TAL Education Group (TAL) 2024 Q1 法說會逐字稿

Ladies and gentlemen, good day, and thank you for standing by. Welcome to the TAL Education Group First Quarter of Fiscal Year 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be informed that today's conference is being recorded. I would now like to hand the conference call 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。歡迎參加好未來教育集團 2024 財年第一季度盈利電話會議。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。我現在將電話會議交給投資者關係總監丁嘉良先生。謝謝。請繼續，先生。

Thank you, operator. Thank you all for joining us today with TAL Education Group's First Quarter Fiscal Year 2024 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 Huang, President, and Chief Financial Officer, and myself, Investor Relations Director. Following the prepared remarks, Mr. Huang and I will be available to answer your questions. Before we continue, please note that today's discussions will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

謝謝你，接線員。感謝大家今天參加好未來教育集團 2024 財年第一季度收益電話會議。收益報告已於今天早些時候發布，您可以在公司的投資者關係網站或新聞專線上找到副本。在本次電話會議中，您將聽到總裁兼首席財務官 Alex Huang 先生和投資者關係總監我本人的發言。在準備好的發言結束後，我和黃先生將回答大家的問題。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做出的前瞻性陳述。

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 our 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 turn the call over to Mr. Alex Huang. Alex, Please go ahead.

前瞻性陳述存在風險和不確定性，可能導致實際結果與我們當前的預期存在重大差異。潛在風險和不確定性包括但不限於我們向 SEC 公開提交的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 SEC 提交的文件。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準則財務指標的討論。請參閱我們的收益報告，其中包含非公認會計準則衡量標準與最直接可比的公認會計準則衡量標準的調節表。我想把電話轉給黃先生。亞歷克斯，請繼續。

Thank you, Jackson. I'd also like to thank all of you for participating in today's conference call. During this call, we will review the financial performance and business progress of the first quarter of the fiscal year 2024. After that, I will share some thoughts on the outlook for the next quarter. So first, in this quarter, is an ongoing effort to fine-tune our core offerings and optimize our operations, such as enrichment learning. We also achieved progress in some of our newer initiatives. Taking the example Oxpad, our smart device, which we launched to the market at the end of last quarter, it has really demonstrated satisfactory sales performance and has received positive customer feedback over the past few months.

謝謝你，傑克遜。我還要感謝大家參加今天的電話會議。在這次電話會議中，我們將回顧2024財年第一季度的財務業績和業務進展。之後，我將分享對下一季度展望的一些想法。因此，首先，在本季度，我們將持續努力調整我們的核心產品並優化我們的運營，例如強化學習。我們在一些新舉措方面也取得了進展。以我們上季度末推出的智能設備Oxpad為例，在過去的幾個月裡，它確實表現出了令人滿意的銷售業績，並得到了積極的客戶反饋。

Furthermore, we've been making progress in our artificial intelligence strategy and are working towards the rollout of AI products in the future. In terms of financial performance, we recorded net revenues of $275.4 million and 1.96.7 million RMB for the quarter, which is an increase of 22.9% and 31.1% year-on-year in U.S. dollar and RMB terms, respectively. In terms of profitability, our non-GAAP loss from operations and non-GAAP net loss attributable to TAL for the quarter were USD 32.3 million and USD 19.5 million, respectively. So with that overview, I'd like to hand the call over to Jackson. He will give you an update on our core business lines' operational developments and review our first-quarter financial results. After that, I'll return to share more details regarding our outlook for the next quarter and then open the call for questions. Jackson, please go ahead.

此外，我們的人工智能戰略一直在取得進展，並正在努力在未來推出人工智能產品。財務業績方面，本季度淨收入為 2.754 億美元和 196.7 萬元人民幣，按美元和人民幣計算分別同比增長 22.9% 和 31.1%。就盈利能力而言，本季度我們的非公認會計準則運營虧損和好未來歸屬於非公認會計準則的淨虧損分別為 3,230 萬美元和 1,950 萬美元。綜上所述，我想將電話轉交給傑克遜。他將為您提供我們核心業務線運營發展的最新信息，並回顧我們第一季度的財務業績。之後，我將返回分享有關我們下一季度展望的更多詳細信息，然後開始提問。傑克遜，請繼續。

Thank you, Alex. I'm pleased to share some details on the progress we made in this quarter across our core business lines. Please note that all financial data for this quarter is unaudited. First, let's take a look at our learning services and others business, which consists of a broad range of learning programs for consumers as well as technology solutions for institutional customers. In the first quarter of fiscal year 2024, our learning services and others business accounted for just less than 75% of our net revenues. Within Learning Services, enrichment learning continued to make material progress, with net revenues achieving double-digit year-over-year growth.

