TAL Education Group (TAL) 2021 Q4 法說會逐字稿

Good day and thank you for standing by.

Welcome to TAL Education Group Fourth Fiscal Quarter and Fiscal Year 2021 Earnings Conference Call.

(Operator Instructions)

Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to Ms. Echo Yan, IR Director of TAL Education Group.

Thank you.

Please go ahead, ma'am.

Thanks, operator.

Thank you all for joining us today for TAL Education Group's Fourth Fiscal Quarter and Fiscal Year 2021 Earnings Conference Call.

The earnings release was distributed earlier today, and you may find a copy on the company IR website or through the news wires.

During this call, you will hear from Mr. Rong Luo, Chief Financial Officer; Linda He, Vice President of Finance; and myself, IR of TAL.

Following the prepared remarks, Mr. Luo and Ms. He will be available to answer your questions.

Before we continue, please note that the discussions today 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 in this call includes 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 now to turn the call over to Mr. Rong Luo.

Rong, please.

Thank you, Echo.

Good evening and good morning to you all.

Thank you for joining us today on this earnings call.

In the recent couple of months, China's public health situation and economy showed further progress.

Internationally, the concerted efforts and vaccination programs are hopeful signs that the worst of the pandemic could be behind us all.

Meanwhile, at TAL, our tutoring business, both online and off-line, as well as our capacity expansion in all cities developed as planned for the fourth quarter of fiscal year 2021.

Let me give you a quick overview of the key metrics.

Net revenue growth in the fourth quarter was up by 58.9% year-over-year in U.S. dollar terms to USD 1,362.7 million and 47.7% in RMB terms.

Total normal priced long-term course student enrollments increased by 44% year-over-year, mostly driven by online as well as Xueersi Peiyou small class enrollments.

GAAP loss from operations was USD 297.2 million compared to USD 41.3 million in the fourth quarter last fiscal year.

Non-GAAP operating loss was USD 216.9 million compared to USD 8.4 million in the same year ago period.

In the full year of fiscal 2021, net revenue growth was 37.3% in U.S. dollar terms, which is 34.1% in RMB terms.

I will now turn the call over to Linda He, our Vice President of Finance.

She will give you an update on our operational progress in the fourth quarter.

And then Echo Yan, our IR Director, will review the fourth quarter and the fiscal year financials.

After that, I will update you on our business strategy and discuss our business outlook.

Linda, please.

Thanks, Rong.

I will review the various revenue streams of our tutoring business for the fourth quarter of fiscal year 2021.

Let me start with small class and other business, which consist of Xueersi Peiyou small class, Firstleap, Mobby and some other education programs and services.

These accounted for 61% of total net revenue compared to 68% in the same year ago period.

The revenue growth rate was 43% in U.S. dollar terms and 33% in RMB terms.

Xueersi Peiyou small class, which remains our stable core business, represented 53% of total net revenue in the fourth quarter compared to 59% in the same year ago period.

The lower revenue contribution from Xueersi Peiyou was mostly due to the faster growth of xueersi.com online courses, which accounted for 32% of total revenue in the quarter compared to 24% in the same period last year.

Fourth quarter net revenue from Xueersi Peiyou small class was up by 43% in U.S. dollar terms and 33% in RMB terms, while our normal priced long-term course enrollments increased by 21% year-over-year.

All in all, the improving overall situation in China supported the continued recovery of our Peiyou business in the course of fiscal year 2021.

Our key operational metrics of Peiyou, such as retention rate, fulfillment rate and drop-out rate, remained very stable throughout the year even in the unprecedented circumstances.

In the fourth quarter, normal priced long-term Xueersi Peiyou small class ASP increased by 22% in U.S. dollar terms and increased by 13% in RMB terms year-over-year.

The increase was mainly due to the pricing gap refund we offered in February 2020, when we had to migrate Peiyou off-line small class students to online small class.

Xueersi Peiyou small class performed well in the various tiers of cities.

Revenue from the top 5 cities, which are Beijing, Shanghai, Guangzhou, Shenzhen and Nanjing, increased by 44% year-over-year in U.S. dollar terms and accounted for 55% of Xueersi Peiyou small class business.

