TAL Education Group (TAL) 2023 Q3 法說會逐字稿

Ladies and gentlemen, good day, and thank you for standing by. Welcome to TAL Education Group Third Quarter Fiscal Year 2023 Earnings Conference Call. (Operator Instructions) Please be informed, 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.

女士們，先生們，美好的一天，感謝你們的支持。歡迎來到好未來教育集團 2023 財年第三季度收益電話會議。 （操作員說明）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。請繼續，先生。

Thank you, operator. Thank you all for joining us today with TAL Education Group's third 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.

謝謝你，運營商。感謝大家今天參加好未來教育集團 2023 財年第三季度財報電話會議。收益發佈於今天早些時候發布，您可以在公司的 IR 網站或通過新聞專線找到一份副本。

During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer; and myself, Investor Relations Director. Following the prepared remarks, Mr. Peng and I will be available to answer your questions.

在此次電話會議中，您將聽到總裁兼首席財務官 Alex Peng 先生的講話；和我自己，投資者關係總監。在準備好的發言之後，彭先生和我將可以回答您的問題。

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.

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因素的影響，可能導致實際結果大不相同從我們目前的期望。潛在風險和不確定性包括但不限於向美國證券交易委員會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，請參閱我們向美國證券交易委員會提交的文件。

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.

此外，我們的收益發布和本次電話會議包括對某些非 GAAP 財務措施的討論。請參閱我們的收益發布，其中包含非 GAAP 措施與最直接可比的 GAAP 措施的調節。

I would like to turn the call over to Mr. Alex Peng. Alex, please go ahead.

我想把電話轉給 Alex Peng 先生。亞歷克斯，請繼續。

Thanks, Jackson. I appreciate you all for joining us on today's call, especially as we are approaching the Chinese New Years' holidays. I'd like to really take this opportunity to wish you and your families a very happy Chinese New Year. One of the traditions of Chinese New Year is to recap the past and plan for the future. On this call, I'd also like to share with you our performance in the last quarter as well as our expectations for the quarters to come.

謝謝，傑克遜。我感謝大家參加今天的電話會議，尤其是在我們臨近中國農曆新年假期的時候。我真的很想藉此機會祝您和您的家人過一個非常快樂的農曆新年。過年的傳統之一是回顧過去，規劃未來。在這次電話會議上，我還想與大家分享我們上個季度的表現以及我們對未來幾個季度的預期。

During this fiscal Q3, we continue to enhance our offerings while developing our go-to-market capabilities. We recorded USD 232.7 million and RMB 1,658.5 million in net revenues for the quarter. The net revenues decreased by 16% and 21% in RMB and USD terms compared to Q2, respectively.

在本財年第三季度，我們繼續增強我們的產品，同時發展我們的上市能力。本季度我們的淨收入為 2.327 億美元和 16.585 億元人民幣。與第二季度相比，以人民幣和美元計算的淨收入分別下降了 16% 和 21%。

Historically, our fiscal Q2 tend to benefit from seasonality effects in terms of revenue. So if we look at a quarter that's more comparable to Q3, for example, Q1, the net revenues increased 4% in U.S. dollar terms and 14% in RMB terms. We expect to continue our development in the next quarter.

從歷史上看，我們的第二財季往往受益於收入方面的季節性影響。因此，如果我們看一個與第三季度更具可比性的季度，例如第一季度，淨收入以美元計算增長 4%，以人民幣計算增長 14%。我們希望在下一季度繼續我們的發展。

In terms of profitability, for the fiscal quarter ended on November 30, 2022, we recorded USD 4.5 million and USD 23.2 million in non-GAAP operating loss and non-GAAP net loss attributable to TAL, respectively. You may have noticed that our operating income decreased by $47.6 million quarter-over-quarter. The decrease in operating income was primarily driven by the reduction in revenue due to seasonality as well as our investment into new initiatives.

在盈利能力方面，在截至 2022 年 11 月 30 日的財政季度，我們分別錄得 450 萬美元和 2320 萬美元的非美國通用會計準則營業虧損和歸屬於好未來的非美國通用會計準則淨虧損。您可能已經註意到，我們的營業收入環比下降了 4760 萬美元。營業收入的減少主要是由於季節性收入減少以及我們對新計劃的投資所致。

So with that overview, I'd like to give Jackson the floor to share more color on the operational developments and the financial performance of our core business lines. Afterwards, I will update our business strategy for you, and then we'll open the call for questions. Jackson, please go ahead.