謝謝你，亞歷克斯。我很高興分享有關本季度我們在核心業務領域取得的進展的一些細節。請注意，本季度的所有財務數據均未經審計。首先，讓我們看一下我們的學習服務和其他業務，其中包括面向消費者的廣泛學習計劃以及面向機構客戶的技術解決方案。 2024 財年第一季度，我們的學習服務和其他業務占淨收入的比例略低於 75%。在學習服務領域，強化學習繼續取得實質性進展，淨收入同比實現兩位數增長。

The progress was predominantly attributed to enrollment growth from our offline small class offerings. In response to the notable demand from our customers, we expanded our learning center network this quarter, increasing the total number of learning centers from roughly 170 to north of $200 million. Through our network expansion, we conscientiously managed our operating efficiency. Efficiency indicators such as retention rate have been relatively stable quarter-over-quarter. At the current level of operating efficiency, our offline small-class enrichment learning services business has a viable business model. As for online large-class enrichment learning business, we are focused on sustaining our existing level of operating efficiency while introducing a new array of offerings to the market.

這一進展主要歸功於我們線下小班課程的入學人數增長。為了滿足客戶的顯著需求，我們本季度擴大了學習中心網絡，將學習中心總數從大約 170 個增加到超過 2 億美元。通過網絡擴張，我們認真管理運營效率。保留率等效率指標環比相對穩定。以目前的運營效率水平，我們的線下小班強化學習服務業務具有可行的商業模式。至於在線大班強化學習業務，我們專注於維持現有的運營效率水平，同時向市場推出一系列新產品。

On our last few calls, I discussed some new programs such as (inaudible) and natural size (inaudible). These programs, although only contributing a fraction of our total revenues, we garnered incremental customer traction in the last couple of quarters. When we look at the next couple of quarters to come for enrichment learning, we'll continue to optimize our product offerings, user experience, and operational efficiency to further develop suitable and differentiated strategies for both online and offline business. Moving on, let's discuss think account, our overseas learning services business.

在我們最後幾次通話中，我討論了一些新程序，例如（聽不清）和自然大小（聽不清）。這些計劃雖然只占我們總收入的一小部分，但在過去幾個季度中我們獲得了越來越多的客戶吸引力。當我們展望未來幾個季度的強化學習時，我們將繼續優化我們的產品、用戶體驗和運營效率，進一步為線上和線下業務制定合適的差異化策略。接下來，我們來討論一下Think Account，我們的海外學習服務業務。

We continue to apply our industry know-how to the overseas market during this quarter. Delivering another consecutive quarter of triple-digit year-over-year growth. We added another learning center for Think Academy this quarter, and we'll further manage our network expansion plan overseas in the next quarter. Now let's talk about our Content Solutions business, which accounted for more than 25% of total net revenues for the quarter. The revenue generated by content solutions has well more than doubled year-over-year. This revenue growth was a result of the combined effects of our product and go-to-market capabilities. Smartbooks and print books, which were the key growth drivers in last fiscal year, continued to exhibit material development year-over-year.

本季度我們繼續將我們的行業知識應用到海外市場。再次連續一個季度實現三位數的同比增長。本季度我們為Think Academy新增了另一個學習中心，下個季度我們將進一步管理我們的海外網絡擴張計劃。現在我們來談談我們的內容解決方案業務，該業務佔本季度總淨收入的 25% 以上。內容解決方案產生的收入同比增長了一倍多。這種收入增長是我們的產品和上市能力綜合作用的結果。智能書和紙質書是上一財年的主要增長動力，繼續呈現逐年增長的材料發展趨勢。

A significant growth contributor for content solutions with (inaudible), an AR-driven learning device we launched towards the end of last quarter. (inaudible) proven attractive to learners by virtue of its personalized learning experiences powered by intelligent functions and expensive quality content library. In fiscal Q1, not only did we ship a considerable number of apps, but we also witnessed month-to-month growth in shipment volume for all 3 months in Q1. Moving forward, we'll pay close attention to customer feedback and upgrade software and hardware functions for Oxpads to better meet the demand of our learners. We're closely monitoring several key indicators, such as average time spent and frequency of usage, to understand user behaviors and manage our product updates accordingly.

