.
Richard: General and administrative expenses increased by 0.8%.
Richard: Two.
Richard: 111, 5 million U S dollars from 110 $7 million for the same period last year.
Richard: non-GAAP general and administrative expenses, which excludes share based compensation cost increase.
Richard: Increased by four 8% year over year too.
Richard: $101 $4 million from $96 $7 million for the same period last year.
Richard: non-GAAP general and administrative expenses as a percentage of total net revenues.
Richard: Decreased from 25, 9% to 16, 7% year over year.
Richard: Okay.
Richard: Total share based compensation expense allocated to related operating costs and expenses decreased by 29, 5% to 15 $5 million for the third quarter of fiscal year 2025.
Richard: From 22.0, many U S dollars for the same period last year.
Richard: Sure.
Richard: Loss from operations was $17 $4 million for the third quarter of fiscal year 2025 compared to loss from operations of.
Richard: $32 $2 million for the same period last year.
Richard: Yes.
Richard: non-GAAP loss from operations, which excludes share based compensation expenses was $1 $9 million compared to a non-GAAP loss from operations of $10 $2 million for the same.
Richard: Period last year.
Richard: Net income attributed attributable to Tao was $23 $1 million for the third quarter of fiscal year 2025.
Richard: Compared to net loss attributable to Tal.
Richard: $23 $9 million for the same period last year.
Richard: non-GAAP net income attributable to Tal, which excludes share based compensation expenses was $38 six many U S dollars.
Richard: Compared to a non-GAAP net loss attributable to Tal.
Richard: One $9 million for the same period last year.
Richard: Sure.
Richard: Moving on to our balance sheet.
Richard: As of November 32024, we had $2 billion $248 million in cash and cash equivalents.
Richard: 1.595 billion U S dollars and short term investments.
Richard: $347 6 million U S.
Richard: And current and non current restricted cash.
Richard: Our deferred revenue balance was.
Richard: $825 6 million U S dollars.
Richard: As of the end of the third fiscal quarter of 2025.
Richard: Yes.
Now turning to our cash flow statement net cash provided by operating activities for the third quarter of fiscal year 2025 was $378 million.
Richard: That concludes the financial section.
Richard: I will now hand, the call back to Alex to briefly update you on our business outlook. Alex. Please go ahead.
Alex Alex: Thanks, Jackson, so I'd like to share some insights on the outlook for the company's future development.
Richard: Moving forward we.
Richard: We may experience some fluctuations in our business performance due to seasonal factors for example.
Richard: In fiscal year, 'twenty five fourth quarter.
Richard: Anticipate a year over year decline in revenue from <unk> devices.
Richard: The third quarter is typically our peak season for e-commerce activities.
Richard: Nevertheless, we remain committed to achieving healthy and sustainable long term growth across all our business lines.
Richard: Learning services, we will maintain our high quality standards for both offline and online learning products and strive to deliver premium enrichment programs.
Richard: Even broader user base, we plan to prudently manage our learning center network and develop additional programs tailored to meet the specific needs of.
Richard: Various user groups, while also managing our operational efficiency.
Richard: In terms of content solutions will closely monitor user feedback and market demand and use those insights to further enhance our learning devices and their features will also expand our learning content library and explore new product developments at the <unk>.
Richard: Time will keep refining our go to market strategies.
Richard: By aligning innovation with user needs, we aim to deliver impactful learning <unk>.
Richard: To all of our customers.
Richard: So for the past few years, we've been innovating at the intersection of learning and technology advancing our technological capabilities to deliver quality learning solutions.
Richard: The potential of emerging technologies, particularly artificial intelligence is transformative and inspiring.
Richard: Over the last year or two we have gained.
Richard: Clear understanding of what is achievable with AI and the education and what is still needed to fully a leash its possibilities.
Richard: Our focus now is twofold.
Richard: First leveraging industry specific data to train vertical models.
Richard: And second developing applications that harness the power of both foundation more models and vertical models.
Richard: Today's children and parents face a major challenge how to grow into individuals who can thrive in the age of artificial intelligence.
Richard: Demand for intelligent solutions exceeds the capabilities of current technology. This creates an opportunity for us to bridge the gap between traditional solutions from centuries ago and advanced needs of today's children and parents with a lot of learning.
