TCTM Kids IT Education (TCTM) 28 Mar 232022 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter and Full Year of 2022 Tarena International Incorporated Earnings Conference Call.

All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I must advise you that today's conference call is being recorded today March 28, 2023.

to today, conference Ms. like your over now speaker first would hand call the to I Sylvia the Yang, Investor Relationship Manager. Thank you. Please ahead. go

operator. welcome and for and Hello, earnings year you, full call quarter the to XXXX. of conference fourth Thank Tarena’s everyone

take were as and CFO, Company's well Nancy and available ir.tedu.cn, newswire Ying from Ms. Ms. services. our Today, you Sun, earlier on The released will today CEO IR Ping our Wei, who results website, hear Company's XXXX guidance the XXXX. year first our the to earnings our Nancy financial fourth as you quarter for your available through be remarks, of answer operational results and and questions. and and quarter will Ms. After prepared full for of their revenue Wei give will the

the of continue, U.S. today looking These looking differ expectations. Harbor please certain forward the that results current actual Act made the statements materially provisions that subject of risks we to from Reform contain XXXX. note statements our Litigation and will under uncertainties Safe to may forward cause are Securities discussion Private Before

posted information ir.tedu.cn. been The GAAP has are U.S. with this assume discussed any U.S. measures Tarena's Tarena’s non-GAAP release defined not that financial applicable prepared in measures of forward G. note update which to Also, in accordance reconciling IR to as financial financial required included does Tarena under GAAP looking statements Company's law. information the some includes and please financial any results non-GAAP website measures to be earnings on except in obligation Regulation as at

recorded. conference this reminder, Finally, as a being is call

of Tarena's webcast this call conference In on website. is Investor Relations addition, available a

Tarena. the turn Ms. over to Nancy now Ying CEO Sun, will call the I of

Sylvia, and us. everyone Language]. Thank joining [Foreign for you, thanks

our for Language]. as impacted dynamics month Year COVID-XX the us period was end challenging temporarily the Chinese have operations. XXXX daily New [Foreign and of a The around

classes teachers period for Our to and employees months also varying acquisition. offline work restrictions To or illnesses. of Meanwhile, time. number our affected some the as suspend this students a due two centers of to almost have were large to degrees, customer offline closed pandemic unable for

course delivery services. center offline and our and online Our offline

In Language]. million non-GAAP our OMO-based excluding operating and quarter. in to inflow the course a operating stable environment, cash share-based this improvement operational of we [Foreign challenging This RMBXX was achieved and system compensation positive our income of operational a expenses business delivery our consistent fourth efficiencies. agility due

quarter, margin XX.X% X.X profit Our on the fourth percentage reached in gross level the up year-over-year. group point’s

stable, year-over-year. of remained a X.X XX.X% Specifically, percentage margin by our business professional gross profit IT rising with point’s education

Our and scalability IT-focused fourth quarter, supplementary gross STEAM education and growth model resilience up business point’s market a of enrollment an year-over-year. XX% XX.X% of in continued margin to percentage profit demonstrate the XX registering business

XXXX, achieved net headwinds non-GAAP profit challenges In external addition, we loss turnaround RMBXX.XX despite of a a the for from million throughout net year. to and profit net the RMBXXX a of from a million

As a our quality upgrades operating capabilities. deliver continuous and service in of model, result the

Language]. [Foreign

same fourth period in revenues XXXX to mentioned earlier. compared million the of down XX.X% RMBXXX to net total Our with I million the due in factors amounted the RMBXXX quarter,

IT-focused impact education supplementary to professional our revenue IT declined the XX.X% Segment-wise while XXXX, with that our was due fourth quarter revenue the of macroeconomic of STEAM by education headwind. comparable of

In by impacted enhance we control operational expenses. our efficiencies the respect quarter, optimized fourth factors [Foreign beyond control, our revenue and decreased. control effectively business model the to Language]. management period, With during our cost to

our gross X.X rose year-over-year, gross profit However, as a by in the margin -- quarter. our percentage decreased our year-over-year cost result, point’s by fourth XX.X%

year-over-year our RMBX.XX loss million. operating XX.X% to XX.X% Additionally, decreased by operating narrowing expenses year-over-year substantially by