因此，有了這個概述，我想讓傑克遜發言，分享更多關於我們核心業務線的運營發展和財務業績的色彩。之後，我將為您更新我們的業務戰略，然後我們將開始提問。傑克遜，請繼續。

Thank you, Alex. I'm pleased to share more details on the progress we made in our 3 main business lines this quarter. Before we start, please note that the financial data is based on our unaudited results for the quarter.

謝謝你，亞歷克斯。我很高興與大家分享本季度我們在 3 大主要業務領域取得的進展的更多細節。在我們開始之前，請注意財務數據是基於我們本季度未經審計的結果。

I'll start with our learning services and other business. Learning services and other continues to be our largest revenue stream and is accounted for slightly more than 2/3 of our total revenues for the quarter.

我將從我們的學習服務和其他業務開始。學習服務和其他仍然是我們最大的收入來源，佔本季度總收入的 2/3 略多一點。

Within learning services, we continue to fine-tune our enrichment learning programs, and as a result, saw an increase in average retention rate for 2 consecutive quarters. We believe a healthy retention rate is key to the long-term sustainable growth of our enrichment learning programs. We'll continue to monitor our learner retention and optimize our offerings to drive healthy retention level.

在學習服務方面，我們繼續微調我們的強化學習計劃，因此，平均保留率連續兩個季度有所提高。我們相信健康的保留率是我們豐富學習計劃長期可持續增長的關鍵。我們將繼續監控我們的學習者保留率並優化我們的產品以推動健康的保留水平。

In terms of learner enrollment, we recorded a quarter-over-quarter decrease in average learner enrollment from Q2, primarily due to seasonal fluctuation. However, if we compare the enrollment of Q3 to that of Q1, we recorded growth in learning enrollment between these 2 periods.

在學習者註冊方面，我們記錄到第二季度的平均學習者註冊率環比下降，這主要是由於季節性波動。但是，如果我們將第三季度的入學人數與第一季度的入學人數進行比較，我們會發現這兩個時期的學習入學人數有所增長。

Further, some recently rolled out enrichment programs such as rhetorics and international chess, demonstrated initial customer reception in this past quarter.

此外，一些最近推出的豐富計劃，如修辭和國際象棋，在上個季度展示了初步的客戶接待。

Like I mentioned in our prior conversations, our enrichment programs are designed to facilitate learners all around development. This is a concept that requires some time for the market to digest and accept. Aside from operating metrics, we're also closely monitoring customer feedback on our enrichment programs. We're encouraged about our customers' feedback and appreciate their trust and support. We'll continue to fine-tune our enrichment offerings to deliver value to our customers.

就像我在之前的談話中提到的那樣，我們的豐富計劃旨在促進學習者的全面發展。這是一個需要一定時間讓市場消化和接受的概念。除了運營指標外，我們還密切關注客戶對我們豐富計劃的反饋。我們對客戶的反饋感到鼓舞，並感謝他們的信任和支持。我們將繼續微調我們的豐富產品，為我們的客戶創造價值。

In this past quarter, we also witnessed recovery in our offline learning centers. In fact, revenue generated from offline enrichment programs increased in Q3 when compared with Q2. Despite that, typically and historically, Q3 has been a down quarter from Q2. We increased our offline learning centers by single-digit in this past quarter.

在上個季度，我們還見證了線下學習中心的複蘇。事實上，與第二季度相比，第三季度線下豐富計劃產生的收入有所增加。儘管如此，通常和歷史上，第三季度比第二季度下降了一個季度。在上個季度，我們以個位數增加了線下學習中心。

This is the second consecutive quarter where the number of our learning centers grew slightly. In this (inaudible) age where OmO learning experience continues to proliferate, we see online and offline presence, both as important components in our learning services business. Our online presence reaches customers despite their geographic locations, while our offline presence provides us the opportunity to interact with our customers face-to-face.