Revenue generated from cities other than the top 5 grew by 41% in U.S. dollar terms.

The other cities accounted for 45% of the Xueersi Peiyou small class business.

Next, I'd like to discuss our Zhikang one-on-one business.

In the fourth quarter, this business sector achieved year-over-year revenue growth of 28% in U.S. dollar terms and 19% in RMB terms.

Zhikang one-on-one accounted for approximately 6% of total revenue in the fourth quarter of fiscal year 2021 compared to 8% in the same year ago period.

In the fourth quarter, normal priced long-term Zhikang one-on-one courses ASP increased by 17% in U.S. dollar terms and 8% in RMB terms year-over-year.

The increase was mainly due to some slight discounts we offered in February last year when we had to move Zhikang off-line students to online after the COVID-19 outbreak as well as the regular increase of tuition fees in several cities during the period.

Now let me update you on our current capacity expansion strategy.

We continued the expansion drive in the fourth quarter as planned for this fiscal year.

We added 8 new cities in the fourth quarter, bringing the total to 110 cities, of which 40 were newly added during fiscal year 2021.

These 8 new cities are Ma'anshan, Cangzhou, Weihai, Liaocheng, Rizhao, Yibin, Nanchong and Zhaoqing.

Similarly, we expanded our learning center network in the fourth quarter based on our healthy and sustainable approach and by following government guidelines and market demand.

In Q4, we added 108 new learning centers on a net basis to a total of 1,098 learning centers.

We opened 119 new Peiyou small class learning centers and closed 9, adding a net of 110 Peiyou small class learning centers.

We closed 5 Mobby and Firstleap centers, and we opened 4 one-on-one centers and closed 1 one-on-one center, adding a net of 3 one-on-one centers.

During the quarter, we added 677 Peiyou small class classrooms.

In all, by the end of February 2021, we had 1,098 learning centers in 110 cities, of which 109 cities in China and 1 Xueersi Peiyou learning center in the United States.

Among these learning centers, 879 were Peiyou small class and international education centers, 82 were the merged Firstleap and Mobby small class and 137 were Zhikang one-on-one.

Looking into Q1 of fiscal year 2022, we have conditionally rented some Peiyou small class learning centers and expect to add a few more and close down some learning centers based on standard operations.

We will closely follow up with government guidelines, as always, and stay alert for COVID-19 developments.

Turning now to our online business.

Fourth fiscal quarter revenue from xueersi.com grew by 115% in U.S. dollar terms year-over-year and 100% in RMB terms, while normal priced long-term course enrollment grew by 71% year-over-year to over 3.5 million.

In the fourth quarter, xueersi.com contributed 32% of total revenue and 63% of the total normal priced long-term enrollments compared to 24% of total revenue and 44% of total normal priced long-term course enrollments in the same year ago period, respectively.

The growth in online business was supported by increasing demand for online education as well as sales and marketing efforts and retentions of the previous quarters.

In addition, in Q4, normal priced long-term online course ASP increased by 9% in U.S. dollar terms and increased by 1% in RMB terms year-over-year.

With that, I will now turn the call over to Echo Yan for the financial update.

Echo, please.

Thanks, Linda.

Let me now go through some key financial points for the fourth quarter and then briefly review the fiscal year 2021 financials.

Gross profit increased by 72.9% to USD 781.2 million from USD 451.8 million in the same year ago period.

Gross margin for the fourth quarter increased to 57.3% as compared to 52.7% for the same period of last year.

Selling and marketing expenses increased by 171.6% to USD 660.5 million from USD 243.2 million in the fourth quarter of fiscal year 2020.

Non-GAAP selling and marketing expenses, which excluded share-based compensation expenses, increased by 168.4% to USD 635.5 million from USD 236.8 million in the same year ago period.

The year-on-year increase of selling and marketing expenses in the fourth quarter of fiscal year 2021 was primarily a result of more marketing promotion activities to strengthen our customer base and brand as well as higher compensation to sales and marketing staff to support more programs and service offerings.

