Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TAL Education Group (TAL, Financial) reported a significant year-over-year increase in net revenues, with a 50.4% rise in USD terms and 50.8% in RMB terms.
- The company launched a new learning device, Xbook, which has gained market acceptance and is contributing to financial growth.
- TAL's Peiyou small class offerings, a major revenue contributor, showed strong enrollment growth, supported by expanded operational capacity.
- The company is actively investing in AI and technological innovation to enhance personalized learning experiences and expand its product offerings.
- TAL Education Group (TAL) maintains a strong cash position with $2.0859 billion in cash and cash equivalents, supporting its strategic initiatives and growth plans.
Negative Points
- Gross margin decreased to 56.3% from 58.9% year-over-year, indicating potential pressure on profitability.
- The learning device segment is currently loss-making, with significant investments in R&D and selling expenses.
- Selling and marketing expenses increased by 56.4% year-over-year, impacting overall profitability.
- The fiscal third quarter is expected to experience seasonal fluctuations, which may affect business performance.
- The company faces competition from full-stack players in the learning device market, which could impact market share and pricing strategies.
Q & A Highlights
Q: Could you share more color on the growth momentum and operating efficiency of your learning service business? What is your outlook for learning service from here?
A: Alex Peng, President & CFO, explained that the enrichment learning business has seen continued growth due to increasing demand from a new generation of parents focused on holistic child development. The business is experiencing growth in user interest and engagement. Jackson Ding, Deputy CFO, added that Peiyou's small class offerings are the largest contributor, driven by service quality and lecturer recruitment. They aim to maintain efficiency and expect growth to continue, although at a tapering rate due to higher base numbers.
Q: Is the learning device segment profitable, and what is the strategy to enhance profitability?
A: Alex Peng stated that the learning device business is currently loss-making, with major costs in R&D, selling expenses, and materials. They are investing in R&D to enhance user experience and content. The focus is on expanding the user base and engagement, with a weekly active rate of around 80%. While exploring new revenue opportunities, they prioritize user experience and product quality.
Q: How do you view the competitive landscape for learning devices, and has the sales and marketing expense per device increased?
A: Alex Peng noted confidence in their learning device products, emphasizing innovation and user engagement. The entrance of full-stack players is expected to enhance user experience and awareness. They focus on product competency and efficient customer communication. Sales and marketing expenses have increased in some channels but remain stable in others.
Q: Could you share your upcoming investment plans in AI, particularly in the learning device sector?
A: Alex Peng highlighted the focus on leveraging data and developing AI-powered applications. They have invested in infrastructure, talent, and data, with future investments focusing on the application layer. Recent AI-powered features include MathGPT for enhanced learning efficiency. They plan to roll out new applications and upgrades.
Q: Could you elaborate on the xueersi.com business and its long-term growth outlook?
A: Jackson Ding explained that the online learning industry is evolving with increasing demand for enrichment learning. Xueersi.com focuses on product quality and innovation, offering science and technology programs. They are exploring various product formats and investing in online enrichment capabilities. The business is in an exploration phase for unit economics and aims to balance growth and profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
