Q4 2024 17 Education & Technology Group Inc Earnings Call

Mr. Shao: Today's conference call is being recorded I will now turn the meeting over to your host for today's call. Mr. Shao 17 at <unk> Investor Relations manager. Please proceed Laura.

Mr. Shao: Thank you operator, Hello, everyone and thank you for joining US today, our earnings release was distributed earlier today and is available on our IR website. Joining us today are Mr. Michael do director and the Chief Financial Officer, and myself Investor Relations manager.

Mr. Shao: Michael will walk you through lately is the business performance and strategies and I will discuss our financial performance in more detail.

Mr. Shao: After their prepared remarks, Michael well be available to answer your questions during the Q&A session.

Mr. Shao: Before we begin I'd like to remind you that this conference call contains forward looking statements as defined in section 21 E of the Securities Exchange Act of 19 City fault and the U S. Private Securities Litigation Reform Act of 1995. These forward looking statements are based upon management's current expect.

Mr. Shao: Patients and current market and operating conditions and relates to events that involve known and unknown risks uncertainties and other factors all of which are difficult to predict and many of which are beyond the company's control.

Mr. Shao: These risks may cause the company's actual results performance or achievements to differ materially.

Mr. Shao: Information regarding these and other risks uncertainties and factors is included in the Companys filings with the U S. SEC The company does not undertake any obligation to update any forward looking statements as a result of new information future events or otherwise, except as required and ethics.

Michael: The law I will now turn the call over to our director and Chief Financial Officer to review some of our business development and strategic direction. Michael. Please go ahead.

Michael: Thank you Laura Hello, everyone. Thank you all for joining us on our fourth quarter 2024.

Michael: Earnings call.

Michael: Before we begin I would like to note that the financial information and the non-GAAP numbers I'm just relieved that presented on a continuing operation basis.

Michael: The RMB unless otherwise stated.

Michael: Let me start with our latest updates.

Michael: We achieved strong results with year over year topline growth of 11% to RMB $189 two.

Michael: 2 million for the full year.

Michael: Driven by our strategic market expansion and new contract positions.

Michael: Revenues for the fourth quarters were RMB $36 6 million refract, reflecting.

Michael: 23% decrease from that.

Michael: Same quarter previous year, primarily due to a reduction in net revenues from history level flagship projects.

Michael: As we prioritize our resource and our school based projects under a subscription model, which typically would generate revenues over a longer period.

Michael: Meanwhile, our sauce subscription business model, maintaining an upward trend as evidenced by three digit growth compared to the same quarter last year bolstered by strong retention rates and the multiyear subscription burden.

Michael: So rigorous cost optimization and leveraging economies of scale operating expenses decreased by 34% from the same quarter of last year, resulting in a 35% reduction in net loss on a GAAP basis.

Michael: As we enhance our products and services through AI for improved automation and user experiences. We have received positive feedback and market recognition looking ahead with a strong pipeline.

Michael: How's the products and our customer centric roadmap, we are well positioned to deliver sustainable growth and industry, leading innovations in the future.

Michael: Okay.

Michael: Now please allow me go into more details.

Michael: Our original flagship project delivery and a new contract acquisitions during this quarter, our teaching and learning as hospitals for district level projects continue to make steady progress through successful delivery and new contract acquisitions.

Michael: Major projects have successfully delivered and contributes significantly to the overall revenue.

Michael: We have a continue to wane teaching and learning sauce projects. This quarter further demonstrating the strong customer stickiness of off offering.

Michael: Such projects, we expand our services to cover more schools was increased number of students in those existing histories and new ones.

Michael: It further demonstrate our capacity between the house version of our education quality and efficiencies through scalable high quality solutions and it plays in the exam example of Terry Brown with four other potential clients to adopt our products.

Michael: Our accelerated growth in school based subscription model.

Michael: Meanwhile, our school based subscription model have witnessed record gross was triple digit growth in terms of the number of students newly subscribed year over year.

Michael: We have also identified an extensive opportunity pipeline that I expect it to continue to expand our school coverage.

Michael: Fisher model scales, it's increasingly contributes to our overall revenue, reflecting strict strategic importance any trigger of ROE to our overall strategy.

Michael: This upward trajectory not only contributes significantly to our revenue, but also in your house custom engagement and loyalty.

Michael: For our customers, whose contract subject to renew though more than 90% have decided to continue to subscribe.

Michael: Even decide to subscribe with a further expanding coverage.

Michael: Such highly recurring subscription together with opportunity to upsell additional value added services have pay without visible pathway for sustainable and healthy gross.

Michael: Synergies across business lines, the synergies across our regional such a project and the school based subscription model initiatives.

Michael: Have driven our product innovations into a virtuous cycle of our business groups.

Michael: Flagship district, teaching and learning science projects not only in not only for Rancho among authorities considering projects of similar nature, but also help us build up strong use case for our school based subscription model our potential client base. They further generate insights that allow us to continuously enhance our school based sauce.