這是我們的學習中心數量連續第二個季度略有增長。在這個 OmO 學習體驗持續激增的（聽不清）時代，我們將在線和離線存在視為我們學習服務業務的重要組成部分。我們的在線業務覆蓋了客戶，無論他們身在何處，而我們的離線業務為我們提供了與客戶面對面互動的機會。

We continue to optimize our learning center network and will gradually and cautiously increase the number of our learning centers in the next few quarters to come.

我們將繼續優化我們的學習中心網絡，並將在未來幾個季度逐步謹慎地增加學習中心的數量。

While our domestic learning services business continues on its development path, Think Academy, our overseas learning services business, maintains its momentum with online operations covering a global market and offsite operations in countries such as U.S. and Singapore. Think Academy again booked a year-over-year triple-digit growth in this quarter. We see significant market potential for Think Academy and will continue to drive the growth of this business.

在我們國內學習服務業務持續發展的同時，我們的海外學習服務業務Think Academy保持了良好的發展勢頭，在線業務覆蓋全球市場，並在美國和新加坡等國家開展異地業務。 Think Academy 在本季度再次實現了三位數的同比增長。我們看到了 Think Academy 的巨大市場潛力，並將繼續推動該業務的增長。

Moving on to our content solutions business, which accounted for roughly 20% of total net revenue compared to slightly more than 15% a quarter ago. Revenue from content solutions grew quarter-over-quarter, driven by growth from multiple product lines.

繼續我們的內容解決方案業務，該業務約佔總淨收入的 20%，而上一季度略高於 15%。受多個產品線增長的推動，內容解決方案收入環比增長。

I talked about small books in the last couple of quarters, the products where we embed videos into print books to supplement learning experience of all users. In this quarter, we're glad to see that a significant portion of the users who purchased and activated the online features of the smart books, are learners who historically never enrolled in our learning program, to the best of our knowledge. We see this as a positive sign in that our content products are reaching new customers and increasing our total addressable market.

我在過去幾個季度談到了小書，我們將視頻嵌入到印刷書籍中以補充所有用戶的學習體驗的產品。在本季度，我們很高興地看到，據我們所知，購買並激活智能圖書在線功能的用戶中有很大一部分是從未參加過我們學習計劃的學習者。我們認為這是一個積極的跡象，表明我們的內容產品正在吸引新客戶並增加我們的總潛在市場。

Within content solutions, we also made progress on the exploration of smart learning devices. We tend to think of smart learning devices as comprehensive content solutions that combine our exclusive learning content and personalized learning experience supported by AI technology. We'll continue to enrich our products based on our insights into users' learning habits and their learning demand.

在內容解決方案方面，我們在智能學習設備的探索上也取得了進展。我們傾向於將智能學習設備視為全面的內容解決方案，結合了我們獨家的學習內容和人工智能技術支持的個性化學習體驗。我們將根據對用戶學習習慣和學習需求的洞察，不斷豐富我們的產品。

In addition to product development, we also continue to build our go-to-market capabilities for our content solutions business. In an industry where offline distribution channel typically constitutes a large portion of the total volume, the majority of our content solutions are sold through online channels, such as e-commerce and live streaming. We're embracing these new distribution channels, and we'll continue to build our capabilities within these channels.

除了產品開發之外，我們還繼續為我們的內容解決方案業務打造進入市場的能力。在一個線下分銷渠道通常佔總量很大一部分的行業中，我們的大部分內容解決方案都是通過電子商務和直播等在線渠道銷售的。我們正在擁抱這些新的分銷渠道，我們將繼續在這些渠道中構建我們的能力。

Finally, let's look at our learning technology solutions business. Total revenue for our learning technology solutions business accounted for more than 10% of our total net revenues in Q3. In this past quarter, we updated our products and further developed our selling and marketing efforts.

最後，讓我們看看我們的學習技術解決方案業務。我們學習技術解決方案業務的總收入占我們第三季度總淨收入的 10% 以上。在上個季度，我們更新了產品並進一步開展了銷售和營銷工作。

For learning technology solutions, we sell to both private and public sectors. I talked about the private sector before, and will shed more light on our effort in the public sector today. In this past quarter, we released a new sub-brand called Meixiao Smart Education, which targets the market for schools. Our solution for schools primarily includes smart homework, smart lesson preparation, integrated teaching platform and small after-school care. This business is still in its early stage, and we'll provide more details as the business matures.