Richard: And technology at the heart of everything we do we remain committed to creating innovative products that empower students families and educators.
Richard: We look forward to shaping and witnessing this exciting future together.
Richard: So that concludes my prepared remarks, operator, we're ready to open the call for questions. Thank you.
Richard: We will now begin the question and answer session to ask a question. Please press star one on your telephone and wait for a name to be announced.
Speaker Change: Next question comes from the line of at least tie from Citi. Please go ahead.
Speaker Change: Good evening management, congratulations on listen only mode.
Speaker Change: Two questions for the PEO.
Speaker Change: In Richmond offline. Thank you could you please share any.
Speaker Change: Changes in the market dynamics.
Speaker Change: Ever notice and the negative impact from <unk> comes from Ben glaze.
Speaker Change: Provide competition.
Speaker Change: My second question is how it was done.
Speaker Change: In Q3, 14 al and have has there been any changes in key operating metrics such as renewal rates. Thank you so much.
Alex Alex: Thanks for your question. This is Alex let me take on those two questions.
Alex Alex: Let me first start with my market observations right.
Alex Alex: So in terms of enrichment learning.
Alex Alex: We observed is sustained growth momentum in both market demand and our enrichment learning business performance over the past few quarters.
Alex Alex: This newest generation of parents.
Alex Alex: Really started to form their own parental and educational philosophies.
Alex Alex: Many of them are today, emphasizing their children's holistic development right rather than focusing only.
Alex Alex: Performance at school.
Alex Alex: Our official data on how fast the enrichment learning market is growing is still limited.
Alex Alex: But we are seeing more on the ground activity and user inquiries, which I think really reflect increasing interest from customers.
Alex Alex: So our products are designed.
Alex Alex: So really meet this growing demand.
Alex Alex: Our enrichment programs interactive and engaging experiences the aim to improve learners critical thinking and logical reasons.
Alex Alex: And they foster an appreciation for the humanities, the arts and enhance hands on capabilities.
Alex Alex: The enrichment learning market grows our learning services business also continues to progress with it.
Alex Alex: I'd like to say a few words about market competition.
Alex Alex: The question that often comes to us it really its a natural part of every market in every stage of the bulb right. So when it comes to the enrichment learning offline small class market and its more fragmented there are many other.
Alex Alex: <unk>.
Alex Alex: Markets.
Speaker Change: The key to remaining competitive in this market is really developing.
Alex Alex: High quality products.
Solid performance focus metrics and ensuring our products serve local users well.
So what we don't we.
Alex Alex: We do monitor the enrichment learning sector dynamics.
Alex Alex: Our core focus is really our spread is bringing our own product capabilities.
Alex Alex: We really think what truly matters is meeting the needs of parents and students.
Alex Alex: Delivering that meaningful value to our users and contributing positively to society.
Alex Alex: That's why we strive to continually improve our product capabilities and adaptability.
Alex Alex: Let me maybe give you some details on two specific efforts.
Alex Alex: One is around teacher recruitment and training.
Alex Alex: And the second is really around product innovation.
Alex Alex: So we've had years of industry experience and deep understanding of our learners and we've developed a comprehensive teacher training system.
Alex Alex: <unk>, a standardized high quality luxury approach.
Alex Alex: And and interact.
<unk> centric learnings.
Alex Alex: So both of these are really critical.
Alex Alex: Two the learning spirits.
Alex Alex: We pride ourselves really on training most of our teachers in house to insure.
Alex Alex: And consistent service quality.
Alex Alex: So what's this.
Alex Alex: Solid teaching foundation in place we are equally.
Alex Alex: <unk> to driving innovation in our products and services.
Alex Alex: We always look for new ways to integrate technology in the classroom.
Alex Alex: So in the hands.
Alex Alex: Both the learning experience and the efficiency of our operations.
Alex Alex: So as an example, the use of both large and small screens, we call them larger and small spring in our payroll.
Alex Alex: Classes.
Alex Alex: Really example.
Alex Alex: Our direction.
Speaker Change: So when you look at traditional small group settings, one on one interaction between teachers and students can be challenging right.
Speaker Change: And we are overtime addressing this challenge.
