TAL Education Group (TAL) 2023 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to TAL Education Group Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a Q&A session. Please be informed that today's conference is being recorded. I would now like to hand the conference over to Mr. Jackson Ding, Investor Relations Director. Thank you. Please go ahead, sir.

美好的一天，感謝您的支持。歡迎來到好未來教育集團 2023 年第二季度收益電話會議。此時，所有參與者都處於只聽模式。演講者演講結束後，將進行問答環節。請注意，今天的會議正在錄製中。我現在想把會議交給投資者關係總監 Jackson Ding 先生。謝謝你。請繼續，先生。

Thank you, operator. Ladies and gentlemen, thank you all for joining us today for TAL Education Group's First Quarter Fiscal Year 2023 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 newswires. During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer of TAL; and myself, Investor Relations Director. Following the prepared remarks, Alex and I will be available to answer your questions. Before we continue, 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 1995. 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 public filings with the SEC. For more information about these risks and uncertainties, please refer to our filings with the SEC. 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. I would like to now turn the call over to Mr. Alex Peng. Alex, please?

謝謝你，接線員。女士們先生們，感謝大家今天參加好未來教育集團 2023 財年第一季度收益電話會議。財報發佈於今天早些時候，您可以在公司的 IR 網站或通過新聞專線找到一份副本。在本次電話會議中，您將聽到好未來總裁兼首席財務官 Alex Peng 先生的講話；和我自己，投資者關係總監。在準備好的評論之後，我和亞歷克斯將可以回答您的問題。在我們繼續之前，請注意今天的討論將包含根據 1995 年美國私人證券訴訟改革法案的安全港條款作出的前瞻性陳述。前瞻性陳述受風險和不確定性的影響，可能導致實際結果出現重大差異從我們目前的預期。潛在風險和不確定性包括但不限於向 SEC 提交的公開文件中概述的風險和不確定性。有關這些風險和不確定性的更多信息，請參閱我們提交給 SEC 的文件。此外，我們的收益發布和本次電話會議還包括對某些非公認會計原則財務措施的討論。請參閱我們的收益發布，其中包含非 GAAP 指標與最直接可比的 GAAP 指標的對賬。我現在想把電話轉給 Alex Peng 先生。亞歷克斯，好嗎？

Thank you, Jackson. Thank you all for joining us on today's call. I would like to again take this opportunity to express my gratitude for your continued attention to and support for TAL's transformation journey. This quarter, we continue to execute our development strategy as we proceed on our new journey and have made meaningful progress. Let's first start with the numbers. We recorded $294.1 million in revenue for the quarter. As a result of our top line expansion for the fiscal quarter ended on August 31, 2022, we recorded $42.3 million and $26.6 million in non-GAAP operating income and non-GAAP net income attributable to TAL, respectively.

謝謝你，傑克遜。感謝大家加入我們今天的電話會議。再次藉此機會感謝大家一直以來對好未來轉型之路的關注和支持。本季度，我們繼續執行我們的發展戰略，繼續我們的新征程，並取得了有意義的進展。讓我們首先從數字開始。我們本季度的收入為 2.941 億美元。由於我們在截至 2022 年 8 月 31 日的財政季度的營收擴張，我們分別錄得 4230 萬美元和 2660 萬美元的非公認會計原則營業收入和 2660 萬美元歸屬於好未來的非公認會計原則淨收入。

This quarter, we updated our mission statement from 'love and technology make education better' to 'to empower life-long growth with love and technology'. This update of our mission statement reflects our continued commitment towards caring for our customers and toward technological innovations. It also reflects our exploration of new initiatives in and beyond the learning solutions market. We believe this new mission inherits our traditions while setting the path for our future development. We've been empowering our users life-long growth through providing learning services, learning content solutions and learning technology solutions since inception, and will continue to empower their life-long growth through learning and beyond. Now I will pass the floor to Jackson to share more color on our operational developments and the financial performance of each of our core business lines. Afterwards, I will update you on our business strategy, and then we'll open the floor for questions. Jackson, please go ahead.