我們在上季度末推出的 AR 驅動學習設備（聽不清）是內容解決方案的重要增長貢獻者。 （聽不清）憑藉智能功能和昂貴的優質內容庫提供的個性化學習體驗，事實證明對學習者很有吸引力。在第一財季，我們不僅出貨了相當數量的應用程序，而且我們還見證了第一季度所有 3 個月的出貨量逐月增長。下一步，我們將密切關注客戶的反饋，對Oxpads的軟硬件功能進行升級，以更好地滿足學習者的需求。我們正在密切監控幾個關鍵指標，例如平均花費時間和使用頻率，以了解用戶行為並相應地管理我們的產品更新。

Additionally, we have continued to build content supply through both internal development and external partnerships. In this quarter, we have established strategic collaborations with 10 publishing houses to jointly promote innovative exploration in the content industry. Together, we aim to create diverse and high-quality content for learners. In the next quarter, we anticipate that Content Solutions business will continue to grow, with revenues derived from Content Solutions expanding year-over-year. Other than shipping more units of products to our consumers, we also endeavor to provide our learners holistic learning experience through our device and our content. We'll closely observe user behaviors and provide more content services through our device. With that overview, I would now like to share our key financial results for the quarter.

此外，我們繼續通過內部開發和外部合作夥伴關係建立內容供應。本季度，我們與10家出版社建立了戰略合作，共同推動內容產業的創新探索。我們共同致力於為學習者創造多樣化、高質量的內容。在下個季度，我們預計內容解決方案業務將繼續增長，內容解決方案帶來的收入將逐年擴大。除了向消費者運送更多的產品之外，我們還努力通過我們的設備和內容為學習者提供全面的學習體驗。我們將密切觀察用戶行為，並通過我們的設備提供更多內容服務。有了上述概述，我現在想分享我們本季度的主要財務業績。

We reported net revenues of USD 275.4 million and 196.7 million RMB for this quarter, an increase of 22.9% and 31.1% year-over-year in U.S. dollar and RMB terms, respectively. The revenue growth was driven by the steady growth of learning services and others business and the release of new products within the Content Solutions business. Gross profit also increased in the first quarter of fiscal year 2024, rising slightly from USD 135.5 million for the same period last year to USD 135.9 million in this quarter. Gross margin decreased to 49.3% from 6.5% for the same period last year, mainly due to a higher revenue contribution from our Content Solutions business, which currently has a lower gross margin percentage.

我們報告本季度淨收入為 2.754 億美元和 1.967 億元人民幣，以美元和人民幣計算分別同比增長 22.9% 和 31.1%。收入增長得益於學習服務和其他業務的穩定增長以及內容解決方案業務中新產品的發布。 2024財年第一季度毛利潤也有所增長，從去年同期的1.355億美元小幅上升至本季度的1.359億美元。毛利率從去年同期的6.5%下降至49.3%，主要是由於目前毛利率較低的內容解決方案業務的收入貢獻較高。

Sales and marketing expenses for the quarter were USD 97.7 million. increased by 62.7% compared to USD 60.0 million in the fiscal first quarter last year. Selling and marketing expenses as a percentage of total revenues increased to 35.5% from 26.8% for the same period last year. Non-GAAP selling and marketing expenses, which excluded share-based compensation expenses, increased by 73.7% to USD 90.2 million from USD 52 million in the first quarter of fiscal year 2023. The year-over-year increase was primarily due to increased selling and marketing activities.

該季度的銷售和營銷費用為 9770 萬美元。與去年第一財季的 6000 萬美元相比增長了 62.7%。銷售及營銷費用佔總收入的比例從去年同期的26.8%增至35.5%。非公認會計準則銷售和營銷費用（不包括股權激勵費用）從 2023 財年第一季度的 5200 萬美元增長 73.7% 至 9020 萬美元。同比增長主要是由於銷售增加和營銷活動。

General and administrative expenses for the quarter decreased by 5.9% to USD 104.9 million from USD 11.5 million in the fiscal first quarter last year. Non-GAAP general and administrative expenses, which excludes share-based compensation costs, decreased by 6.5% year-over-year to USD 89.2 million from USD 95.4 million in the same period of fiscal year 2023. Loss from operations expanded by 104% to USD 57.8 million from USD 28.3 million in the first quarter of fiscal year 2023. Non-GAAP loss from operations, which excludes share-based compensation expenses, was USD 32.3 million compared with USD 1.8 million in the same period of the prior fiscal year.