Michael: Offering products.

Michael: Wow customer feedbacks driver ETA radio products upgrades and a breakthrough innovations. This integrated approach as opposed to the operational agility positioned us to seize emerging opportunities and to deliver scalable solutions.

So our product and service offerings, we are committed to enhance our products and service offerings to improve customer satisfaction.

Michael: Our focus on innovation and capabilities to deliver premium learning products has driven us to refine our two channel learning source solutions ensure efficiency and high quality development. During this quarter, we have further advanced our offerings through the following strategic improvements.

Michael: Unified data ecosystems, we have advanced cross domain data integration by leveraging granularly insights into across education ecosystem, including classroom interactions assignments.

Michael: And assessments and the valuations sort of standardized data collection, we have built a cohesive multi scenario data framework that maximize analytical utility.

Michael: Scale product portfolio.

Michael: Building on this foundation, our data driven product portfolio now can Max teaching application was the resource centers that streamline lesson planning and capture comprehensive instructional d'etats zero debt.

Michael: Following segments.

Michael: Small school base walkable for capturing detailed lesson data.

Michael: Adaptive prepare pan.

Michael: System supporting flexible daily practice with digital tracking capabilities.

Michael: Precision fast food platforms tailored for high Stakes testing in a benchmarking.

Michael: Personal lines the learning solutions.

Michael: For smart learning curves individual practice Brooks and a comprehensive evaluation dashboards for competency based teaching them the analytical providing for educators and the managers across all scenarios.

Michael: And you have the data value automated accumulation and intelligent distribution of teaching resources data knowledge dresses diverse learning needs, while maintaining long term data integrity.

Michael: Lots of do no analysis ensure academic quality monitoring wild process, Oregon oriented data exploration abuse holistic student profiles and enables effective competency in a competency based evaluation.

Michael: By aligning data infrastructure with scalable solutions, we are now empowering educators, who make evidence based decisions while preparing students for future writing learning spaces.

Michael: In this quarter, we have initiated a targeted internal pilot of our AI powered the learning diagnostic agent leveraging state of the art large language models to analyze student performance data and how teachers being pretty efficiency in class preparation and homeward correction.

Michael: It generates personal lines explanations will come when mistakes and recommended tailor teaching strategies.

Michael: Initial data shows that twos potential to streamline instruction of workflow and improve learning outcomes by enabling teachers too.

Michael: Efficiently interpret and utilize data, thereby enhancing teaching effectiveness and improve the quality of education.

Michael: Things are gration of AI marks a significant step forward in optimizing teaching practice and their learning outcomes with our offerings.

Michael: In terms of distribution channels.

Michael: We have always intensified our focus on strategic market penetration so channel diversification in the customer.

Michael: Century innovations by aligning product development was emerging education trends.

Michael: And optimizing distribution network, we have improved our customer acquisition efficiency.

Michael: Moreover, our multichannel marketing initiatives and our strategic partnership have further solidified our presence in high growth markets positioning us for sustainable sustained development.

Michael: Now I will turn the call over to Laura to walk you through our latest financial performance. Thank you.

Laura: Thanks, Michael and thank you everyone for joining the call I will now walk you through our financial and operating results. Please note that all financial data I talk about will be presented in RMB terms I would like to remind you that our quarterly results. We present here should be taken with care and the reference to our potential future.

Laura: Performance are subject to potential impactful from seasonality and one off events as a result of the series of regulations introduced in 'twenty, 'twenty, one and corresponding adjustment to our business model organization and workforce.

Laura: In the physical year of 'twenty 'twenty four we recorded net revenues of 118, $89 2 million RMB compared with 171.0 million RMB into southern Ninja and history, representing a 10, 7% of the increase year over year basis.

Laura: Net revenue for the fourth quarter of 'twenty to 'twenty four was.

Laura: RMB $36 6 million compared with 46, $47 3 million in the fourth quarter of 'twenty 'twenty four net loss on a GAAP basis for the fourth quarter of 'twenty 'twenty four was RMB $63 7 million compared with 98 point for many arm being the fourth quarter of two.

Laura: 1923, representing a decrease of 35.2 year on year. The adjusted net loss non-GAAP for the first quarter of 'twenty 'twenty four was $40 1 million compared with adjusted net loss non-GAAP of 81.8 million RMB in the fourth quarter of 2023.

Laura: A decrease of 51.0 there on yet.

Laura: Gross margin for the first quarter of 'twenty 'twenty four was three 6% compared with 43, 4% in the first quarter of 'twenty to 'twenty three.

Laura: The relatively lower gross margin. This quarter is mainly attributable to the delivery of RMB nine 9 million legacy moral education project, which did not include the typical components of our teaching and learning offering and that's had a lower margin dragging down the overall margin.