本季度，我們將使命宣言從“愛與科技讓教育變得更好”更新為“用愛與科技賦能終身成長”。我們使命宣言的更新反映了我們對關愛客戶和技術創新的持續承諾。它還反映了我們對學習解決方案市場內外的新舉措的探索。我們相信，這一新使命繼承了我們的傳統，同時為我們的未來發展指明了道路。自成立以來，我們一直通過提供學習服務、學習內容解決方案和學習技術解決方案來賦能我們的用戶終身成長，並將繼續通過學習和超越來賦能他們的終身成長。現在我將請傑克遜發言，就我們的運營發展和每個核心業務線的財務表現分享更多色彩。之後，我將向您介紹我們的業務戰略，然後我們將開始提問。傑克遜，請繼續。

Thank you, Alex. I'm pleased to share with you some more details on the progress we made in our 3 main business lines in this quarter. Before we start, please note that the financial data for each business line mentioned below is based on unaudited data for the quarter. Let's start with learning services and other, which primarily consists of learning programs we provide in various class sizes, both online and offline. This includes Peiyou small class, Xueersi.com, Think Academy and other learning services businesses. This quarter, learning services and other accounted for approximately 75% of the total net revenue, maintaining its status as our largest revenue contributor. Quarter-over-quarter, revenue from learning services showed a healthy growth momentum. The top line growth of our learning services business was a result of our effort to fine-tune our product offerings and operational efficiency, compounded by seasonal fluctuation due to school holidays.

謝謝你，亞歷克斯。我很高興與您分享本季度我們在 3 個主要業務領域取得的進展的更多細節。在我們開始之前，請注意下面提到的每個業務線的財務數據是基於該季度未經審計的數據。讓我們從學習服務和其他開始，它主要包括我們提供的各種班級規模的學習計劃，包括在線和離線。這包括培優小班、學而思網、Think Academy等學習服務業務。本季度，學習服務和其他業務約佔總淨收入的 75%，保持了我們最大的收入貢獻者的地位。學習服務收入環比呈現健康增長勢頭。我們學習服務業務的收入增長是由於我們努力微調我們的產品和運營效率，加上學校假期造成的季節性波動。

Within learning services for enrichment learning, we continue to optimize our user experience and operating metrics by improving service quality of our existing programs while also expand our program offerings. In this quarter, we saw increase in retention rates in multiple programs. While retention rates still vary by program, we're working towards achieving healthy retention rates across the board. At the same time, we also continued to launch new enrichment programs. Some newly launched courses such as natural science learning and international chess have shown a good momentum in terms of enrollment growth. With respect to our overseas learning services, I'm delighted to share with you that Think Academy is still maintaining a triple-digit year-over-year growth rate. While the ongoing epidemic has profoundly impacted the learning habits of students and parents around the world. It also created incredible opportunities across all aspects of learning, spurring demand for high-quality learning products and services. To better address this market demand in various overseas markets, we have focused on developing effective localized learning service offerings, leveraging our technology capabilities and our expertise in learning.

在豐富學習的學習服務中，我們通過提高現有計劃的服務質量，同時擴展我們的計劃產品，繼續優化我們的用戶體驗和運營指標。在本季度，我們看到多個項目的保留率有所提高。雖然保留率仍因計劃而異，但我們正在努力實現全面健康的保留率。同時，我們也不斷推出新的充實計劃。自然科學學習、國際象棋等一些新開辦的課程在招生增長方面表現出良好的勢頭。關於我們的海外學習服務，我很高興與大家分享，Think Academy 仍然保持著三位數的同比增長。而持續的流行病已經深刻影響了世界各地學生和家長的學習習慣。它還在學習的各個方面創造了難以置信的機會，刺激了對高質量學習產品和服務的需求。為了更好地滿足各個海外市場的市場需求，我們專注於開發有效的本地化學習服務產品，利用我們的技術能力和我們在學習方面的專業知識。