本季度一般及管理費用下降 5.9%，從去年第一財季的 1150 萬美元降至 1.049 億美元。非 GAAP 一般及管理費用（不包括股權激勵成本）同比下降 6.5%，從 2023 財年同期的 9,540 萬美元降至 8,920 萬美元。運營虧損擴大 104%，至2023 財年第一季度為2830 萬美元，較上一財年第一季度的2830 萬美元減少5780 萬美元。非GAAP 運營虧損（不包括股權激勵費用）為3230 萬美元，而上一財年同期為180 萬美元。

Net loss attributable to TAL was USD 45 million in the quarter compared with USD 43.8 million in the same period of the prior fiscal year. Non-GAAP net loss attributable to TAL, which excludes share-based compensation expenses, was USD 19.5 million compared with USD 17.4 million in the same period of the prior fiscal year. Moving on to our balance sheet. As of May 31, 2023, we had USD 2.85.4 million of cash and cash equivalents, $959.3 million of short-term investments, and USD 34.2 million in current and noncurrent restricted cash. Our deferred revenue balance was $387.7 million as of the end of the first fiscal quarter compared with $237.4 million as of February 28, 2023.

本季度好未來應佔的淨虧損為 4500 萬美元，而上一財年同期為 4380 萬美元。不按美國通用會計準則計算，好未來應占淨虧損（不包括股權激勵費用）為 1,950 萬美元，而上一財年同期為 1,740 萬美元。繼續我們的資產負債表。截至 2023 年 5 月 31 日，我們擁有 285.4 萬美元的現金和現金等價物，9.593 億美元的短期投資，以及 3420 萬美元的流動和非流動限制性現金。截至第一財季末，我們的遞延收入餘額為 3.877 億美元，而截至 2023 年 2 月 28 日，我們的遞延收入餘額為 2.374 億美元。

Now turning to cash flow statement. Net cash provided by operating activities for the first quarter of fiscal year 2024 was USD 125.5 million. In April 2023, the company's Board of Directors authorized to extend its share repurchase program by 12 months. Pursuant to the extended share repurchase program, the company may spend up to approximately $737.4 million to purchase shares through April 30, 2024. As of May 31, 2023, the company repurchased an aggregate of approximately 25.9 million ADSs for approximately USD 151.3 million from the open market under the share repurchase program. That concludes the financial highlights section. I'll now hand the call back to Alex to briefly update you our business outlook. Alex, please go ahead.

現在轉向現金流量表。 2024財年第一季度經營活動提供的現金淨額為1.255億美元。 2023年4月，公司董事會授權將股份回購計劃延長12個月。根據延長的股票回購計劃，公司可能會在2024 年4 月30 日之前花費最多約7.374 億美元購買股票。截至2023 年5 月31 日，公司以約1.513 億美元的價格從股東處回購了總計約2590 萬股美國存託股。股份回購計劃下的公開市場。財務要點部分到此結束。現在我將把電話轉給亞歷克斯，向您簡要介紹我們的業務前景。亞歷克斯，請繼續。

Thanks, Jackson. As we introduced before, some of the achievements in this quarter are just a start to this fiscal year. Next, I would like to share some thoughts on our outlook for the next quarter. About the outlook for the upcoming Q2, we expect that development momentum will continue as the next quarter will cover the summer vacation and e-commerce shopping of festivals. We expect Q2 to be a high season with seasonality having a positive impact on our revenues. On a non-GAAP basis, we anticipate an improvement in operating profit compared to this quarter.

謝謝，傑克遜。正如我們之前介紹的，本季度的一些成就只是本財年的開始。接下來，我想分享一下我們對下一季度展望的一些想法。對於即將到來的第二季度的展望，我們預計發展勢頭將持續，因為下一季度將涵蓋暑假和節日電商購物。我們預計第二季度將是旺季，季節性因素將對我們的收入產生積極影響。在非公認會計原則的基礎上，我們預計營業利潤將比本季度有所改善。

As generative AI is on the cusp of redefining our industry, I'd also like to speak a bit more about our endeavor in artificial intelligence. We'll apply AI technology and launch learning products in a number of learning subjects in the near future. We'll update you on the progress in this area after the products are launched. We'll continue to invest in the artificial intelligence technologies to innovate our business. We really sit at a very interesting time in our industry. When I look back at Hal's track record in the last 20 years. I see a pattern of providing high-quality, affordable services to customers through technology and or business model innovations. We really believe AI has the potential to enable us to provide more accessibility to our customers and redefine the industry paradigm for decades to come. And that concludes my prepared remarks. Operator, we are now ready to open the call for questions.