Other income was USD 7.9 million for the fourth quarter of fiscal year 2021 compared to other expense of USD 4.7 million in the fourth quarter of fiscal year 2020.

Other income in the fourth quarter of fiscal year 2021 was primarily due to the value-added tax and social security expense exemption offered by the government during COVID-19 impacted period and partially offset by impairment loss of noncurrent assets.

Income tax benefit was USD 80.5 million in the fourth quarter of fiscal year 2021 compared to USD 63.6 million of income tax expense in the fourth quarter of fiscal year 2020.

Net loss attributable to TAL was USD 169 million in the fourth quarter of fiscal year 2021 compared to net loss attributable to TAL of USD 90.1 million in the fourth quarter of FY 2020.

Non-GAAP net loss attributable to TAL, which excluded share-based compensation expenses, was USD 88.7 million compared to non-GAAP net loss attributable to TAL of USD 57.2 million in the same year ago period.

From the balance sheet, as of February 28, 2021, the company had USD 3,243 million of cash and cash equivalents and USD 2,694.5 million of short-term investment compared to USD 1,873.9 million of cash and cash equivalents and USD 345.4 million of short-term investments as of February 29, 2020.

As of February 28, 2021, the company's deferred revenue balance was USD 1,417.5 million compared to USD 781 million as of February 29, 2020, representing a year-over-year increase of 81.5%, which was mainly contributed by the tuition collected in advance of part of the spring semester of Xueersi Peiyou small classes and online courses through www.xueersi.com as well as deferred revenue related to other businesses.

Turning now to the full fiscal year 2021.

Let me briefly review some key financials as follows.

Fiscal year revenue grew by 37.3% to USD 4,495.8 million.

Gross profit grew by 35.6% to USD 2,447.2 million from USD 1,804.7 million in the fiscal year 2020.

Gross margin for the fiscal year 2021 decreased by 70 bps to 54.4% in as compared to 55.1% for the same period of last year.

Loss from operations was USD 438.2 million in the fiscal year 2021 compared to income from operations of USD 137.4 million in the prior year.

Non-GAAP loss from operations, which excluded the share-based compensation expenses, was USD 233.3 million for the fiscal year 2021 compared to non-GAAP income from operations of USD 255.4 million in the fiscal year 2020.

Net loss attributable to TAL was USD 116 million in the fiscal year 2021 compared to net loss attributable to TAL of USD 110.2 million in the fiscal year 2020.

Non-GAAP net income attributable to TAL, which excluded the share-based compensation expenses, was [USD 89 million] (corrected by company after the call) compared to non-GAAP net income attributable to TAL of USD 7.7 million in the fiscal year 2020.

Now I will hand the call back to Mr. Luo to briefly update you on our strategy execution and provide the business outlook for -- of the next quarter.

Rong, please.

Thank you, Echo.

Fiscal year 2021 was indeed an unprecedented year due to the outbreak of COVID-19.

During the year, we timely responded to any government instructions related to public health and did whatever necessary to protect safety of our students and employees and contribute to our country's great efforts to fight against this pandemic.

Despite all the challenges we have faced, we realized 37.3% revenue growth for the fiscal year 2021, which was in line with our long-term growth rate expectations.

We stayed our -- we stayed on course of our development strategy as an education service provider regardless of the pandemic and the intense competition.

Looking ahead, we will continuously follow up with the government guidelines for the industry and conduct our class teachings in line with national public health regulations as well as keep investing in the quality of our products, services, teachers' training and technologies, supported by sustainable marketing efforts.

Thus, our ever more diversified tutoring offerings will be able to better meet customers' changing demand and ability to pay.

Let me turn finally to our business outlook.

Based on our current estimates, total net revenue for the first quarter of fiscal year 2022 is expected to be between USD 1,302.2 million and USD 1,320.5 million, representing an increase of 43% to 45% on a year-over-year basis.

That concludes my prepared remarks.

Operator, we are now ready to take questions.

(Operator Instructions) Your first question comes from Lucy Yu from Bank of America Securities.

So my question is about localization, which has been a hot topic lately.