Moving on to our learning content solutions business, which provides learning content in print, digital and hardware formats to address diverse demand across various user groups. The content themselves are either created in-house, licensed or acquired from our global and domestic partners. In this quarter, our content solutions business accounted for around 15% of the total net revenue, representing a larger share of our overall revenue and exhibiting encouraging quarter-over-quarter growth. The top line growth of our content solutions business was a result of our product suite and go-to-market channel expansion, compounded by seasonality fluctuation due to school holidays and shopping holidays. In the last quarter, I talked about smart books, the products where we embed videos into print books to supplement the learning experience of our users. We continue to receive positive customer feedback on smart books. For this past summer holidays, we rolled out summer-specific smart books that decompose the learning experience into weekly -- and in some instances, daily -- programs. As smart books break the learning experience into engaging and interactive bite sizes, students are more likely to engage and finish the programs. We sold hundreds of thousands in volumes of smart books in this quarter.

繼續我們的學習內容解決方案業務，該業務提供印刷、數字和硬件格式的學習內容，以滿足不同用戶群體的不同需求。內容本身是在內部創建、許可或從我們的全球和國內合作夥伴處獲得的。本季度，我們的內容解決方案業務佔總淨收入的 15% 左右，占我們總收入的較大份額，環比增長令人鼓舞。我們的內容解決方案業務的收入增長是由於我們的產品套件和上市渠道擴張，加上學校假期和購物假期造成的季節性波動。在上個季度，我談到了智能書，我們將視頻嵌入到印刷書籍中以補充用戶學習體驗的產品。我們繼續收到客戶對智能書的積極反饋。在過去的這個暑假中，我們推出了針對暑假的智能書籍，將學習體驗分解為每週——在某些情況下，每天——計劃。隨著智能書籍將學習體驗分解為引人入勝的互動式小規模，學生更有可能參與並完成課程。我們在本季度售出了數十萬冊智能書。

Finally, let's look at our learning technology solutions business, which provides a full suite of enterprise-grade technology products and services for learning institutions. Its revenue accounted for less than 10% of our total net revenue, primarily due to seasonal demand fluctuation from our institutional clients driven by school holidays.

最後再來看看我們的學習技術解決方案業務，它為學習機構提供全套企業級技術產品和服務。其收入占我們總淨收入的不到 10%，主要是由於學校假期驅動的機構客戶的季節性需求波動。

Now, let's switch gears a bit and let me talk you through the key financial results for the quarter. Our total net revenue was $294.1 million, representing a 79.6% decrease from $1,443.9 million in the same period last year. The decline in revenue was primarily driven by the cessation of our K-9 AST services on the academic subjects in the mainland of China. Year-over-year, gross profit declined by 69% to $176.9 million from $571.3 million in the same period last year, while our gross margin increased from 39.6% to 60.2%. Selling and marketing expense decreased by 74.8% to $78.1 million from $309.7 million in the same period last year. Non-GAAP selling and marketing expenses, which excluded share-based compensation, decreased by 75.5% year-over-year to $69.8 million from $285.2 million in the same period last year. The year-over-year decrease was primarily a result of the reduction in marketing promotion activities. General and administrative expenses decreased by 73.7% to $97.2 million from $356.5 million in the second quarter last year. Non-GAAP general and administrative expenses, which excluded share-based compensation costs, decreased year-over-year by 74.4% to $80.7 million from $314.9 million in the same period last year. Income from operations was $14.9 million compared to loss from operations of $379.9 million in the second quarter of fiscal year 2022. Non-GAAP income from operations, which excluded share-based compensation expenses, was $42.3 million, compared to non-GAAP loss from operations of $313.4 million in the same period last year. The year-over-year increase in operating profitability was primarily driven by our continuing effort to optimize our operation efficiency. Net loss attributable to TAL was $0.8 million in this quarter compared with net loss attributable to TAL of $826.5 million in the same period last year. Non-GAAP net income attributable to TAL, which excluded share-based compensations, was $26.6 million compared with non-GAAP net loss attributable to TAL of $760.1 million in the same period of last year.