Speaker Change: Technology driven solutions, so in our offline small classes the teachers use a tablet.
Speaker Change: They hold the tablet in their hands.
Speaker Change: We call that teachers co pilot alright.
Speaker Change: And the.
Speaker Change: The screen displays a timeline that's helped the teacher went to explain.
Speaker Change: Example, one to initiate interaction with our students. So this really helps the teacher keep the lesson on pace and insurers.
Speaker Change: Every student in the classroom can receive a level of individualized personalized attention.
Speaker Change: And then in the meantime, we also provide.
Speaker Change: Small screen devices tablets, right for students, which will let them interact with futures using and writing they can use voice they can use gestures.
Speaker Change: And students can submit their class work real time.
Speaker Change: And the teachers.
Speaker Change: We review those results.
Speaker Change: And after class.
Speaker Change: Reports are promptly generated and share with parents.
Speaker Change: And they are saving the system to really build overtime.
Speaker Change: Personalized individualized learning profile for that students.
Speaker Change: So this really.
So you can see this really.
Speaker Change: In addition to providing individualized.
Speaker Change: Attention and experience. It also helps to save time and boost efficiency right.
Speaker Change: In addition.
Speaker Change: To improve the classroom experience for students with embedded immersive.
Speaker Change: <unk> activities.
Speaker Change: And Hi Tech interactive elements.
Speaker Change: Two pre class preparation in class teaching and post class motivational activities.
Speaker Change: Our ongoing technological upgrades and innovations really I think they make the classroom smarter and more engagement alright.
Speaker Change: So this increases student engagement attention interaction.
Speaker Change: And they really result in a.
Speaker Change: More efficient and more enjoyable learning journey.
Speaker Change: So the peering enrichment business.
Speaker Change: It is growing in parallel with user entrust.
Speaker Change: Overall markets developments along was the first I just mentioned.
Speaker Change: We played a key role in our business growth overall.
Speaker Change: In the third quarter of fiscal 'twenty five.
Speaker Change: As I mentioned before we've.
Speaker Change: We prudently managed our learning Center network.
Speaker Change: And.
Speaker Change: As the demands.
Speaker Change: There.
We would add some additional learning centers in existing studies.
Speaker Change: And optimize our network footprint to really meet demand and make it more convenient.
Speaker Change: Or are all our customers.
Speaker Change: So to answer your question about operating metrics.
Speaker Change: We really aim to maintain operating efficiency.
Speaker Change: The healthy level by balancing our capacity.
Speaker Change: What's the band.
Speaker Change: We track key up efficiency indicators.
Speaker Change: As we always do right such as utilization rate refund rate and retention rate.
Speaker Change: The retention rate has remained.
Speaker Change: Relatively stable quarter over quarter.
Speaker Change: And overall, our operating operating metrics.
Speaker Change: Reflect a sustainable business model.
Speaker Change: And we really aspire to maintain this level of efficiency going forward.
Speaker Change: So we will continue to manage our learning center network expansion prudently.
Speaker Change: Balancing both growth and efficiency.
Speaker Change: So I hope that answered your questions.
Speaker Change: Thank you for the question guys.
Speaker Change: Next question comes from the lie of Yvonne Chang from China Renaissance. Please go ahead.
Speaker Change: Yes.
Management and taking my question. So my question your Ekati our investment so there and then update as smartphone can provide that we're counting the lawn tool last month.
Speaker Change: Specifically, where have plenty last month and made and have waste any notable change I'll return sofa. Thank you.
Speaker Change: Yes, Thanks <unk>.
Speaker Change: It's a great question.
Speaker Change: We've been focusing on the K 12 educational sector.
Speaker Change: And we've developed a number of vessels lines.
Speaker Change: Across the entire learning journey and in different types of learnings scenarios.
Speaker Change: I'd say these are really at different stages of growth.
Speaker Change: And they each phase there.
Speaker Change: The challenges are opportunities right.
Speaker Change: We remain committed to elevating our presence in this space.
Speaker Change: Whereas continuous innovation.
Speaker Change: So we're deepening our investment in areas that are still in their early stages.
Speaker Change: Two in the hands user experience expand our customer customer base and generate greater societal value.