And we also noticed that one of our competitors today also reviewed their plan in localization of their courses, products, et cetera.

So given that our Peiyou online size is getting meaningful and already like over 10% of our revenue, so how should we think about our competitive edge in localization and our -- the future competition dynamic in this localized online course industry going forward?

So that's question number one.

And then number two, related to that is that could you please share with us the progressing status of synergies or cooperations among our different business lines, especially between xueersi.com and Peiyou online?

So do we have any targets and say that how much traffic we can divert or share between these 2 platforms?

Thank you so much, Lucy.

I think the first question about localized -- no matter it's localized online class or localized offline class, I think, which remind me, I think, last year second quarter, we talked about that, that's why we developed our Peiyou localized online class, Peiyou Bendiwangke.

So because we -- when we reach through all the learning process for Chinese students, we need to consider a lot of different factors.

The more tailor made or maybe more localized sometimes lead to a better result.

For example, in China, we have over 30 provinces, and different provinces have their different version of the college entrance exams.

If we go down to the senior high school entrance exams, the versions will be even more.

So if we want the students to spend less time but get a much better result, we need to make sure we teach, can meet their needs, which means we need to provide them the localized content, the localized content including different versions, different level of difficulty and different sequence.

So you probably know that in primary school and in the middle school, China has multiple version of textbooks.

And even if it's the same version of textbooks, we have different provinces and different cities.

Even within one city, different districts.

Maybe among different schools, they have different sequence.

Some schools use their textbooks to learn certain knowledge first followed by the other, while this sequence in other schools may be different.

And even same school, same textbooks and same sequence, and their level of difficulty will be also different.

So we are facing a market very dynamic, and we need to be very careful.

When we teach one students, we try to teach the best content to fit their needs instead of only 1 version for all.

So in this perspective, we need to know the localized content will be very helpful for that, no matter that's an online class or that's an off-line class.

In the second place, we also figured out, I think, starting from last year, the local teacher even in the online part typically can teach the local students better.

Because the local -- for example, the teachers in Beijing, Shanghai, they teach in these cities.

They know a lot about what's happening in these cities.

They know what is the level of difficulty of the exams in different cities.

So if we ask the local teachers to teach local students, the outcome will be better than only one teacher teach the students all over the country.

And besides, we also need to be very careful because education is very different from e-commerce.

They require a significant level of services.

So whatever services we provide them should also be very tailor made and very localized.

For example, a student in Beijing, what they care is what's happening in Beijing.

What's happening in other cities maybe care less to their attention.

So going more localized and provide more individual kind of solutions to the students.

In the long run, when the technology is good enough, possibly there is some chance to have a so-called self-adapt learning platform.

At that time, everyone can be teached individually and differently.

But today, we're seeing, at least compared to a purely online part, one version to all, the localized offers will be more helpful than the previous versions.

So we are happy to see more and more companies that care the students' needs, and they are working on providing the localized offer to them.

We believe that's the right direction to go.

We need to know the student more, and we need to teach them the most appropriate content to them.

The ideal cases will be they spend less of their time, but they learn more.

But on the other side, sometimes going localized or maybe going -- and be closer to the students' needs, sometimes it's easy to say but it's hard to execute.

We as a company same as our counterparts in this industry for over 10 years.

So we are building a lot of learning centers, and we have different teams working in different cities.

The local team will help us to get information from the local geography and do some localized R&D, so -- which is the fundamental for providing the localized offers.

And besides -- which is quite different from the purely online part.

And it takes more time, it takes more patience and it takes a significant amount of investment for the new team, for the new channels and for the new way to attract students and et cetera.

So -- which means if we say the purely online part is kind of like Air Force, then if you want to go more localized, which means you'll need to do more kind of tiers and hard work, so everyone needs to get prepared for that.

Especially in China, we have a huge geography, we need to care the students equally for every city.

So all in all, we are happy to see more companies are going more localized and try to teach the students -- use a more efficient way.

That's right thing to do.

But on the other side, we need to be patient, and we need to spend enough time or energies on technology, on content, on the teacher training and et cetera to make sure that works.

So that's our view on how to be localized.