現在，讓我們換個角度來看一下本季度的主要財務業績。我們的總淨收入為 2.941 億美元，比去年同期的 14.439 億美元下降 79.6%。收入下降主要是由於我們停止了中國大陸學術科目的 K-9 AST 服務。與去年同期相比，毛利潤從去年同期的 5.713 億美元下降 69% 至 1.769 億美元，而我們的毛利率則從 39.6% 上升至 60.2%。銷售和營銷費用從去年同期的 3.097 億美元下降 74.8% 至 7810 萬美元。不包括基於股票的薪酬的非美國通用會計準則銷售和營銷費用從去年同期的 2.852 億美元同比下降 75.5% 至 6980 萬美元。同比下降主要是營銷推廣活動減少所致。一般和行政費用從去年第二季度的 3.565 億美元下降 73.7% 至 9720 萬美元。非美國通用會計準則一般和行政費用（不包括基於股份的薪酬成本）從去年同期的 3.149 億美元同比下降 74.4% 至 8070 萬美元。運營收入為 1490 萬美元，而 2022 財年第二季度的運營虧損為 3.799 億美元。非 GAAP 運營收入（不包括股權激勵費用）為 4230 萬美元，而非 GAAP 運營虧損為去年同期為 3.134 億美元。經營盈利能力的同比增長主要是由於我們不斷努力優化我們的經營效率。本季度歸屬於好未來的淨虧損為 80 萬美元，而去年同期歸屬於好未來的淨虧損為 8.265 億美元。歸屬於好未來的非美國通用會計準則淨利潤為 2660 萬美元，而去年同期歸屬於好未來的非美國通用會計準則淨虧損為 7.601 億美元。

From the balance sheet, as of August 31, 2022, the company had $1,759.3 million of cash and cash equivalents, $1,327.3 million of short-term investments, and $366.2 million in current and non-current restricted cash. The company's deferred revenue balance was $177.5 million by the end of the second quarter. Now, I'll hand the call back to Mr. Alex Peng to briefly update you on our business strategy outlook. Alex, please go ahead.

從資產負債表來看，截至 2022 年 8 月 31 日，公司擁有 17.593 億美元的現金和現金等價物、13.273 億美元的短期投資以及 3.662 億美元的流動和非流動受限現金。截至第二季度末，該公司的遞延收入餘額為 1.775 億美元。現在，我將把電話轉回給 Alex Peng 先生，向您簡要介紹我們的業務戰略前景。亞歷克斯，請繼續。

Thanks, Jackson. Let me continue the call with updating you on our business and development strategy. As we continue to transform our business into a smart learning solutions provider, we are committed to executing our company's long-term strategy. I'll provide more details on the strategy of each of our business lines.

謝謝，傑克遜。讓我繼續電話，向您介紹我們的業務和發展戰略。隨著我們繼續將我們的業務轉變為智能學習解決方案提供商，我們致力於執行公司的長期戰略。我將提供有關我們每個業務線戰略的更多詳細信息。

First, for our learning services business, we'll continue with our efforts in advancing product development, optimizing our go-to-market strategy and further exploring opportunities in overseas markets. We believe its healthy business model, combined with our strong branding and operational efficiency will enable us to be well-positioned to capture the market opportunities and deliver long-term value. Content solutions remains an important initiative -- an important strategic initiative -- for TAL. We believe content will play an important role in our user's learning journey, and we'll continue to expand our product portfolio to provide our customers with diversified and innovative learning experiences. As I mentioned on the previous call, we look forward to partnering with third parties from around the world to delivering world-class content to our customers. Regarding learning technology, by adhering to our keywords 'online', 'digital', 'intelligent' and 'open', we'll stay committed to enhancing our technological competitiveness and empower our institutional customers to deliver a better learning experience through technology and innovation.