對於學習技術解決方案，我們向私營和公共部門銷售。我之前談到了私營部門，今天將更多地闡述我們在公共部門所做的努力。在上個季度，我們發布了一個新的子品牌，名為美小智慧教育，其目標市場是學校。我們為學校提供的解決方案主要包括智能作業、智能備課、一體化教學平台和小型課後託管。該業務仍處於早期階段，隨著業務的成熟，我們將提供更多詳細信息。

After updating the above business progress, now let me take you through the key financial results for the quarter.

在更新了上述業務進展後，現在讓我為您介紹本季度的主要財務業績。

Our net revenues totaled USD 272.7 million, representing a 77.2% decrease from USD 1.02 billion in the same period last year. The decline in revenue was a result of the [cessation] of our K-9 academic services in the mainland of China. Cost of revenue decreased by 80.2% to USD 103 million from USD 519.5 million in the third quarter of fiscal year 2022.

我們的淨收入總計為 2.727 億美元，比去年同期的 10.2 億美元下降了 77.2%。收入下降是由於我們在中國大陸 [停止] K-9 學術服務。收入成本從 2022 財年第三季度的 5.195 億美元下降 80.2% 至 1.03 億美元。

Non-GAAP cost of revenues, which excluded share-based compensation, decreased by 80.9% to USD 99.4 million from USD 519.2 million in the third quarter of fiscal year 2022. Gross profit declined by 74.1% to USD 129.7 million from USD 501.4 million in the same period last year, while our gross margin increased from 49.1% to 55.8%.

2022 財年第三季度的非美國通用會計準則收入成本（不包括基於股份的薪酬）從 5.192 億美元下降 80.9% 至 9940 萬美元。毛利潤從 2022 財年的 5.014 億美元下降 74.1% 至 1.297 億美元與去年同期相比，我們的毛利率從 49.1% 上升到 55.8%。

Selling and marketing expenses decreased by 74.3% to USD 70.4 million from USD 273.6 million in the same period last year. Non-GAAP selling and marketing expenses, which excluded share-based compensations, decreased by 75.3% year-over-year to USD 63.8 million from USD 208 million -- USD 258.6 million in the same period last year. The year-over-year decrease was primarily the result of a reduced number of selling and marketing activities.

銷售和營銷費用從去年同期的 2.736 億美元下降 74.3% 至 7040 萬美元。不包括基於股份的薪酬的非美國通用會計準則銷售和營銷費用同比下降 75.3% 至 6380 萬美元，而去年同期為 2.586 億美元，為 2.08 億美元。同比下降主要是由於銷售和營銷活動數量減少。

General and administrative expenses decreased by 69.0% from USD 93.0 million -- from USD 300 million in the third quarter of last fiscal year. Non-GAAP general and administrative expenses, which excluded share-based compensations, decreased year-over-year by 72.7% to USD 74.8 million from USD 274.4 million in the same period last year.

一般和行政費用從 9300 萬美元下降 69.0%——上一財年第三季度為 3 億美元。不包括基於股份的薪酬的非美國通用會計準則一般和行政費用從去年同期的 2.744 億美元同比下降 72.7% 至 7480 萬美元。

Loss from operations was USD 32.9 million compared to loss from operations of USD 108.4 million in the third quarter of fiscal year 2022. Non-GAAP loss from operations, which excluded share-based compensations, was USD 4.5 million compared to non-GAAP loss of operations of USD 67.6 million in the same period last year.

運營虧損為 3290 萬美元，而 2022 財年第三季度的運營虧損為 1.084 億美元。非 GAAP 運營虧損（不包括基於股份的補償）為 450 萬美元，相比之下，非 GAAP 虧損為去年同期營業額為6760萬美元。

Net loss attributable to TAL was USD 51.6 million in this quarter compared with net loss attributable to TAL of USD 99.4 million in the same period last year. Non-GAAP net income attributable to TAL, which excluded -- excuse me.