XXXX compared meanwhile expenses as with compensation well year RMBXX.XX of million loss a income full share-based excluding we income, operating realized XXXX, for operating in income the operating of million. GAAP RMBXXX.X non as was of Our RMBXXX,XXX, an non-GAAP an operating

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our me through walk education. IT-focused let you STEAM supplementary Next,

from with recorded in STEAM XXX,XXX margin total This as net to XX.X% quarter In quarter XXXX, quarter XX thanks fourth of courses XXXX. the well increased in the by our IT-focused gross revenue delivery of to of of as XXXX, our recognition. XXXX fourth growth to our RMBXXX period, climbed supplementary our quarter million XX% effective increase the and we quarter in and our [Foreign brand our centers, cost and education represented fourth fourth points million, profit fourth of XX.X%. high from during profit of program the XXXX. by an gross from control XX.X% in the by Language]. Meanwhile, revenue the comparable quality year-over-year was period to Enrollment the RMBXXX steady our revenue growing at same rose XXX,XXX percentage

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affected offline customer our paying XXXX quarter student XX,XXX, of by year-over-year closure temporary our in the acquisition On XX.X% front, number was of decrease was centers. total as our fee of fourth the the students of recruitment a

However, our education paying our and students' percentage STEAM number referrals an of offsetting customer partially students, in results the translated word-of-mouth vendor in increase supplementary due delivery IT-focused of limited excellent and learning and a students renewal fee course to decrease into a quality access. in acquisition have as

non-staff despite and maximum operations we in our constraints online quality service extent system Meanwhile, model fourth high thanks the delivery to and service on imposed course ensure our our OMO offline course the the to integrated and quarter.

enrollments renewal over the quarter, fourth have by a year-over-year, of to the fourth XX.X% in students quarter. exceed increased enrolled percentage the In for who XX% continued year notably

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managed This helps costs fourth pandemic Regarding and single expand course the operation to them although and quarter, to us service suspended profitability. in our some while center of the operational quality. of ensuring centers, the efficiency we improve reduce operating to due operations

declined center of the period the the quarter XXX XXXX. at IT-focused the XXXX, of of per students increased XXX of fourth of number centers. of the revenue grew by enrolled In of reduction center per from in quarter, of to quarter a number the fourth end same from the XXX total the same At in average X.X%. supplementary the At of to quarter time, end XXXX fourth services the providing XXXX, STEAM education XX net centers XXX fourth

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our Next, professional business. education moving IT to

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the some enrollments the quarter, fourth and our significant mobility To fourth centers with we the well. suspended offline of a This our cope in operation societal operations as on impacted pandemic general, for the situation, operations During had in quarter. the impact period. affecting a

education Specifically, by our net professional year-over-year. XX.X% dropped revenue IT for business

Of the course, centers New have Year holiday. full since operations our in Chinese resumed

operations improving by XX.X% operational our of and continued business and we addition, to quarter, operating total professional education facilitate year-over-year. decreased the expenses reducing In costs by stable fourth In the costs efficiency. IT

Language]. [Foreign

on latest wave embrace society We'll economy generative business stay the brought AI its promote set deployment services opportunities new more and and by We AI emphasis and abreast advancements operations worldwide edge society and models accordingly. recovery. will courses, digitalization a new about market the during Our macroeconomic development. information-based core up technology of and of and develop. influence has places China's our ChatGPT new digital continuously demand and always technologies of how cutting technology innovate the

of this of approved of the we model education to ERNIE latest technology developed marks one the Meanwhile, in technologies. we dialogue smart Recently, became continued the explore explore professional application conversational the Baidu. of in application partners Bot collaboration, which ecosystem in of language professional Through first by the the China. first the will application education, we have

and will technology education of demand rapid bound high talent broader they the and that development believe We AI professional to application the development are standard for industry. of the IT drive that fuel IT

our in technological to and will employers innovations with the industry at spend delivery students of create to and continue forefront We services. leading our industry courses value for and their continue

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through financials full the for year the to walk to XXXX. you turn I'll of fourth and our over Next, Ping, call quarter

Thank you, hello and everyone. Nancy,

fiscal the release Now quarter year of you of some Please to to let I'll brief. fourth as me for walk try the the financial highlights XXXX. information press more refer be through and