Speaker Change: You may have observed our product advancements in these areas right.
Speaker Change: I think they're really propelled by a sustained investment in product development research marketing and operational enhancements.
Speaker Change: For inflows.
Speaker Change: If you look at our learning services.
Speaker Change: <unk> steadily broadening the scope of our online offerings.
Speaker Change: Originally our online classes or based on dual teacher live streaming models.
Speaker Change: And now we have.
Speaker Change: <unk> introduced new product formats, such as reported classes.
Speaker Change: We also launched two new smart and learning devices in 2024 and were really consistently and continuously upgrading their AI powered software and concepts.
Speaker Change: In the smart learning devices business.
Speaker Change: We're continuing to invest in hardware.
Speaker Change: Software research and development in confidence.
And also strengthening our.
Speaker Change: Go to market capabilities across both online and offline channels.
And really.
Speaker Change: Additionally, as I mentioned, the consumer electronics show, we're exploring opportunities to expand our product reach internationally.
Speaker Change: So overall based on our experience serving users.
Speaker Change: We believe that the.
Speaker Change: Full stack capability.
Speaker Change: This full stack capability across.
Speaker Change: <unk>, our software our content AI technology offline operational and online.
Speaker Change: Services operational capability is thats the cornerstone.
Speaker Change: Of our user service of our future growth and long term strategy. So it is really essential for us to continue to invest across these four stock capabilities.
Speaker Change: So let me maybe walk you through a few of our current top priorities in this area.
Speaker Change: I'll start with technology and content maybe.
Speaker Change: The integration of technology with learning.
Speaker Change: It really enhances our products.
Speaker Change: So investing in R&D and research and development is vital.
Speaker Change: For creating a forward thinking afore looking learning experience and strengthening our long term competitive advantage.
Speaker Change: We also firmly believe and this was really widely recognized.
Speaker Change: The transformative power.
Speaker Change: This latest generation of artificial intelligence.
Speaker Change: As exemplified by these large language models that were really.
Speaker Change: Redefine and re imagine the future of education.
Speaker Change: So in terms of content.
Speaker Change: We always believe that high quality programs are a core competitive advantage.
Speaker Change: When students and parents.
Speaker Change: Trust, our company's quality and standards, they're more likely to choose as products and services.
Speaker Change: This in turn then enhances the companies.
Speaker Change: Reputation and strengthens its brand recognition.
Speaker Change: Next we are committed to establishing and strengthening both online and offline.
Speaker Change: Customer conversation.
Speaker Change: Mechanisms.
Speaker Change: So let me talk a little bit about the.
Speaker Change: Exactly what I mean by that right.
So for online products, such as your stock home learning devices.
Speaker Change: Online marketing efforts are obviously, a key if fostering that conversation with customers in this conversation really.
Speaker Change: Spans across the entire decision, making journey and then niches too.
Speaker Change: The learning ensuring itself.
Speaker Change: And.
Speaker Change: You know.
We are trying to deepen.
Speaker Change: This customer conversation.
Speaker Change: And really broadening.
Speaker Change: The users.
Speaker Change: We reach and broadening.
Speaker Change: Their acceptance of our products.
Speaker Change: So for offline channels.
Speaker Change: Really there is.
Speaker Change: Ever.
Speaker Change: Ever more present need for integrated online and offline to Iowa going in conjunction.
Speaker Change: While the offline touch points themselves also remain crucial for user engagement. So in areas like learning services, we've been steadily building offline communications for years right.
Speaker Change: Comverse, where with our parents.
Speaker Change: As a learning center at the reception desk inside of the classroom and so on.
Speaker Change: But in other areas such as for learning devices.
Speaker Change: We're still at a nascent stage.
Speaker Change: We have a number of exploratory efforts underway.
Speaker Change: In learning devices, there's a lot that we can learn from existing players.
Speaker Change: Their experience.
Speaker Change: In having those offline Congress.
Speaker Change: Customer conversation.
Speaker Change: And we also look for ways to.
Speaker Change: To innovate on Aro.
Speaker Change: So finally in terms of investment I'd like to also say a word about organization.
Speaker Change: We really aspire to become an organization that drives continuous innovation.