本季度歸屬於好未來的淨虧損為5160萬美元，而去年同期歸屬於好未來的淨虧損為9940萬美元。歸屬於 TAL 的非 GAAP 淨收入，其中不包括 - 對不起。

So I think I got cut off when I said non-GAAP net loss attributable to TAL, which excluded share-based compensations -- was USD 23.2 million compared with non-GAAP net loss attributable to TAL of USD 58.6 million in the same period of last year.

因此，當我說好未來的非 GAAP 淨虧損（不包括基於股份的補償）為 2320 萬美元時，我想我被打斷了，而同期好未來的非 GAAP 淨虧損為 5860 萬美元。去年。

Turning to the balance sheet. As of November 30, 2022, the company had USD 1.86 billion in cash and cash equivalents, $1.18 billion of short-term investments and USD 447.4 million in current and noncurrent restricted cash. The company's deferred revenue balance was USD 270.8 million by the end of the third quarter.

轉向資產負債表。截至 2022 年 11 月 30 日，公司擁有現金和現金等價物 18.6 億美元，短期投資 11.8 億美元，流動和非流動受限現金 4.474 億美元。截至第三季度末，公司遞延收入餘額為2.708億美元。

Now I'll hand the call back to Mr. Alex Peng to briefly update you on our business strategy outlook. Alex, please go ahead.

現在我將電話轉回給 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. I think Jackson has just given everybody a pretty detailed picture and lots of numbers. So what I'll try is to maybe take a step back and paint the big picture.

謝謝，傑克遜。我認為 Jackson 剛剛給大家提供了一張非常詳細的圖片和大量數字。因此，我將嘗試退後一步，描繪大局。

As we continue to transform our business into a smart learning solutions provider, we remain committed to executing our company's long-term growth strategies with each of our 4 business blocks. Although the revenue of this quarter was affected by exchange rate fluctuation and seasonality, our new business has maintained the momentum of continuous development. We expect our main businesses to continue to develop in the next few quarters.

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，我們仍然致力於通過我們的 4 個業務板塊中的每一個來執行我們公司的長期增長戰略。儘管本季度收入受到匯率波動和季節性的影響，但我們的新業務保持了持續發展的勢頭。我們預計我們的主要業務將在未來幾個季度繼續發展。

The first, our learning services and other business. We will continue to strengthen the quality of the products and services, while also gradually roll out more programs and increase our physical footprint. We are a believer of the enrichment learning and all-around development. As the market for enrichment learning evolves, we plan to leverage our (inaudible) learning and our operational [model] to further serve our customers.

第一，我們的學習服務等業務。我們將繼續加強產品和服務的質量，同時逐步推出更多計劃並增加我們的實體足跡。我們堅信充實學習和全面發展。隨著強化學習市場的發展，我們計劃利用我們的（聽不清）學習和我們的運營[模型]來進一步為我們的客戶服務。

For our content solutions business, we're really encouraged by the progress, but we also do understand that we have a long way to go before we become competitive in this relatively new market [lots]. We intend to increase our TAM through serving our customers with quality content in various form factors. In the next few quarters, we'll roll out new product SKUs while investing in our go-to-market capabilities, especially in our [OmO] channels.

對於我們的內容解決方案業務，我們確實為取得的進展感到鼓舞，但我們也明白，要在這個相對較新的市場 [lots] 中具有競爭力，我們還有很長的路要走。我們打算通過為我們的客戶提供各種形式的優質內容來增加我們的 TAM。在接下來的幾個季度中，我們將推出新產品 SKU，同時投資於我們的上市能力，尤其是我們的 [OmO] 渠道。

Turning to learning technology solutions. We are committed to enhancing our services for clients in both private and public sectors with quality content, innovative devices and advanced technologies. Our goal is to work with our clients to deliver a better learning experience to end customers.

轉向學習技術解決方案。我們致力於通過高質量的內容、創新的設備和先進的技術來增強我們為私營和公共部門客戶提供的服務。我們的目標是與客戶合作，為最終客戶提供更好的學習體驗。

About the outlook for Q4, we expect our development to continue in the fourth quarter. We do not expect to break even in the next quarter as we continue to invest in certain new initiatives. We believe the transformation into a smart learning solutions provider is a long journey, and are currently focused on creating value for our customers through our offerings.