首先，對於我們的學習服務業務，我們將繼續努力推進產品開發，優化我們的上市策略，並進一步探索海外市場的機會。我們相信，其健康的商業模式，加上我們強大的品牌和運營效率，將使我們能夠更好地把握市場機遇並創造長期價值。內容解決方案仍然是好未來的一項重要舉措——一項重要的戰略舉措。我們相信內容將在我們用戶的學習旅程中發揮重要作用，我們將繼續擴大我們的產品組合，為我們的客戶提供多樣化和創新的學習體驗。正如我在上次電話會議中提到的，我們期待與來自世界各地的第三方合作，為我們的客戶提供世界一流的內容。在學習技術方面，通過堅持我們的關鍵詞“在線”、“數字”、“智能”和“開放”，我們將繼續致力於提升我們的技術競爭力，讓我們的機構客戶能夠通過技術和創新提供更好的學習體驗.

As we look at this last quarter's performance, we're really encouraged by the progress and we are really thankful to our customers' trust in us. Although the financial performance was partially a result of seasonal fluctuations, we did see some early signs of positive customer reception of our new products and services. We look forward to optimizing our products and services and delivering a better experience to our customers. As I come to the end of my prepared remarks, I just want to take a moment to reflect on the mission statement. As I mentioned before, we changed our mission statement to 'to empower lifelong growth with love and technology'. I think that's not just the mission to our customers, but also a constant reminder to ourselves to look at every setback and every challenge with a growth mindset -- to be humble, to be resilient and to be open to new possibilities. So that concludes my prepared remarks. Operator, we are now ready to open the floor for questions.

回顧上個季度的表現，我們對取得的進展感到非常鼓舞，我們非常感謝客戶對我們的信任。儘管財務表現部分是季節性波動的結果，但我們確實看到了一些早期跡象表明客戶對我們的新產品和服務的接受度很高。我們期待優化我們的產品和服務，並為我們的客戶提供更好的體驗。當我準備好發言即將結束時，我只想花點時間思考一下使命宣言。正如我之前提到的，我們將使命宣言更改為“用愛和技術賦能終生成長”。我認為這不僅是對我們客戶的使命，也是不斷提醒我們自己要以成長的心態看待每一次挫折和每一次挑戰——謙虛、堅韌並樂於接受新的可能性。我準備好的發言到此結束。接線員，我們現在可以開始提問了。

To ask a question at this time, please press *11 on your telephone, Please stand by as we compile the Q&A roster. Our first question comes from the line of Mark Li of Citi. Please go ahead, Mark Li.

此時要提問，請在您的電話上按*11，請等待我們編制問答名冊。我們的第一個問題來自 Citi 的 Mark Li。請繼續，馬克·李。

Hi management, congratulations for the results and improving margin for this quarter. May I ask, what is our target market size of the content business? And how do we think about the cost and the margin profile for this business? Thank you.

嗨管理層，祝賀本季度的結果和提高利潤率。請問，我們內容業務的目標市場規模是多少？我們如何看待這項業務的成本和利潤狀況？謝謝你。

Thanks Mark, great question. This is Alex, let me take that first one. So, first of all, I think we believe that the scope of our content business is not really limited to print books. It also includes a series of learning technologies. Many of our content solutions are actually coupled with interactive and engaging digital features, and so as a result, they can drive up the average ASP. We see this business as a learning content developer and distributor. So, it's really different from traditional book publishers. So, our content solutions are (inaudible) a kind of end-to-end learning solutions to our users. These contents, they can guide users along their learning experience at a self-directed pace. I think as I mentioned last quarter, we're also on the GTM side, continue to double down on some of the most dynamic e-commerce and content platforms. So, with all that combined, we really think, as this business matures, it will have more upsides than the traditional publishing industry. Mark, I hope that answers your question.

謝謝馬克，好問題。這是亞歷克斯，讓我拿第一個。所以，首先，我認為我們相信我們的內容業務範圍並不僅限於印刷書籍。它還包括一系列學習技術。我們的許多內容解決方案實際上都與互動和引人入勝的數字功能相結合，因此，它們可以提高平均 ASP。我們將此業務視為學習內容開發商和分銷商。因此，它與傳統的圖書出版商確實不同。因此，我們的內容解決方案（聽不清）是一種面向用戶的端到端學習解決方案。這些內容，他們可以引導用戶自主學習體驗。我認為正如我上個季度提到的那樣，我們也在 GTM 方面，繼續在一些最具活力的電子商務和內容平台上加倍努力。因此，綜合所有這些，我們真的認為，隨著這項業務的成熟，它將比傳統出版業擁有更多的優勢。馬克，我希望能回答你的問題。

Our next question comes from the line of Candis Chan of Daiwa. Please go ahead, Candis Chan.