And the second question you're asking, the synergy between Xueersi online school and Peiyou small class business, you're asking how much traffic they can share.

I think it's not a traffic business.

When we consider the synergy between Xueersi online school and Xueersi Peiyou small class, in the first place, they are sharing the same brand.

They're under the same brand.

In the second place, they share the content and the technology strategy.

So we try to think, as -- when we built the Peiyou small class business, we tried to analyze every process of the learning, both online and off-line.

And we tried to standardize the operations.

And for the standard operations, which has a lot of similarity among online and off-line, we tried to integrate them as one.

But at the end of the day, I think these 2 teams, they have some synergies and they share some of the infrastructures in the back end in their brand strategies.

But in the front end, in an operational perspective, they still tend to be more independent.

That is because today, they target different markets.

The Xueersi Peiyou small class business today cover 110 cities.

And so that's their main market to go.

Xueersi online school, that's the product for the whole country.

They cover more geographies and now even go down to the very low-tier cities.

So they have different targets.

So in the front end, operations are quite independent.

But the back-end functions, we try to do more integrations and we try to drive more synergies.

But these synergies are now simply in the traffic, but more in the infrastructure perspective.

Thank you, Lucy.

Our next question comes from Sheng Zhong from Morgan Stanley.

I also want to follow up on the Peiyou online.

So as I look at your Peiyou off-line capacity, it's very clear to me that your classroom per learning center is much less than before, especially this quarter.

So will this be a new normal for your new capacity in the future?

So with that, I think part of the reason should be your off-line and online strategies.

So will that mean -- so what the company's outlook for the Peiyou online contribution to Peiyou total next year and maybe in the longer term?

Any color will be appreciated.

Thank you, Zhong Sheng.

I think the Peiyou live and Peiyou today is under one team, and we try to integrate them together, even maybe not only in the big cities but also go down to the lower-tier cities.

I suggest you guys look into to the Peiyou revenue as a whole, both online and off-line.

I think that is more kind of the proper way to look into our business.

I show one example.

For example, in Beijing and Shanghai.

In Beijing and Shanghai actually, we have a very high percentage of off-line students that are using the Peiyou live offering now.

So sometimes it's difficult to separate what is Peiyou live -- or what's Peiyou online, what's Peiyou off-line.

So the better way to look at that is we're combining the 2 together, and we're looking into the Peiyou total growth.

And on the other side is I think when we're looking to the Peiyou live, part of the reason they are so successful is because they use the very localized way to do that, which is quite different from Xueersi online school.

And we're also piloting some of the new format of the class in the Peiyou online channels, not only the big class but also we try to pilot the small class in the top cities.

And even today, I think the Peiyou online/Peiyou live has not covered all the cities.

They only cover the top-tier cities in Peiyou small class business.

We are confident they have a chance to continue to develop and try to expand and cover more cities in the future.

And when we're looking to all of this, I think the way to manage the business needs to be -- needs to change according to the customers' behavior.

I think 2 years ago, online and off-line, even in Peiyou space, are relatively more independent.

But coming to today, we have seen that Peiyou students and parents are buying these offers, both online and off-line merged together.

So our way is very clearly.

We don't have a special target to say how much Peiyou online we need to deliver or how much Peiyou off-line we need to deliver.

The only target we have is we need to use the best way to fit parents' and students' need.

So we need to provide them more visibility and kind of more possibility to maximize their return of investment in time and energy.

So again, all in all, we wish we can look all of this together.

And we believe that Peiyou can leverage both online and off-line growth drivers to grow -- to drive healthy growth in the coming few years.

Thank you, Zhong Sheng.

Our next question comes from Felix Liu from UBS.

Congratulations on a very strong quarter.

My question is on the growth of this quarter and the next quarter and maybe on the next fiscal year as well.

I understand that previously, the guidance for Q4 was a little bit weak on the online side because of scheduling.

But then online, I think it was -- xueersi.com ended up performing very well.

May I know what's driving the strong performance?

And secondly, on the guidance, could you possibly break that down into business lines?

And what do you expect the growth will be like by business line?