關於第四季度的展望，我們預計我們的發展將在第四季度繼續。由於我們繼續投資於某些新計劃，我們預計下一季度不會實現收支平衡。我們認為，轉型為智能學習解決方案提供商是一個漫長的過程，目前我們專注於通過我們的產品為客戶創造價值。

And as I come to the end of my remarks, I'd like just to say, we're just a few days away from Chinese New Year. And there's another name for Chinese New Year, which is Spring Festival. Spring is the season of renewal and growth. I think on the previous call with you all, I reflected on the fact that we changed our mission statements and how critical it is for us to adopt a growth mindset going forward. So as we head into the spring season, it is with that growth mindset that we'll embrace the future.

在我的發言結束時，我想說的是，我們離中國農曆新年只有幾天的時間了。中國的新年還有一個名字，那就是春節。春天是更新和生長的季節。我想在之前與大家的通話中，我反思了我們改變了我們的使命宣言這一事實，以及我們採用成長心態向前發展的重要性。因此，當我們進入春季時，我們將以這種成長心態擁抱未來。

So that concludes my prepared remarks. Operator, we're now ready to open the call for questions.

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。

(Operator Instructions) Our first question comes from the line of Lucy Yu from Bank of America.

（操作員說明）我們的第一個問題來自美國銀行的 Lucy Yu。

I have a question on margins. So can you shed a bit more color on the margins for this quarter and also expectation of the main business operating margins going forward?

我有一個關於邊距的問題。那麼，您能否更詳細地說明本季度的利潤率以及對未來主要業務運營利潤率的預期？

I'll take this one. [Reflecting] more about the numbers, I would just say, as we transform our business and how we think about profitability, we probably focus more on creating more value for customers and have structurally healthy business model as opposed to focusing on near-term operating profitability as well. But let me break this down for you a bit.

我要這個。 [反映]更多關於數字，我只想說，隨著我們轉變我們的業務以及我們如何看待盈利能力，我們可能更專注於為客戶創造更多價值並擁有結構健康的商業模式，而不是專注於近期運營盈利能力也是如此。但是，讓我為您分解一下。

When I look at the 3 main business lines, for learning services and other, in this past quarter, we had a positive operating margin. For learning technology solutions, we are also operating profit and had double-digit operating margin. For content solutions, if we look at the more mature SKUs, they're profitable on a contribution margin basis. But some of the newer SKUs are still in investment phase.

當我查看學習服務和其他的 3 條主要業務線時，在上個季度，我們的營業利潤率為正。對於學習技術解決方案，我們也有營業利潤並且有兩位數的營業利潤率。對於內容解決方案，如果我們看一下更成熟的 SKU，它們在邊際貢獻的基礎上是有利可圖的。但一些較新的 SKU 仍處於投資階段。

You also asked about margin outlook in the future. I would say, as we look in the long run, when we think about learning services and other, we tend to think operating margin will have some fairly small room for margin improvement as the business goes up, and the improvement will be quite gradual. And for content solutions we'll carefully manage our operating profitability as we manage the balance between mature and new SKUs. Lucie, I hope that answers your question.

您還詢問了未來的利潤率前景。我想說的是，從長遠來看，當我們考慮學習服務和其他方面時，我們傾向於認為隨著業務的增長，營業利潤率會有一些相當小的利潤率改善空間，而且改善將是漸進的。對於內容解決方案，我們將在管理成熟和新 SKU 之間的平衡時謹慎管理我們的運營盈利能力。露西，我希望這能回答你的問題。

We will take our next question. Our next question comes from the line of Liping Zhao from CICC.

我們將回答下一個問題。我們的下一個問題來自中金公司的趙麗萍。

Iterating to your introduction report, the content solutions business is still in the investment period. Can you share the main direction of investments? And could you also share your thoughts about how the company becomes an industry in here, sir?

重複您的介紹報告，內容解決方案業務仍處於投資期。能否分享一下投資的主要方向？先生，您能否也分享一下您對公司如何成為這裡的產業的看法？

Let me unpack that question. So in terms of the direction for investment, it will probably be in a few areas. The first one we mentioned, I think, on a couple of previous calls, our aim is really to build world-class content. Much of it is going to be built in-house. And we're going to also increase our cooperation with our partners to bring those content into market.