由於生成式人工智能即將重新定義我們的行業，我還想多談談我們在人工智能方面的努力。不久的將來，我們將應用人工智能技術，在多個學習科目上推出學習產品。產品推出後，我們將向您通報該領域的最新進展。我們將繼續投資人工智能技術來創新我們的業務。我們確實正處於行業中一個非常有趣的時期。當我回顧哈爾過去 20 年的業績記錄時。我看到了一種通過技術和/或商業模式創新為客戶提供高質量、負擔得起的服務的模式。我們堅信人工智能有潛力使我們能夠為客戶提供更多便利，並在未來幾十年重新定義行業範式。我準備好的發言就到此結束。接線員，我們現在準備開始提問。

Certainly. (Operator Instructions). One moment for our first question. And our first question comes from the line of Yiwen Zhang from China Renaissance. Your question please.

當然。 （操作員說明）。請稍等一下我們的第一個問題。我們的第一個問題來自華興資本的張藝文。請你提問。

So my question is regarding the learning device, I'm glad to say we have made considerable progress by Oxpad. So how do you view the current market dynamics? And what is our company's competitive advantage in Oxpad?

所以我的問題是關於學習設備的，我很高興地說我們已經通過 Oxpad 取得了相當大的進步。那麼您如何看待當前的市場動態呢？那麼我們公司在Oxpad上的競爭優勢是什麼？

Let me take this question. So I think, first of all, we are really striving to meet the daily learning needs of our young learners and be their trusted companion, on their journey of growth. I think this is a journey that goes across multiple years. It's intense in terms of what the young learners need to learn. So there's quite a bit of support they need along the way. What we found is that their learning needs are really very diversified across different age groups across different types of students, their personal learning journey up to date, and so on. So in addition to attending classes, I think hardware products really be an effective way to meet that kind of personal needs in different scenarios and really lots of self-learning needs.

讓我來回答這個問題。所以我認為，首先，我們確實在努力滿足年輕學習者的日常學習需求，並成為他們成長路上值得信賴的伴侶。我認為這是一個跨越多年的旅程。就年輕學習者需要學習的內容而言，這是非常激烈的。因此，他們在此過程中需要相當多的支持。我們發現，不同年齡段、不同類型的學生、他們最新的個人學習歷程等等，他們的學習需求確實非常多樣化。所以除了上課之外，我認為硬件產品確實是一種有效的方式來滿足這種個人在不同場景下的需求，以及非常多的自學需求。

So that's the first thought. So in terms of our competitive advantages, I think there are a few things. One is there's 20 years of pedagogical and education research experience and through that 2 decades of experience, I think the company has developed a set of tailored contents for the learning devices. This not only ensures consistently high-quality content but also serves to students or different types of what they're accustomed to in terms of utilizing frac (inaudible) time for learning. So I think that's really an important foundation.

這就是第一個想法。所以就我們的競爭優勢而言，我認為有以下幾點。一是有20年的教學和教育研究經驗，通過這20年的經驗，我認為公司已經為學習設備開發了一套量身定制的內容。這不僅確保了始終如一的高質量內容，而且還為學生或他們習慣的不同類型的人提供了利用 frac（聽不清）時間進行學習的服務。所以我認為這確實是一個重要的基礎。

Now on top of that, as I mentioned before, we continue to strive and seize this the secular trend around artificial intelligence; we think that AI combined with our content that we've developed over the years can really be a powerful support for students, especially for their personalized learning needs across that learning journey. And lastly, I think the users have given us pretty positive feedback regarding both the content and the personalized user experience. We realize this is still fairly early in our endeavor into the learning devices space. And we just take these feedback as further encouragement and guidance for our continued endeavor and further polish our products, bring additional content and artificial intelligence experience to this product in the future. So hopefully, that answers your question.