And given the strong momentum, is there any update to our FY '22 growth outlook?

Okay.

Thank you for the question.

I think when you only look into to the Q4 numbers.

Sometimes, the people will say the number is very good.

But I need to draw attention to deep dive to the kind of the details of numbers.

In Q4, if you remember what we present just now in our script, our Peiyou enrollment growth is around 20%-plus while the revenue growth is higher.

That's because last year -- same quarter Q4 last year, that is the outbreak quarter of the COVID-19.

So at that time, we moved all of our off-line business to online.

But frankly speaking, the move is very rushed because we never know what is the pandemic at that time.

So to compensate the parents, so we changed the pricing from off-line to online pricing, which is a significant -- less than the -- the online price is much lower than off-line price, so -- which drives the last year's Q4's base a little bit higher.

So I suggest you guys look into my Peiyou enrollment growth, 20%-plus.

So that is the right number to look at.

And compared to the previous quarters last year, which goes through a very tough time of COVID-19, the Peiyou small class is recovering step by step.

And we're also seeing the recovery will pretty much on track in the coming quarter, the Q1 for fiscal year '22.

And the second part is our online part, I said our online part performed a little bit better than what we expected.

Part of the reason is because the online offers, it's -- can fit a student's needs.

And we also spent a fair amount of the marketing dollars to drive the growth.

And looking to the Q1, we probably can see that the Q1 Xueersi online school's enrollment growth is -- will be similar to this year, Q4.

So we're pretty much on track in both online and off-line perspective.

There is no big surprise to that.

And -- but again, I suggest when looking to the education companies' growth, the best way to do that is rolling 12 months.

If you're looking to the growth in rolling 12-months way, which can eliminate some of the impact of scheduling on maybe quarter-over-quarter adjustments, which makes more sense to read our -- the total business.

And all of this -- all of these numbers is based on what we see today.

I also need to draw attention is actually, you probably can see that some more policies were ongoing and coming out from the government.

So we as a company, we will follow the government guidelines.

And if the policy is clear, we will definitely comply with the policies to make necessary adjustments.

So all of the numbers you see today is based on what we have, which [is subject] (corrected by company after the call) to change if the policy has any new updates.

Thank you.

Our next question comes from D. S. Kim from JPMorgan.

Congrats on such a massive revenue beat.

My first question is actually related to your last one just now, a little bit indirectly.

I know it's impossible to predict at this point.

But in an unlikely scenario of government limiting advertisements significantly, what do you think will be the sustainable growth rate for xueersi.com or online tutoring industry as a whole in a less-advertisement or no-advertisement environment?

And how do you think we can achieve such a run rate, i.e., could you please possibly break out new student enrollment or new student contribution currently from online performance adds versus organic versus referral or any way so that we can have a sense that no advertisement would see a -- would still be giving us extra amount of growth?

Then I have one follow-up.

Thank you.

I think right before we see clearly what policy is, it's too early to talk about the potential impact of that policy.

I think when looking to our online part, specifically you talked about the advertisements and the promotions and online marketing, I think frankly speaking, we are not a company who [are very good at] (corrected by company after the call) promotions, frankly speaking, or maybe advertisements in the past.

And so we are typically an education company.

We prefer we teach the students well and we make people satisfied and we drive our growth through our high-quality services.

That's the typical way we drive up growth.

So if the policy has some impact on advertisements or online marketing, I think we as one player in this industry, we will do the same thing as what other players do in the whole industry.

So -- but today, because we still need to wait for what's the final policies or what's clearly are requirements right over there, so it may be too early to make some judgment call based on something we don't know.

On the other side is one thing I need to draw attention is actually, in the past few quarters, the Xueersi online school always had more students coming from the branding channels because we share the brand under Xueersi together with Peiyou small class.

So we have a little bit better in the customer awareness across the top 100 cities and even more.

So we have chance to attract the students directly to register in my platform and take my classes, which is some of the advantages we have compared to the other players.

On the other side is we need to focus a lot on how to serving the current students.

When a student is studying in my platform, we need to make sure they can receive high-quality services so their retention rates will be very healthy.