Speaker Change: And we consistently invest in building and refining our team and their capabilities to achieve this goal.
Speaker Change: So developing initiatives aligned with major industry trends and broader ecosystem is a big part of our innovation journey.
Speaker Change: There's a saying hockey.
Speaker Change: That is skate to where the puck is going.
Speaker Change: So that's our approach.
Speaker Change: Some of the capabilities.
Speaker Change: We need to excel in these areas are already in place while others are still being built are still in development.
Speaker Change: So we're constantly driving to enhance our organizational strength by nurturing our current employees and helping them grow.
Speaker Change: While also recruiting outstanding external talents.
Speaker Change: So I hope that answered your question.
Speaker Change: Thank you for the questions. Our next question comes from the line of.
Speaker Change: Timothy Zhao from Goldman Sachs. Please go ahead.
Timothy Zhao: Thank you management for taking my question and congrats on the very solid results.
Speaker Change: One is regarding your online enrichment programs I was just wondering if management can provide more insights.
Speaker Change: Into shares Dot com.
Speaker Change: Is the primary growth driver for this business driven by SKU expansion and innovation.
Speaker Change: Excess marketing applications. Thank you.
Speaker Change: Timothy Thanks for the question. This is Jackson I'll take this one.
Speaker Change: And.
Speaker Change: Happy to share some thoughts on.
Speaker Change: Oh sure so dot com.
Speaker Change: Based on our observations of market demand and our confidence in our product quality.
Speaker Change: Sure. So dot com remains one of our strategic priorities.
Speaker Change: We have consistently <unk>.
Speaker Change: In this business.
To strengthen our online enrichment product capabilities.
Speaker Change: And enhanced operational and marketing strategies.
Speaker Change: Our current goal is to serve more users.
By creating an offering quality products.
Speaker Change: Just like in many other businesses.
Speaker Change: Our strategic focus for sure so dot com is product quality.
Speaker Change: So we're focused on developing high quality products and competing through product accidents.
Speaker Change: Additionally, we also believe it's important to engage our users across.
Speaker Change: Multiple channels.
Speaker Change: Especially during.
Speaker Change: Exploratory phases of some products.
Speaker Change: That's why.
Speaker Change: Constantly exploring ways.
Speaker Change: To reach our users more efficiently.
Customer acquisition is also a key growth driver for this business, but.
Speaker Change: But let me again talk about products.
Speaker Change: First.
Speaker Change: Our product development efforts are primarily focused on refining and expanding product offerings.
Speaker Change: As you may have noticed.
Speaker Change: We are consistently upgrading existing products, while developing new skus.
Speaker Change: And diversifying our online format.
Speaker Change: When we first launched our online enrichment business. Our main product format was the dual teacher live streaming model.
Speaker Change: So sir.
Speaker Change: Adapted our products to better need user demand.
Speaker Change: And we're now offering more topics and formats. In addition to what we already have.
Speaker Change: <unk>.
Speaker Change: We're also continually refining our products interactive features and technology, we have meticulously designed our online programs to differentiate them from offline offerings.
Speaker Change: They're smart interactive features.
Speaker Change: <unk> users and enhanced teaching effectiveness.
Speaker Change: As a result.
Speaker Change: Our programs align well with online learning habits and meet the growing demand for digital learning experiences.
Speaker Change: For example.
Speaker Change: Example, online classes today offer interactions that mimic real life experiences in some of our online.
Speaker Change: Students will be divided into small groups for example.
Speaker Change: Four in cost discussions and then regroup again for the lectures.
Speaker Change: We have observed and impact on user engagement driven by such interactive features.
Speaker Change: Yes.
Speaker Change: Now coming back to user acquisition effectively reaching new users is always crucial and building.
Speaker Change: <unk> Dot com.
Speaker Change: As we continue to deepen our understanding of user needs and enhance our product offerings.
Speaker Change: Also improving our marketing efforts to better match, our products was user demands.
Speaker Change: Additionally, we're leveraging multiple marketing channels to connect with a broader audience of target customers.
Speaker Change: This increases users awareness of our offerings and attract more users to engage with our private domain operations and driving increased user conversion.
Looking at how we aim to further strengthen these efforts and build connections with our audience.