除此之外，正如我之前提到的，我們繼續努力並抓住人工智能的長期趨勢；我們認為，人工智能與我們多年來開發的內容相結合，確實可以為學生提供強大的支持，特別是滿足他們在整個學習過程中的個性化學習需求。最後，我認為用戶在內容和個性化用戶體驗方面都給了我們非常積極的反饋。我們意識到，我們進入學習設備領域的努力還處於相當早期的階段。我們只是將這些反饋作為對我們繼續努力的進一步鼓勵和指導，進一步完善我們的產品，在未來為這款產品帶來更多的內容和人工智能體驗。希望這能回答你的問題。

Yes, sure. That's very clear. Thank you.

是的，當然。這非常清楚。謝謝。

One moment for our next question. And our next question comes from the line of Candis Chan from Daiwa.

請稍等一下我們的下一個問題。我們的下一個問題來自大和的 Candis Chan。

My question is related to our expansion plan for this year. So I know that you (inaudible) mentioned that we actually added roughly 30 new learning centers this quarter. And how would be the pace for the remaining quarters? And in the longer term, what sort of expansion rate that we should expect?

我的問題與我們今年的擴張計劃有關。我知道您（聽不清）提到我們本季度實際上增加了大約 30 個新的學習中心。剩下幾個季度的進度如何？從長遠來看，我們應該期望什麼樣的擴張速度？

This is Jack and I'll take this one. Maybe before I go into the specific plan, I think it would be helpful to kind of share with you a thoughts behind how we manage our learning centers, right? So when I think about managing our learning center network, the general rule of one we have is that we want to manage and maintain operating efficiencies of existing centers as we open up new centers to the extent that there's market demand and we have operating capabilities. In the last couple of quarters on these calls, I think I've talked about how we're gradually adding new learning centers. And you could see this pattern continue this quarter.

這是傑克，我要這個。也許在我討論具體計劃之前，我認為與您分享我們如何管理學習中心背後的想法會有所幫助，對吧？因此，當我考慮管理我們的學習中心網絡時，我們的一般規則是，當我們開設新中心時，我們希望在有市場需求且我們有運營能力的情況下管理和維持現有中心的運營效率。在過去幾個季度的電話會議中，我想我已經談到了我們如何逐步增加新的學習中心。您可以看到這種模式在本季度繼續存在。

Now this quarter, the number of learning centers did continue to grow. Our total number of learning centers has increased from roughly 170 at the end of the previous quarter to north of 200 at the end of Q1. I would want caution you though that the growth of number of learning centers in this quarter is partially in preparation for the peak season during the summer. So we don't necessarily expect to see the same level of increase at this pace every single quarter from now on. As to the future, we'll expand our learning centers at a steady pace to ensure a smooth and balanced growth. I hope that answers your question, Candis.

現在這個季度，學習中心的數量確實繼續增長。我們的學習中心總數從上一季度末的約 170 個增加到第一季度末的 200 個以上。不過，我想提醒您的是，本季度學習中心數量的增長部分是為了為夏季的旺季做準備。因此，我們不一定期望從現在起每個季度都能看到同樣水平的增長。未來，我們將穩步擴大學習中心，確保平穩、平衡的增長。我希望這能回答你的問題，坎迪斯。

Thank you Jackson.

謝謝杰克遜。

One moment for our next question. And our next question comes from the line of Felix Liu from UBS.

請稍等一下我們的下一個問題。我們的下一個問題來自瑞銀集團的 Felix Liu。

Congratulations on the fast growth of the hardware, and that's where my question is. So first, I'd like to get your thought on the potential addressable market of our hardware business. Could you share a bit more about our target demographics? Or which part of the student population are our learning hardware popular amount? And a second part of the question is on the margin. Can management provide more color on the margin profile of the learning hardware currently? And where do you expect the margin to eventually arrive at.

恭喜硬件的快速增長，這就是我的問題所在。首先，我想了解您對我們硬件業務的潛在目標市場的看法。您能否分享更多有關我們的目標人群的信息？或者說我們的學習硬件普及量佔學生群體的哪一部分？問題的第二部分是在邊緣。管理層目前能否對學習硬件的利潤概況提供更多的信息？您預計利潤最終會達到多少？

So the first part of the question was related to TAM. When I look at -- if I limit this conversation to the China market, in terms of TAM, I think on an annual basis, we see shipments of 45 million units of learning talents every year. And that's the kind of existing market size. And if we -- but when we look at our products, we not only -- we believe we not only tackle the existing market. We also have an opportunity to serve the broadly speaking learning industry. We really look at this as customers should want how much they spend on our learning on supplemental learning in general and how much of that use case and use scenarios could be served through a learning table by offering more intelligent functionalities as well as high-quality and personalized content.