讓我解開這個問題。所以在投資方向上，大概會在幾個方面。我們提到的第一個，我想，在之前的幾次電話會議上，我們的目標確實是構建世界級的內容。其中大部分將在內部建造。我們還將加強與合作夥伴的合作，將這些內容推向市場。

So as I think about that more topics -- more topic areas for print and smart books and continue to enhance the digital features of those contents, more [quarter] factors for hardware, those are all going to be the investment areas on the content side.

因此，當我考慮更多主題時——更多印刷和智能書籍的主題領域，並繼續增強這些內容的數字特徵，更多硬件的 [quarter] 因素，這些都將成為內容方面的投資領域.

Secondly, I think, we're going to continue to enhance our channel capabilities. I think we talked about this just now that much of our content products are sold on online channels. These channels are developing rapidly, and should be able to build a competitive channel presence. We need to continue to invest into our capabilities, and we're also going to be into -- invest into an omnichannel approach so that our customers will have a seamless experience across all these touch points.

其次，我認為，我們將繼續增強我們的渠道能力。我想我們剛才談到了這一點，我們的很多內容產品都是在在線渠道上銷售的。這些渠道發展迅速，應該能夠建立具有競爭力的渠道存在。我們需要繼續投資於我們的能力，我們也將投資於全渠道方法，以便我們的客戶在所有這些接觸點上都能獲得無縫體驗。

Lastly, I'm also going to mention infrastructure, especially on the supply chain side. As we go into these various or factors, we, obviously, are getting deeper into various kind of supply chain for (technical difficulty), and these are all deep expertise areas for us to build up our experience and capabilities, wanting to continue to enhance our product quality and experience and also to ensure we have a competitive cost structure. So I think if you look at the investment, that's what we are going to be looking at the 3 main areas.

最後，我還要提到基礎設施，尤其是在供應鏈方面。當我們進入這些不同的或因素時，我們顯然正在更深入地進入各種供應鏈（技術難度），這些都是我們積累經驗和能力的深度專業領域，希望繼續提高我們的產品質量和經驗，並確保我們擁有具有競爭力的成本結構。所以我認為，如果你看一下投資，那就是我們要看的三個主要領域。

In terms of the strategy, in introduction -- I think I mentioned this on a few calls, over the past quarters, I think we are continuing to building that world-class content. We continue to infuse more technology, such as an AI, into our product. And we also ensure there's an integrated experience for our customers across all these form factors. So, Liping, I hope that answers your question.

在戰略方面，在介紹方面——我想我在過去幾個季度的幾個電話中提到了這一點，我認為我們正在繼續構建世界級的內容。我們繼續在我們的產品中註入更多技術，例如 AI。我們還確保為我們的客戶提供跨所有這些外形規格的集成體驗。所以，麗萍，我希望這能回答你的問題。

Our next question comes from the line of Felix Liu from UBS.

我們的下一個問題來自瑞銀的 Felix Liu。

My question is on the COVID outbreak that happened in China recently. How does that impact our business in the February quarter? And given offline activities have largely resumed in many cities in China now, how should we think about the online and offline strategy from here? And would you expect a reacceleration of our offline expansion?

我的問題是關於最近在中國發生的 COVID 疫情。這對我們二月份的業務有何影響？而現在國內很多城市的線下活動已經基本恢復，我們應該如何從這裡思考線上線下的策略？您是否期望我們的線下擴張重新加速？

Regarding the first part of your question, the impact of the epidemic, I would say, historically, we carefully manage that impact through offering an online option to students who enrolled in our offline classes when the epidemic caused a convenience.

關於你問題的第一部分，疫情的影響，我想說的是，從歷史上看，我們通過在疫情帶來便利時為報名參加我們線下課程的學生提供在線選擇來謹慎管理這種影響。

In the last -- and looking forward, and obviously, as the impact of COVID starts to diminish in China, we'll offer a balance and hybrid online and offline learning experience to our learners. We do see both online and offline offerings as important components in the learning experience we provide to our learners and they each have their own merit.