Timothy Zhao: Timothy I hope that answers your question.
Timothy Zhao: Thank you Jackson.
Speaker Change: Thank you for the questions.
Timothy Zhao: One moment for the next questions.
Felix Liu: Our next question comes from Felix Liu of UBS. Please go ahead.
Felix Liu: Hi, Good evening, good evening Jenny on behalf of 60 will probably best Fellows. Thanks management for taking my question and congrats on the <unk>.
Felix Liu: One quarter results.
Felix Liu: My question is regarding our Xiaomi device. So pharma third party data that shows the device that we're doing to please open. So could you. Please elaborate more on the reasons behind me strong sales performance and could management provide some updates from both the channel and product side.
Felix Liu: And management mentioned earlier is that do you expect revenue decline, England advising fourth quarter.
Felix Liu: Just wanted to confirm heavy declines year over year.
Felix Liu: Thanks, a lot.
Speaker Change: Hi, this is <unk>.
Alex Alex: Alex Let me take on the so first just on your last point.
Speaker Change: We expect.
Speaker Change: Learning devices revenue too.
Speaker Change: Have a decline quarter over quarter.
Speaker Change: Because the quarter, we just had.
Speaker Change: It's really the peak e-commerce season.
Speaker Change: So thats a quarter to quarter statement.
Speaker Change: Let me.
Speaker Change: Let me come back to.
Speaker Change: Main portion of your question right.
Speaker Change: I think our devices business.
Speaker Change: <unk>.
Speaker Change: So far year over year and quarter over quarter growth, especially during the ecommerce season.
And I think this growth is really.
Speaker Change: Attributable to.
Speaker Change: The growth and evolution of the industry as a whole.
Speaker Change: As I mentioned last time, we're seeing more.
Speaker Change: Players with.
Speaker Change: Great number of our capabilities coming into the market and they are driving the continued improvement on our products and if you look at the products today.
Speaker Change: They are really increasingly being look by parents as a valuable tool in the at home learning scenario and Thats, a very important part of the entire learning journey.
Speaker Change: <unk>.
Speaker Change: The products have.
Speaker Change: Quite a bit compared to even just a few years ago.
Speaker Change: It's still there.
Speaker Change: Todd.
Speaker Change: At home learning is still an area where user experience can be.
Speaker Change: Dangerously improve.
Speaker Change: So we believe there is a significant market potential.
Speaker Change: For this type of intelligent hardware solutions that combine <unk> software and hardware and content.
Speaker Change: Support this at whole self learning scenario.
Speaker Change: So in addition to that overall industry growth.
Speaker Change: Our product expansion and growing product capabilities. They also serve as a.
Speaker Change: <unk>.
Speaker Change: The second key growth driver.
Speaker Change: Based on what we've heard from users.
Speaker Change: Now launched three different types of ex Pat learning devices, one export this year.
Speaker Change: Or two.
Speaker Change: Different consumer segments and preferences.
Speaker Change: Different types of learning scenarios.
Speaker Change: And they offer a different selection of functionality performance and prices are ex pads are currently priced at 4000 6000 8000 RMB.
Speaker Change: Ex bucket just under 4000 RMB.
Speaker Change: And if you compare that to.
Speaker Change: The same periods last financial year.
Speaker Change: At that time, we will only offer one product.
Speaker Change: So by expanding our product range, we're meeting the diverse needs of more users right.
Speaker Change: Our focus has always been.
Speaker Change: <unk>.
Speaker Change: <unk>.
Speaker Change: A lot of it has been on product design hardware innovation.
Speaker Change: With every new product launch to really ensure that.
Speaker Change: Students children can use the tools efficiently.
Speaker Change: And safely.
Speaker Change: For example.
Speaker Change: The book.
Speaker Change: <unk> was a few unique features.
Speaker Change: That prototype prioritize safety and usability.
Speaker Change: The export comes with a.
Speaker Change: Electromagnetic stylus pen.
And this really desire.
Speaker Change: Children proof.
Speaker Change: Teachers.
If you chew on the tariff.
Speaker Change: There are safety features.
Speaker Change: And they come with different types of nips.
Speaker Change: To really provide a very smooth.
Speaker Change: And.