For Company XXXX. of same million its an loss quarter million US$X.X the loss or million to of of RMBX.X period to RMBXX.X operating the compared operating the in fourth narrowed XXXX,

driven share-based million income, the million period the non-GAAP we profit which The controls environment. from our XXXX. during in was a challenges although compensation or operating expenses, the of operating and well faced million expense quarter the fourth cost quarter by executed RMBX.X was in compared our temporary excluded business to same operating improvement RMBXX.X Non-GAAP of of uncertainties XXXX, in US$X.XX loss in

supplementary RMBXXX.X RMBXXX.X, STEAM or Our education our revenues which IT-focused was US$XX.X total revenue total million of of XXXX million net quarter business XX% net our revenue. from of fourth about representing reached the in

to the RMBXXX.X effective revenues or Meanwhile, our of fourth same by quarter US$XX.X decreased million the from in of to million in cost million XX.X% of our period measures, XXXX. XXXX, thanks RMBXXX.X control

in organization. million main US$XX.X or million achieved XXXX, same RMBXXX XXXX, as RMBXXX.X to XX.X% fourth by of expense following. decreased the The in to expenses million of and operating reductions the expense Total quarter across reductions cost our include the period the we contributors from

performing continuously we the efficiency. Firstly, optimizing and centers closed to personnel operations low improve

businesses IT-focused XX As a XX.X% both respectively, by XXX education result, professional for centers earlier, and our supplementary headcount learning to STEAM total mentioned centers decreased decreased IT as and Nancy year-over-year. education and our

marketing as marketing as well and spending. sales personnel reduced we Secondly,

on focused content core excellence to our operational and quality of remaining delivery endeavoring While by services. the upgrade

strong the generate students. more word-of-mouth to for continue maximize the value enrollment and to referrals effect. lifetime renewal and our We word-of-mouth Thanks referral

mobility social strong restrictions during showed this exceptional enrollment Our despite period. resilience

narrowed was we net loss XXXX. same compensation RMBXXX.X a fourth Non-GAAP of in foregoing, of of of RMBXX.X net XXXX, the in million net share-based expenses, of As to the of same the non-GAAP excluded the loss a million US$X.X of loss, to a period or million RMBXXX.X which XXXX. our quarter or US$X.X in compared loss net result XXXX, RMBXX.X in the compared million quarter period fourth million million to

the reached or growth million, Non-GAAP was compared or net net of to given emphasize of loss million million for RMBXXX.X the Company, million basis, in XXXX. RMBXXX.X annual US$XX.X XXXX, of period to the compared profitable for for in operational our net non-GAAP year income RMBXXX.X the implementation a RMBXX.X loss of that million has strategies income On net million same US$XX.X XXXX.

diluted per in ADS side, and XXXX. was XXXX. ADS per per basis, of quarter ADS income in US$X.XX or basic period in basic the loss XXXX, per RMBXX.XX compared a compared compared of was of per or loss fourth income in in RMBXX.XX same Diluted or loss RMBX.XX annual XXXX, XXXX. to was to an EPS to RMBXX.XX of ADS On US$X.XX XXXX, the per RMBX.XX ADS in on loss US$X.XX the of RMBX.XX Now ADS

increasing December As including or of we of do US$XX.X million generated RMBXX was million was and XX, to of RMBXX total financing balance cash RMBXXX.X XXXX. cash, RMBXX.X restricted operating deposits, million and on cash time current non-current, due from million cash from equivalents and by XXXX, the as and credit down XX, million quarter increase mainly inflow The the inflow our activities of facilities. September in

payments Capital IT XXXX mainly the or million purchasing fourth in RMBX.X renovate learning and of quarter centers. used equipment were cautions expenditures to in million US$X.X from

This XXXX. Nancy, and of with for concludes my Nancy you will section. share highlights financial the revenue the guidance business quarter outlook first And, please.