所以問題的第一部分與 TAM 有關。當我看時——如果我把這個話題限制在中國市場，就 TAM 而言，我認為每年我們都會看到 4500 萬單位的學習人才出貨量。這就是現有的市場規模。如果我們——但是當我們審視我們的產品時，我們不僅——我們相信我們不僅解決了現有市場的問題。我們還有機會為廣泛的學習行業提供服務。我們確實關注這一點，因為客戶應該希望他們在我們的補充學習學習上花費了多少費用，以及通過提供更智能的功能以及高質量和高品質的學習表可以通過學習表來服務多少用例和使用場景。個性化內容。

So the short answer to the TAM question is depending on what you look at the current 10 is probably 4 to 5 million units per year. If you look at the broadly speaking, all for the running industry, it's much harder to potentially could be a much higher number. The second part of the question was related to margin profile. Let me break that down for you a little bit. Firstly, it may be helpful to understand how we book our top line. I would -- I think it's worth noting that a meaningful portion of the revenue from our hardware business will be recognized as deferred revenue and will be deferred over the next year or 2 depending on the product, where substantially all cost expenses would be recognized upfront.

因此，TAM 問題的簡短答案取決於您對當前 10 個產品的看法，每年可能有 4 到 500 萬台。如果你從廣義上看，對於跑步行業來說，要獲得更高的數字要困難得多。問題的第二部分與保證金概況有關。讓我為你解釋一下。首先，了解我們如何預訂頂線可能會有所幫助。我認為值得注意的是，我們硬件業務收入的很大一部分將被確認為遞延收入，並將根據產品的不同在未來一年或兩年內遞延，其中幾乎所有成本費用都將預先確認。

So this accounting technicality would have a negative impact on margin profile while the business is growing. That's number one. Two is when we look at fixed cost for this business, we have -- we've made upfront investments in fixed costs, predominantly in the form of building a team who manage and develop product as well as producing content for our devices. So that part of the fixed cost is there. Now our hardware business is still in its early stage of development. So as sales increases, we believe there will be potential upside to the profitability of this business. I hope that answers your question.

因此，在業務增長的同時，這種會計技術會對利潤狀況產生負面影響。這是第一。二是當我們考慮這項業務的固定成本時，我們已經對固定成本進行了前期投資，主要形式是建立一個管理和開發產品以及為我們的設備製作內容的團隊。所以這部分固定成本就在那裡。現在我們的硬件業務還處於發展的早期階段。因此，隨著銷售額的增加，我們相信該業務的盈利能力將有潛在的上升空間。我希望這能回答你的問題。

One moment for our next question. And our next question comes from the line of Ken Yang from CICC.

請稍等一下我們的下一個問題。我們的下一個問題來自中金公司的楊肯。

So just a quick one. Could the management team provide an overview of the specific plans and future plans for their share buyback program.

所以只是快一點。管理團隊能否概述一下其股票回購計劃的具體計劃和未來計劃？

We always look forward to generate shareholder returns, and share buyback is one of those tools that, from time to time, we deploy when what condition fits if we buyback a year ago in fiscal year 2023, we repurchased close to 18 million ADSs at an aggregate consideration of approximately USD 65 million. In April, now this year, in April 2023, the company's Board of Directors extended the share repurchase program from the previous year. The current program authorized the company to spend up to approximately $737 million in proceeds issue repurchased through April 30, 2024. In this fiscal year, as of May 31, 2023, the company has repurchased 25.9 million ADSs and an aggregate consideration of approximately $151.3 million under the share repurchase program. In the next quarter, we'll continue to buy back. And the amount spent will be subject to market and business conditions. I hope that answers your question.

我們始終期待為股東帶來回報，股票回購是我們不時部署的工具之一，如果我們在一年前的2023 財年回購，我們會在什麼條件適合時部署，我們以每股1800 萬股的價格回購了近1800 萬股美國存託股。總代價約為6500萬美元。今年4月，即今年2023年4月，該公司董事會延長了上一年的股票回購計劃。目前的計劃授權公司在2024 年4 月30 日之前花費最多約7.37 億美元進行收益發行回購。在截至2023 年5 月31 日的本財年中，公司已回購2590 萬股美國存託憑證，總對價約為1.513 億美元根據股票回購計劃。下個季度，我們將繼續回購。支出金額將視市場和業務情況而定。我希望這能回答你的問題。

One moment for our next question. And our final question for today comes from the line of Howard Sun from Macquarie.