我們的下一個問題來自大和的 Candis Chan。請繼續，Candis Chan。

Yes. Hi Alex and Jackson, congratulations on the solid set of results. As you mentioned, the new statement for TAL, can you share a little bit more on the new business initiatives? And what is the investment focus and the related budget, and how would that impact our cash flow? Thank you.

是的。嗨，亞歷克斯和傑克遜，祝賀你取得了一系列可靠的結果。正如你提到的，好未來的新聲明，你能分享更多關於新業務計劃的信息嗎？投資重點和相關預算是什麼，這將如何影響我們的現金流？謝謝你。

Candis, thanks for the question. This is Jackson, I'll take this. I would say we're still in the early stages of our business transformation. So, in this past quarter and the next few quarters to come, we'll continue to invest in new initiatives such as overseas learning services and certain new product categories within content solutions. You asked about investment size and budget- I would say, as we look at these new initiatives, the company's management will adopt a balanced and prudent investment strategy. Typically, we aim to achieve product market fit before deploying a significant amount of capital into any new initiatives. In terms of new initiatives' impact on the company's cash flow, I would say, by the end of this past quarter, the company had more than $3 billion where we combine cash and cash equivalents, short-term investments and current and non-current restricted cash. So with that, we're confident that our current cash position will be sufficient to support our transformation. I hope that answers your question, Candis.

坎迪斯，謝謝你的提問。這是傑克遜，我會接受這個。我想說我們仍處於業務轉型的早期階段。因此，在過去的這個季度和接下來的幾個季度中，我們將繼續投資新舉措，例如海外學習服務和內容解決方案中的某些新產品類別。你問到投資規模和預算——我想說，當我們看到這些新舉措時，公司管理層將採取平衡和審慎的投資策略。通常，我們的目標是在將大量資金部署到任何新計劃之前實現產品市場匹配。就新舉措對公司現金流的影響而言，我想說，到上個季度末，公司擁有超過 30 億美元的現金和現金等價物、短期投資以及流動和非流動投資有限的現金。因此，我們相信我們目前的現金狀況將足以支持我們的轉型。我希望這能回答你的問題，坎迪斯。

Thank you, our next question comes from the line of (inaudible) of CICC. Please go ahead, (inaudible).

謝謝，我們的下一個問題來自中金公司（聽不清）。請繼續，（聽不清）。

Good evening Alex and Jackson, thank you for taking my question. Congratulations on the good progress of business performance. My question is about the impact of seasonal changes on revenue and profitability. Can you share more color on how several businesses performed differently in terms of the seasonality? Thank you.

晚上好，亞歷克斯和傑克遜，謝謝你提出我的問題。祝賀企業業績取得良好進展。我的問題是關於季節性變化對收入和盈利能力的影響。您能否分享更多關於幾家企業在季節性方面表現不同的色彩？謝謝你。

(inaudible), thanks for the question. This is Jackson, I'll take this. As each of our business line is still in the early stage of exploration, we're still closely following the impact of seasonality throughout the year. Let me talk through each business line, respectively. For learning services, similar to the past, we've witnessed higher demand in winter and summer holidays. So as a result, our fiscal Q2 and Q4 tend to benefit from seasonality, with Q2 tending to be the peak season. As for content solutions, we're still in the early stages of understanding the market demand pattern. This business is impacted by school holidays as well as shopping holidays in China, such as (inaudible). For technology solutions, Q2 tends to have lower market demand because some of our institutional clients offer less tutoring services during summer school holidays. I hope that answers your question (inaudible).