最後 - 展望未來，顯然，隨著 COVID 的影響在中國開始減弱，我們將為我們的學習者提供平衡和混合的在線和離線學習體驗。我們確實將在線和離線產品視為我們為學習者提供的學習體驗的重要組成部分，它們各有千秋。

The second part of the question asked a bit about offline expansion plan and future outlook, I would just say, with regard to our offline learning centers, for the last 2 consecutive quarters, we increased the number of our learning centers by both single-digit increase in the last 2 quarters, and we currently have somewhere between a 100 and 200 learning centers. In the next few quarters to come, we'll continue to slowly but gradually increase the number of our learning centers. Felix, I hope that answers your question.

問題的第二部分問了一些關於線下擴張計劃和未來展望，我只想說，關於我們的線下學習中心，在過去連續兩個季度，我們的學習中心數量都以個位數增長在過去兩個季度有所增加，我們目前擁有 100 到 200 個學習中心。在接下來的幾個季度裡，我們將繼續緩慢但逐漸增加學習中心的數量。菲利克斯，我希望這能回答你的問題。

We will take our next question. Our next question comes from the line of D.S. Kim from JPMorgan.

我們將回答下一個問題。我們的下一個問題來自摩根大通的 D.S. Kim。

I was actually going to ask about profitability, but both of you have already provided great insight. So thanks for that. May I then follow up with quick housekeeping questions. Perhaps three if I may ask. First one is, what was this $32 million other expenses this quarter in the below OP line? Just curious, any details there?

我實際上是想問一下盈利能力，但你們兩個已經提供了很好的見解。所以謝謝你。然後我可以跟進快速的內務問題嗎？如果我可以問的話，也許是三個。第一個是，本季度以下 OP 行中的這 3200 萬美元其他費用是多少？只是好奇，那裡有詳細信息嗎？

And can you remind us on the nature of the restricted cash on our balance sheet, which was quite sizably [thing] at a $450 million total, including non-current? I remember this was somewhat related to some financial products, wealth management products and whatnot, but just wanted some clarification, or elaboration would be really appreciated.

你能提醒我們資產負債表上受限制現金的性質嗎，這是相當大的 [東西] 總計 4.5 億美元，包括非流動現金？我記得這與一些金融產品、理財產品等有點關係，但只是想澄清一下，或者詳細說明一下，將不勝感激。

I heard -- the second part of the question is loud and clear with regard to restricted cash. And just to confirm that the first part of your question was related to other -- that $32 million of other expense?

我聽說 - 關於受限現金，問題的第二部分很明確。只是為了確認您問題的第一部分與其他相關——那 3200 萬美元的其他費用？

Yes, correct, sir.

是的，沒錯，先生。

Got it. Yes. So that $32 million of other expense, obviously, is not related to any operating activities, and that is a combination of multiple factors including, one, exchange rate fluctuation; and two, some of the equities we hold and booked according to fair value.

知道了。是的。因此，這 3200 萬美元的其他費用顯然與任何經營活動無關，這是多種因素的結合，包括：一是匯率波動；二是我們持有並按公允價值入賬的部分股權。

And the second part of your question with regard to restricted cash, again, it's a combination of multiple factors, including: one, some of the payment we collect from learning -- from -- for our learning programs are restricted; and two, some of the wealth management product depending on the nature of the underlying instruments, are restricted as well.

關於受限現金問題的第二部分，同樣，它是多種因素的結合，包括：第一，我們從學習中收取的一些款項——來自——我們的學習計劃是受限的；二是部分理財產品根據標的工具的性質，也受到限制。

Thank you. I would now like to hand back to management for closing remarks.

謝謝。我現在想把結束語交還給管理層。

Great. Again, thank you, everybody, for joining us today. A Happy Chinese New Year, and we'll see you next quarter. Bye-bye.

偉大的。再次感謝大家今天加入我們。中國新年快樂，我們下個季度見。再見。

This concludes today's conference call. Thank you all for participating. You may now disconnect. Speakers, please stand by.

今天的電話會議到此結束。謝謝大家的參與。您現在可以斷開連接。發言人，請稍候。