Speaker Change: And actual pen and paper writing type of experience.
Speaker Change: We placed a.
Speaker Change: Three way toggle button at the top of the X book also.
Speaker Change: So users can quickly switch between study proctors are reading molds.
Speaker Change: And this really helps ensure that children can stay focused and fully immersed in.
Speaker Change: In each mode.
Speaker Change: Beyond that we're.
Speaker Change: We're continuously integrating.
Speaker Change: Artificial intelligence models.
Speaker Change: Our capabilities across all of our smart devices.
Speaker Change: These devices serve Sn.
Speaker Change: Great platform.
Speaker Change: For deploying AI features and seamlessly connecting content.
Speaker Change: AI and user data to.
Speaker Change: To really help realize their full potential.
Speaker Change: Let me share a few specific functional smart devices updates.
Speaker Change:
Speaker Change: First.
Speaker Change: We're constantly updating our intelligent assistant shell suit.
Speaker Change: <unk> integrated in all.
Speaker Change: Across these different types of learning devices.
Speaker Change: And that will support <unk>.
Speaker Change: Seniors.
Speaker Change: Opex base.
Speaker Change: Iowa.
Speaker Change: It provides answers to students queries assist with English speaking proctors and offers.
Speaker Change: Lee.
Speaker Change: A supportive companionship.
The learning.
Speaker Change: Journey. So during the 12 month ended on November 27th 2024.
Speaker Change: She also had been activated a total of 230 million times.
Speaker Change: Jackson mentioned, our homework corruption pools.
Speaker Change: In that same period.
Speaker Change: They've bought $75 million.
Speaker Change: Mistakes and corrections.
Speaker Change: <unk> performed over 25 million words lockups.
Speaker Change: And provided about 6 million SA corrections.
Speaker Change: These are big numbers right, but usually these features.
Speaker Change: Not only support students in learning efficiently a whole, but also they really are aimed at easing the burden on parents.
Speaker Change: Our deepening understanding of the users is really empowered us to create personalized learning profile for children are learning devices.
Speaker Change: These profiles that really.
Speaker Change: Can help us deliver more Turkish support.
Speaker Change: More targeted and more effective learning plans.
Speaker Change: For each trial.
Speaker Change: Taylor to Dodge House need.
Next just a quick word about constant.
Speaker Change: I mentioned this a few times.
Speaker Change: Content.
Speaker Change: Really is critical to these devices and we are committed to long term.
Speaker Change: Building up these concepts.
Speaker Change: Obviously provides.
Speaker Change: High quality first party content library, which has been accumulated over the years and we also work actively.
Speaker Change: Third party content providers through partnerships and together, we aim to create a powerful.
Speaker Change: <unk>.
Speaker Change: Synergistic content offering.
Speaker Change: To our customers.
Speaker Change: Finally and in.
Speaker Change: In the third quarter of fiscal year.
Speaker Change: As I mentioned this is traditionally the peak season for E Commerce.
Speaker Change: We've also focused our attention on managing our sales channels and optimizing our marketing strategies.
Speaker Change: <unk>.
While we closely monitor our online channels your frequency we also started exploring.
Speaker Change: Offline opportunities.
Speaker Change: To really further expand our.
Speaker Change: Our customer reach and back to an earlier point that I made to really provide more touch points and opportunity is to have that conversation.
Speaker Change: What customers so Phyllis I hope that answers the question.
Speaker Change: Yes.
Speaker Change: Thank you for the questions one moment for the next questions.
Speaker Change: Our next question comes from Kenneth Chen from Daiwa. Please go ahead.
Speaker Change: Hi, Alex and Justin Thank you if I can keep taking my question.
Speaker Change: I think this quarter.
Speaker Change: 2% top line growth can you shed more light on the revenue.
Speaker Change: Some de risked at this mine and also some comments for the following.
Speaker Change: What else would be great. Thank you.
Kenneth Thanks, a lot.
A question. This is Jackson, let me take this one.
Speaker Change: Yeah.
Speaker Change: We have two main business lines learning services and others.
Speaker Change: Content solutions.
The revenue generated from both business lines.
Speaker Change: In this quarter experienced year over year growth.
Speaker Change: And if we look at the first nine.