（聽不清），謝謝你的提問。這是傑克遜，我會接受這個。由於我們的每一條業務線都還處於早期探索階段，全年我們仍在密切關注季節性的影響。讓我分別談談每個業務線。對於學習服務，與過去類似，我們目睹了寒暑假的需求增加。因此，我們的第二季度和第四季度往往受益於季節性，第二季度往往是旺季。至於內容解決方案，我們仍處於了解市場需求模式的早期階段。該業務受到中國學校假期和購物假期的影響，例如（聽不清）。對於技術解決方案，Q2 的市場需求往往較低，因為我們的一些機構客戶在暑假期間提供的輔導服務較少。我希望這能回答你的問題（聽不清）。

Thank you. Our next question comes from Crystal Li of China Merchants. Please go ahead, Crystal Li.

謝謝你。我們的下一個問題來自招商局的李晶。請繼續，Crystal Li。

Hi, thanks management. Congratulations on the strong results. Could you please share with us your expectation on the profitability for next quarter and for the whole year? Thank you.

你好，謝謝管理。祝賀你取得了不錯的成績。您能否與我們分享您對下一季度和全年盈利能力的預期？謝謝你。

Crystal, thanks for the question. This is Jackson again, and that's a good question. In this past quarter, we're glad to see that the company achieved profitability in terms of operating profit. This is a combined effect of business growth, seasonal fluctuation and all cost optimization measures. When we look at next quarter, our best guess is that profitability level in the next quarter will likely be lower than this quarter, and that is because we expect revenue to decline quarter-over-quarter due to seasonality. At the same time, we'll continue to take measures to drive business growth and optimize cost efficiency. I hope that answers your question, Crystal.

水晶，謝謝你的提問。這又是傑克遜，這是一個很好的問題。在過去的這個季度，我們很高興看到公司在營業利潤方面實現了盈利。這是業務增長、季節性波動和所有成本優化措施的綜合影響。當我們展望下個季度時，我們最好的猜測是下個季度的盈利水平可能會低於本季度，這是因為我們預計由於季節性因素，收入將環比下降。同時，我們將繼續採取措施推動業務增長，優化成本效率。我希望這能回答你的問題，水晶。

Thank you. Our next question comes from the line of (inaudible). Please go ahead, (inaudible).

謝謝你。我們的下一個問題來自（聽不清）。請繼續，（聽不清）。

Okay. Good evening Alex and Jackson, thank you for taking my question. Could you please share some new progress of the content business? And we noticed that TAL has launched some new hardware products such as (inaudible). Could management team show some color on product idea and maybe business model of the hardware products, especially when some of the (inaudible) function can be replaced by APPs on the mobile phone.

好的。晚上好，亞歷克斯和傑克遜，謝謝你提出我的問題。能否分享一下內容業務的一些新進展？我們注意到好未來推出了一些新的硬件產品，例如（聽不清）。管理團隊能否在產品理念和硬件產品的商業模式上展示一些色彩，尤其是當某些（聽不清）功能可以被手機上的應用程序取代時。

Yes, thanks for that question. This is Alex, let me unpack that question. I think, first, on the previous question, I already discussed a bit on the content business, and I think there is a key takeaway from that, which is we're seeing a shift in consumer behavior toward more self-directed and self-paced learning. And we think that's a long-term (inaudible) trend. In concern with that, what I'm also seeing is that in an increasingly digitally connected world, we need to provide to young people the benefit of online content through digital devices while safeguarding their health. So, underpinned by improvement in AI technology and other innovations from the hardware industry such as screens that are more protective of the user's eyesight, we believe that intelligent devices tailored to the needs of young people will play an increasingly important role in this industry. So, we recently launched a couple of new hardware products, which were designed based on this insight and this belief. They provide a new way for users to seamlessly consume a wealth of third-party printed and digital content on a more interactive and more personalized basis.