請稍等一下我們的下一個問題。我們今天的最後一個問題來自麥格理的 Howard Sun。

So I have a question on AI products. Wondering if management could share more on the details of AI products. And if there is a current -- like what's the current R&D status? And when do you plan to launch the product?

所以我有一個關於人工智能產品的問題。想知道管理層是否可以分享更多關於人工智能產品的細節。如果有當前的情況——比如當前的研發狀況是什麼？您計劃什麼時候推出該產品？

Let me take that one on, let me just actually add one point before we get to the specific R&D progress and product launch road map. I think this is really truly a long-term secular trend. As I mentioned in the last call with all of you, really in the time about summer months since general chip AI has broken to the public discourse. We've spent tons of time discussing with players across the entire ecosystem from dedicated large language model developers to leading technology companies, startups, researchers, we've spent that time both in China and have taken a few trips to the United States as well.

讓我來談談這一點，在我們討論具體的研發進展和產品發布路線圖之前，讓我實際上補充一點。我認為這確實是一個長期的趨勢。正如我在上次與大家的通話中提到的，實際上是在夏季的幾個月裡，通用芯片人工智能已經進入公眾視野。我們花了很多時間與整個生態系統的參與者進行討論，從專門的大型語言模型開發人員到領先的技術公司、初創公司、研究人員，我們在中國度過了這段時間，也去過美國幾次。

I think this is pretty much of a consensus looking forward that the power unleashed by the large language model would really redefined and help us reimagine the future of education. So it's absolutely exciting, and it's the area where I think the management team and the company as a whole have already embraced, and we'll continue to embrace for many years to come. So as that's a long journey, that's again, I think, a decade-long journey as all of us learn how to grow and develop and build a world with artificial intelligence. So the products that we have, it's just a very, very start of it. It's in the internal testing phase now for our employees, and a very limited set of customers are testing them. And we're continuously optimizing, obviously, the performance of the product and improving the user experience and in preparation for the future launch.

我認為這幾乎是一種共識，期待大型語言模型釋放的力量將真正重新定義並幫助我們重新構想教育的未來。所以這絕對是令人興奮的，我認為管理團隊和整個公司已經擁抱了這個領域，並且我們將在未來的許多年裡繼續擁抱這個領域。因此，這是一個漫長的旅程，我認為，這又是一個長達十年的旅程，我們所有人都在學習如何成長、發展並建立一個人工智能的世界。所以我們擁有的產品只是一個非常非常的開始。現在我們的員工正處於內部測試階段，只有非常有限的客戶正在測試它們。顯然，我們正在不斷優化產品的性能並改善用戶體驗，並為未來的發布做好準備。

So moving forward, we plan to expand the capabilities of these large language models with a few things. I think, Obviously, there is a large set of proprietary data that we have accumulated over the years through our pedagogical experience and customer service. I think that's invaluable in terms of helping the large language model to become more suitable for the various scenarios across the learning journey. I think we would need to continue to work on better alignment for the model, for the type of interactions with students on various types of subjects. And lastly, I think it's just in terms of features and functionalities across our learning services type of business models as well as our content and learning devices business models to meet the diversified learning needs of our customers. So Howard, I hope that answers your question.

因此，展望未來，我們計劃通過一些事情來擴展這些大型語言模型的功能。我認為，顯然，我們多年來通過教學經驗和客戶服務積累了大量專有數據。我認為這對於幫助大型語言模型變得更適合整個學習過程中的各種場景來說是非常寶貴的。我認為我們需要繼續努力使模型更好地協調一致，以適應與學生在各種類型科目上的互動類型。最後，我認為這只是在我們的學習服務類型的商業模式以及我們的內容和學習設備商業模式的特性和功能方面，以滿足客戶多樣化的學習需求。霍華德，我希望這能回答你的問題。

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to management for any further remarks.

謝謝。今天節目的問答環節到此結束。我想將該程序交還給管理層以徵求進一步的意見。

Great. Again, thanks to everybody for joining us today. And we look forward to talking to you next quarter. Bye-bye now.

偉大的。再次感謝大家今天加入我們。我們期待下個季度與您交談。現在再見了。

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

女士們、先生們，感謝你們參加今天的會議。這確實結束了該程序。您現在可以斷開連接。再會。