Speaker Change: Nine months.
Speaker Change: <unk> 2025, the mix between these two business lines remained largely stable.
Speaker Change: Year over year.
Speaker Change: When you compare to the same period last year.
Speaker Change: Now for payroll enrichment small class programs and four.
Speaker Change: Smart learning devices. Those two are the largest revenue contributors.
Key revenue growth drivers for learning services and content solutions, respectively.
Speaker Change: Respectively.
Speaker Change: Solutions, respectively. We remain dedicated to delivering high-quality enrichment learning services, advanced hardware, and engaging content to more users.
Thank you.
Speaker Change: Smart learning devices revenue was up this quarter during the e-commerce peak season. The contributing factors were already covered by Alex earlier, so I won't repeat that again. As for payo, enrichment, small class learning, in recent quarters, we have observed year-over-year growth in this business.
Thank you.
Speaker Change: We've already covered the particulars of this business, but as far as our growth drivers, including market demand, our service quality, and our capability to recruit and train lecturers,
Speaker Change: As long as these are still in play, we expect growth in this business line to continue. That said,
Speaker Change: Candice, you asked about long-term trend. We do expect payo enrichment's long-term growth rate to gradually taper off going forward as we're comparing to higher base numbers than a couple of years ago.
Speaker Change: From a broader perspective, we believe a company's growth and development are fundamentally tied to the value it creates.
Speaker Change: both for its users and for the society. This principle is embedded in every aspect of a business, large and small. At both the company and industry levels, we view revenue growth as a
Speaker Change: direct outcome of improved innovation, product capabilities, organizational efficiency, and operational effectiveness. So I hope that answers your question, Candice.
Thank you.
Thank you for the questions.
Speaker Change: Our last question comes from the line of Li Bingchao from CICC. Please go ahead.
www.zeoranger.co.uk
www.zeoranger.co.uk
Speaker Change: Good evening, Alex and Jackson. Thanks for taking my question. I noticed the company is currently at a breakeven level in terms of profits. Could you provide some insights into the bottom line, please? LA plans to improve margins moving forward. Thank you.
Thank you.
Speaker Change: This is Jackson and thanks for the question, Li Ping. It's a good question and a complicated one. You know, we have developed multiple business lines around enrichment learning, around technology-powered smart learning solutions.
Speaker Change: Each business is at a different stage with its own set of priorities and parameters.
Speaker Change: For instance, in the learning device business, we're still exploring and validating user value. Our priority there is to closely track user feedback, net promoter score, and engagement.
Speaker Change: Although our learning device business is still operating at a loss,
Speaker Change: It remains a key long-term strategic initiative. We will continue investing in this area, launching new products, building content, crafting AI-driven experiences, and iterating on a regular basis.
Thank you.
Speaker Change: On the other hand, our payo small class enrichment learning business is more mature, with a relatively stable profit margin. The company's overall margin is influenced by the mix of its different business lines, so it's a little hard to generalize.
Going forward...
Speaker Change: with high long-term strategic value. By combining technology and learning, we aim to develop an enhanced experience for all users. This requires us to commit to continuous innovation.
Speaker Change: The challenging opportunity for us is realizing this mission while balancing growth and efficiency.
So, some of our early stage businesses.
will continue to operate at a loss.
for a while as we focus on user experience.
Speaker Change: We believe this allows us to expand our current operations while building a solid foundation for long-term competitiveness. This will also enable us to be well-positioned to capture the market opportunities and deliver long-term value.
Speaker Change: However, from a group perspective, we will continue to proactively address
Speaker Change: this challenge and opportunity by closely monitoring the efficiency metrics in all business factors.
Speaker Change: and make timely adjustments to optimize various factors in our operations.
Speaker Change: including, you know, content generations, product R&D, sales and marketing, and more.
Li Ping, I hope that answers your question.
Thank you very much.
Speaker Change: Thank you for the questions. That concludes the Q&A session. I'd like to hand the call back to the management for closing.
Speaker Change: So again, thanks to everybody for joining us today, and we bid everybody an early happy Chinese New Year, and we'll see you next quarter. Bye-bye.
Speaker Change: That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
Thank you.
Speaker Change: [music].