是的，謝謝這個問題。我是亞歷克斯，讓我解開這個問題。我認為，首先，關於上一個問題，我已經討論了一些內容業務，我認為有一個關鍵的收穫，那就是我們看到消費者行為轉向更加自主和自我有節奏的學習。我們認為這是一個長期（聽不清）的趨勢。對此，我還看到，在一個日益數字化連接的世界中，我們需要通過數字設備為年輕人提供在線內容的好處，同時保護他們的健康。因此，在人工智能技術的進步和硬件行業的其他創新（例如更能保護用戶視力的屏幕）的支持下，我們相信針對年輕人需求量身定制的智能設備將在該行業發揮越來越重要的作用。因此，我們最近推出了幾款基於這種洞察力和信念而設計的新硬件產品。它們為用戶提供了一種新方式，可以在更具交互性和更加個性化的基礎上無縫消費大量第三方印刷和數字內容。

I think for the business model, we look out for each particular use case, there are instances where it's paid upfront as a piece of hardware. There are also instances where there are recurring revenue stream of subscription renewal. I hope that answers your question.

我認為對於商業模式，我們會關注每個特定的用例，在某些情況下，它是作為硬件預先支付的。在某些情況下，訂閱續訂會產生經常性收入流。我希望這能回答你的問題。

Thank you. Our next question comes from the line of Felix Liu of UBS. Your line is open, Felix Liu.

謝謝你。我們的下一個問題來自瑞銀的 Felix Liu。您的電話已開通，Felix Liu。

Thank you management, and congratulations on turning profitable this quarter and reporting a good progress on your transition. My question is on your overseas business. You mentioned that Think Academy is reporting triple-digit growth this quarter. So, may I just ask you to break down the driver of this growth? Is this through capacity expansions in new markets, or is this more of a ramping up or ASP increase? And could you share a bit more of our overseas strategy from here, as well as what level of materiality do you expect from the overseas business? Thank you.

感謝管理層，並祝賀您在本季度實現盈利並報告您在過渡方面取得了良好進展。我的問題是關於你的海外業務。您提到 Think Academy 本季度報告了三位數的增長。那麼，我可以請你分解一下這種增長的驅動力嗎？這是通過新市場的產能擴張，還是更多地增加或平均售價增加？您能否從這里分享更多我們的海外戰略，以及您對海外業務的重要性程度如何？謝謝你。

Thanks, Felix. This is Alex, let me take that one on. I think, first of all, the revenue share of this business is still at low single-digit level, but as we mentioned before, the growth rate is high. At present, we provide online and offline courses under the Think Academy brand in several regions and countries, but we really look at those as only the initial phase of the company in the overseas market. After the outbreak of the epidemic, we noticed that there are many opportunities worth exploring in the overseas market, such as the development and distribution of digital content, highly interactive teaching aids or smart books, and high-quality online and offline teaching services. We believe that the company's rich content library and business know-how accumulated in the past 2 decades of operations will help us find scalable growth opportunities in key overseas markets. Felix, I hope that answers your question.

謝謝，菲利克斯。這是亞歷克斯，讓我來接那個。我認為，首先，這個業務的收入份額仍然處於低個位數的水平，但正如我們之前提到的，增長率很高。目前，我們在多個地區和國家提供 Think Academy 品牌的線上和線下課程，但我們確實認為這些只是公司在海外市場的起步階段。疫情發生後，我們注意到海外市場有很多值得探索的機會，比如數字內容的開發和發行、高交互的教具或智能圖書、優質的線上線下教學服務等。我們相信，公司在過去 20 年運營中積累的豐富內容庫和業務知識將幫助我們在關鍵的海外市場找到可擴展的增長機會。菲利克斯，我希望能回答你的問題。

Thank you. At this time, I'd like to turn the call back over to management for closing remarks.

謝謝你。此時，我想將電話轉回給管理層以結束髮言。

Thanks, operator, and thanks everyone, again, for joining us today, and we'll talk to you next quarter. Bye-bye.

感謝運營商，再次感謝大家今天加入我們，我們將在下個季度與您交談。再見。

That does conclude the conference. Thank you for participating. You may now disconnect.

這確實結束了會議。感謝您的參與。您現在可以斷開連接。