Laura: This project was as a result of his his history historical attempt and no longer a core offering for us.

Laura: As of December 31st 2024, we have cash reserves.

Laura: Hum of 359, 3 million RMB or better balance sheet.

Laura: Next I will go through our first quarter financials in greater detail.

Laura: Net revenues net revenues for the first quarter of 2020 full was RMB $66 6 million, representing a year over year decrease of 22, 7% from 47 3 million in the fourth quarter of 2023. This was mainly due to the redact.

Laura: Sure and that revenues from district level project as we prioritize our resources our school based project under a subscription model.

Laura: And up to a higher.

Laura: Higher proportion of contract and assess the SaaS subscription model, we signed in the first quarter of 22, when they fall, which requires a longer period of revenue recognition.

Laura: Cost of revenue for the fourth quarter of 2024 was $24 3 million RMB, representing a year over year decrease of nine 2% from 26.8 million in the fourth quarter of 2023, which was mainly due to the sale of district level project deliveries for fall out.

Laura: <unk> learning SAS offerings as a result of the growing proportion of recurring revenue and the subscription model that requires fewer hardware and software deliveries.

Laura: Gross margin gross profit for the first quarter of 2024 was $12 3 million RMB compared with 26 million in the first quarter of 2023 gross margin for the first quarter of 'twenty 'twenty four was set his 3.6% compared with.

Laura: 43, 6% in the fourth quarter of 2023.

Laura: Operating total operating expenses total operating expenses for the first quarter up 2020 folks were 81 4 million RMB, including $15 5 million of share based.

Laura: Share based compensation expenses, representing a year over year decrease of 33.8% from from.

Laura: From $122 8 million in the first quarter of 2023.

Laura: Net loss from a loss from operations.

Laura: Loss from operations for the first quarter of 'twenty 'twenty, four was $69 1 million RMB compared with 100 and.

Laura: 102, 3 million in the first quarter of 'twenty to 'twenty three.

Laura: Loss from operations as a percentage of net revenues for the first quarter of 'twenty 'twenty four.

Laura: For the first quarter of 2024 was negative 188, 8% compared with negative 200, 200, and a 16.0% in the fourth quarter of 2023.

Laura: Net loss for the first quarter 'twenty 'twenty four was $63 7 million compared with net loss of 98 point for many in the first quarter of 2023.

Laura: Net loss as a percentage of net revenues was negative 174, 2% in the first quarter of 'twenty 'twenty four compared with negative 207, 9% in the fourth quarter of 2023.

Laura: Adjusted net loss non-GAAP for the first quarter of 'twenty 'twenty four was 41 million RMB compared with adjusted net loss non-GAAP of 81.8 million RMB in the fourth quarter of 2023.

Laura: Adjusted net loss non-GAAP as a percentage of net revenues was negative 109, 5% in the first quarter of 'twenty 'twenty, four compared with negative 170% to 72.8% of adjusted net loss non-GAAP as a percentage of net revenues in the fourth quarter of 2012.

Laura: This rate please.

Laura: Please refer to the table captioned reconciliation of non-GAAP measures to the most comparable GAAP measures at the end of this press release for a reconciliation of net loss and a U S. GAAP to the adjusted net loss non-GAAP.

Laura: Cash and cash cash and cash equivalents restricted cash and term deposits were $359 3 million RMB.

Laura: It was $49 2 million U S. Dollar as of December 31st 2024, compared with 400 and $476 7 million as of December 31st 2023.

Laura: Isn't it.

Laura: As we look to as we look to the future we remain steadfast in our commitment to advancing educational digital digitalization.

Laura: Nation, and engaging learning experiences with our strength in our core business operations, while exploring new opportunities through dual focus on innovation and sustained it rose by prioritizing AIG then solutions, we aim to redefine personalized AD patients and Ian.

Laura: Our learners teachers and educators with valuable insights.

Laura: With that that concludes that concludes our prepared remarks. Thank you operator, we are now ready to begin the Q&A session. Thank you.

Speaker Change: Thank you so much dear participants as a reminder, if you wish to ask a question. Please press star one bond on the telephone keypad and wait for name to be announced to withdraw your question. Please press star one again.

Speaker Change: Once again, if you wish to ask a question. Please press star one on your telephone keypad and wait for a name to be announced at least in Babil composite can narrow studies will take a few moments.

Speaker Change: Yeah participants as you might think.

Speaker Change: Your question. Please press star one one.

Speaker Change: Speakers there are no questions at this time I would now like to hand, the conference over to the management team for any closing remarks.

Speaker Change: Thank you operator in closing on behalf of 17 add tax management team, we'd like to thank you for your participation on today's call. If you require any further information please feel free to reach out to us directly. Thank you for joining us today.

Speaker Change: This concludes the call.

Speaker Change: This concludes today's conference call. Thank you for participating you may now all disconnect have a nice day.

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