Ms. you, quarter the Thank our Language]. financial for full XXXX. performance your [Foreign and summary Wei, fourth year for of

for the turning Now Company's XXXX. to outlook

pandemic The Year. New October continuously Language]. evolved [Foreign from XXXX Chinese the through

XXXX. our operations majority only employees, first and our including normal for December most two-thirds families around good meant the That decision non-essential of of many we from their the operations until maintained As for Year, teachers, of our New XXXX, to quarter approximately the we fell students suspend classes. made January Chinese of ill of

As a revenue. result, about first represents of two quarter our revenue only months

addition, reduction our with in estimated period periods cash normal million receipts during compared RMBXXX In this operations. a R&D we of

operating services, As receipts. education our IT-focused on customer proceed rendered for later services and accounting supplementary this model based IT recognition than in, cash education of STEAM professional results both revenue in came

quarter In courses first professional to particularly for be addition, XXXX, four GAAP given effective. months, quarters, will last our of also subsequent revenue that IT education nine the

Language]. [Foreign

enthusiasm operations. an course, of we the level course Of is to seen recovery of impact believe the our in enroll By February, the to our fully we normal as enhanced of And macroeconomic we have the student’s holiday temporary. centers' fueled courses, in resumed early operations steady sign-up. conditions Chinese end suspending Year New of

we acquisition XXXX. Moreover, foundation an stronger from OMO-based capabilities, with year a emerged operational solid delivery operations challenges customer system our upgraded laying full the as for optimized as and in the top confidence us second the will since effects quarter the in of our XXXX. adverse performance external Company's early February that has of some This earlier on offset headwinds financials great onwards, given from well

to million, XX.X% Accordingly, with representing current the RMBXXX to preliminary decrease respect may XX.X% conditions, a estimate for of net of the [Foreign operating market environment guidance RMBXXX estimate the XXXX, guidance, to of from our our the Company's financial Language]. quarter first of revenues and which we and be quarter million total the between XXXX change. first reflects Company's

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fully Looking market, system optimize bring we’ll product IT services services students. improve are OMO-based more the our course ahead, value experience we the about education better quality delivery a potential to and service and to of our confident and further continue our to and

to are students and about and renewal enrollment acquisition fee-paying the new customer referrals reinforce in optimistic drive word-of-mouth We students rebound we’ll in while consistently growth costs. lowering

At the full in same year efficiency will and operating new operations. a level to further our the businesses strive time, both and of healthy profitability enhance with achieve

our [Foreign is future Language]. the above statement revenue and guidance. our The for outlook

for your support. this like attention would now and for I questions. ready Language]. [Foreign to take to We're you thank opportunity again

Instructions]. [Operator Ladies and thank gentlemen, you.

with go Edward question. Riley E. comes today Hutton. Please ahead F. question your first Our from from

taking for question. Thanks my

first So the reconcile I'm the guidance results. fourth to quarter with quarter trying

Given the the environment kind same. of seemed

in virtually the are but online continued the quarter, classes January there looks in it you like lockdown. said, classes no So you fourth during

just you could but costs like what wondering of gross costs had I'm and for revenue look on in So personnel maybe still rental quarter, the some January? that kind first limited some the given you might probably quarter if in provide margins color

Right, Eddie.

the question will Okay. Kathy take I'll question. translate the then have first, I

[Foreign have for because etcetera. basically any staff we question of leave, Language]. as a mentioned, great a Eddie. Nancy non-essential didn't take opened to sick lot had January classes That's our and actually

are QX for the So margin more gross XXXX, able overall, match below in slightly quarter, achieved first XX%. looking be we we we of for won't to margin

we that's what expect. So

be we Now rent, you in got in January and and some to actually mentioned repeated of in QX other quarters the cost, rental We XXXX. the personnel expect relief XXXX. the don't that

So improving year, all progressively same last but extends of rent be we organization. QX optimizing for the and were cost sort as will efficiency about

I earlier, So XX% already front, we headcount from personnel as all, first had of reduction year. mentioned the of during

sick will quarter one in be reduction people XXXX, take related also the headcount, of costs leave. is first of some the XX% So with two is much them lower,

as quarter, expense overall, to first RMBXXX So probably means. around able like expenses through RMBXXX on the of costs all quarter to compared should for adding cost say million more to and normal be so than together, we a

be So expect Also, on sort while But our losing margin a be revenue as have better. for horizon for quarter, top the quarter. will we'll significant longer growth money won't the line it both full lower more we of wise, actually be year significant. and loss probably will we a on net size

we XXXX And on well, annual operating actually income be and QX wise actual expect would to than XXXX. for after dollar better number on as basis