And we also encourage the students to refer their parents -- or their other friends to study in our platform.

So again, we still believe the only way to make our classes more competitive is teach the students well, high-quality, high retention rate, low drop-off rate and all of that.

So we work very hard on operations to make sure our efficiency is better than the other one.

And go back to the advertisement policy or not, let's stay tuned.

And we probably can give you more colors when we see the policies very clearly in the future.

But again, this industry always has a lot of policy changes and challenges in the past few years, not today.

So we are -- very clearly, we comply with the guidelines.

We made necessary adjustments.

But again, we focus on students, we focus on parents to let them receive high-quality services.

That is the fundamentals for us and never changed.

Thank you.

That's really helpful, and I absolutely agree with you, sir.

One follow-up question, if I may, is about our expansion.

If you look at for the past 2 years, I couldn't help but notice that we are entering new cities in a pace that we never did before.

Like nearly 60 cities, we only had 1 center there.

And may I ask what's driving the strategy?

I'm talking about Peiyou.

And what's driving the strategy?

Is it because we want to set up home base for the Peiyou live for the nearby cities, so like OMO efforts?

Or are we seeing off-line market city -- market share opportunity in that specific cities and want to build brand equity there as soon as possible?

That's it from me.

Thank you.

I think no matter you're in Beijing or Shanghai or maybe you are in Rizhao or Yibin, the students has equal demand or equal opportunity to study better and go to the better universities.

So the demand is always there.

And the only difference is previously, if you only have the off-line growth drivers, run the classrooms, hire a lot of teachers and do offline trainings, well, it is very operation intensive and very difficult to be scalable.

But when you have the online part, so you can move some of the elements or some percentage of the workloads to online, which made the model easier to be flexible -- or more flexibility to be scaled, and -- which also encourages us to provide the high-quality and affordable services to the students not only in the top cities but also in the rest of places.

Today, we cover around 110 cities, so we'll tend to enter more new cities in the future.

We wish we can provide equal access to the high-quality teaching services from our platform and with which we can help and support more students to achieve their goals in the future.

So thanks to technology, which give us some possibility to go into more places and teach more students.

But this is not the end.

During the online merged off-line process, we still see a lot of points we can improve.

We still see a lot of challenges.

We need to deal with that.

So -- which is -- would take us -- the other -- several years, maybe 3 or 5 years, even longer, to make this happen.

Thank you.

Our final question today comes from Alex Xie from Crédit Suisse.

Congratulations on the good performance in this quarter.

So firstly, I'd like to ask about your ASP in online.

I think this is the first time for the online business to achieve significant ASP growth in 2 years.

So you can, say, elaborate on that?

And I believe you previously mentioned that ASP should go lower to attract students in low-tier cities.

And secondly, for -- would you please update us on the status in Beijing.

How many of your learning center have obtained the approvals to reopen?

And what are your expectations for the rest of them?

Yes.

Thank you.

In the first place, let me make it clear for the online ASP.

Online ASP looks -- grew 9% growth.

That's because of the exchange rates.

That's because of the exchange rates, the currency issues.

That's -- not our -- in RMB terms, our normal priced ASP for the Xueersi online school is only around 1% increase.

Very stable, very, very stable.

And we don't see any major changes in the ASP perspective in Q4.

Secondly, I think you're asking about the Beijing.

Beijing even today, we only have single-digit learning centers get approved to be reopened.

The rest of the learning centers is still under the government process to gather reopen approvals, which will take some time, and I can't estimate how soon that will be complete.

Our view is very clear, is we will comply with government guidelines and follow their requirements to do the off-line learning centers.

But at the same time, we leverage the online platform.

We'll use the online way to teach students in Beijing.

So far, the growth is quite stable, and we also see the retention rates and the dropout rates and all of that is quite -- pretty much on track.

We don't see any big differences.

And looking forward, when the new policy is out, and we'll definitely follow the policies to make the necessary adjustments.

Based on what we see today, we are pretty much on track.

Thank you.

Right.

Thank you.

So with that, we conclude our conference for today.

Thank you for participating.

You may all disconnect.