that your So question, hope I Eddie? answers

have Thanks professional Yes, the segment much wondering what the some just in missed it. enrollment that. quarter. I'm for And absolutely. was for I might housekeeping, fourth so

onwards from period. period mobility It's social enrollment mentioned for give what of same to lower XX,XXX Right. normal is few about take The last Language]. lower as October we a primarily than like compared the of much because [Foreign adult around hundred. or year, XX% is

students hit it. expect is continue segment. pretty this XXXX? enrolled grow any the have the adolescent that you're capacity looking terms And per constraint or specific And what to Should enrolled per center target to continues of center? or then we Okay, per target strong there to you students forward going got on within in centers the throughout

strong After Eddie. question, very with Language]. we see etcetera. operation February, [Foreign good in momentum Again, resumed do we fairly normal enrollment,

XX kids growth still an low we high percentage So to probably run rate enrollment a like basis on expect teens for points. even especially

is kind scalable we yes will year, the centers OMO so sure. time, because this of for able of same number is current an answer the very accommodate growth. for at part enrollment a whether about second year The that's the have have And model. this -- question be Now to we of model

for classes, of While online. some have the classes of students taught come centers to purely some we

of combined offline have the learning. some We and with classes online

great And time, growth. our back sort to exploring the now want certainly huge because we expansion plans since are normal, potential. profit. children's this So to At are in opportunities those center enrollment of for we the has -- want of utilization won't same with any to we country is forgive due we as segment drive sort market the yield growth expansion to market certainly with operating put just as

So we drive want growth. to sustainable profitable

yes. So,

we total got growth I expect should decline forward, might centers mean seems Okay, going it it. or like flat continue to there some there? to remain be

Right.

relatively in center stay would lot will like stable primarily a And will half expect this the For say growth be I some heading year’s first numbers. existing centers. then from on a we you numbers. drive half, year, of current into probably yes, Won't second growth should we

Okay, revert year, we of how And then you. to taken of reductions much cost these normal are regarding the XXXX? reductions costs levels should got to some back in during expect or permanent the

Right. from Again for anticipate can to full year. and of did don't size is And sales on XXXX. cost of existing XXXX. overall running expansion. marketing and going we will G&A basically this secondly, than as XXXX for year, be we higher we achieved Simply to centers reduction headcount rather see sizable actually the -- you with the pretty a is of reduction one for kicking of revenue overall cost our cost for center this of cost XX% a revenue, On as and like part most reduction revenue optimizing because, gear be than operations basis, well side, that forward both

more be So structural front. -- lot more there a that won't cost from

stay rents pretty basically, stable. So will

achieved marketing marketing headcount optimized. reduction on again, then spending side, And and

cover and be other that, will So will leads. spending. more scale it we of than fairly what on our leads conservative additional more control generate spending see as as some we growth But

those and I delivered think to also as numbers lower On compared XXXX. side, Yes. G&A overall actually think marketing I annual sales side, will the

I million we have also saving million RMBXX to some charge. on stayed But think of one-time marketing $X and one remember one-time on flat. provisions on yes one-time that's settlement in expenses, and one-time about XX% a balance litigation of we we overall would probably on is, charge mentioned a thing. G&A, And secondly, on That's side sales taking the have XX% are sheet. while G&A they the XXXX,

say we the will G&A will one-time So for I compared probably excluding to G&A would stay expense level side XXXX. flat

you with if year? next us great was Okay, And provide might details maybe color. for great. look taxes on That's like the wondering I then could what some

Tax?

Yes.

income asking you about tax? are Eddie,

Yes.

[Foreign Yes. Language].

For XXXX, sort estimated of but effective XX% level rates be various of for -- our to we the tax tax have through organization. rate on we around entities different within legal the

we So shift for for mix expect year. XXXX, effective around of because the XX% tax of rate actually the the

you. That's Okay, from me. great. it Thank

Eddie. you, Thank

And ladies any at and gentlemen, we continue. other moment. questions don't Presenters, please the have

more operator? questions, there Are

We an Please do actually Superbowl] additional go [G. ahead question. with have Dave question from your (ph). from

is, question both My in Language]. education adults market advantages? current what Tarena’s are services, the [Foreign of and differentiated competition children's

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Thank and you does conclude Ladies for that gentlemen, our for today. participating. call

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