Ladies and gentlemen, good day, and thank you for standing by. Welcome to TAL Education Group Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. [Operator Instructions] I’d now like to hand the conference over to Mr. Jackson Ding, Investor Relations Director. Thank you. Please go ahead, sir.

Thank you, operator. Thank you all for joining us today for TAL Education Group Fourth Fiscal Quarter and Full Fiscal Year 2023 Earnings Conference Call. The earnings release was distributed earlier today, and you may find a copy on the company’s IR website or through the newsletters. During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer; and myself, Investor Relations Director. Following the prepared remarks, Mr. Peng and I will be available to answer your questions. 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. 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 now turn the call over to Mr. Alex Peng . Alex, please go ahead.

Thanks, Jackson. I appreciate you all for joining us on today’s call. I would like to take this opportunity to share with you our progress for the fourth fiscal quarter as well as review some key results from the full fiscal year 2023. Let’s start with our financial performance for the fourth fiscal quarter of 2023. We continue to improve our service offerings, develop new initiatives and progress our strategic transformation road map. As a result, for the fourth fiscal quarter ending on February 28, 2023, we recorded $269 million and RMB 1.845 billion in net revenues for the quarter. The net revenues increased by 11% and 16% in RMB and U.S. dollar terms compared to the third fiscal quarter, respectively. In terms of profitability, for the fiscal quarter ended on February 28, 2023, we reported $18.1 million and $13.1 million in non-GAAP loss from operations and non-GAAP net loss attributable to TAL, respective. For the full fiscal year of 2023, we reported net revenues of more than $1 billion and generated positive non-GAAP operating profit. Fiscal year 2023 was a year of transformation for TAL. This was the first full fiscal year of our operations following the cessation of offering academic subjects to students from Kindergarten through to Grade 9 in the Mainland of China. In fiscal year 2023, some of our newer initiatives such as the enrichment learning, smart books and smart devices exhibited material development. While we are encouraged by these developments, we continue to upgrade our product offerings and improve our operational efficiency. We believe the combination of these efforts by our team and all of our partners laid a solid foundation for our long-term sustainable development. As the industry evolves and technology advances, we’ll endeavor to explore and seize new opportunities. At the same time, we would like to take this opportunity to express our gratitude to all of you for your continued support during our transformation journey. As the whole industry endorses analogical evolution, we look forward to TAL’s next page of development. With that overview, I would like to hand the call over to Jackson. He will give you an update on the operational development of our corporate perform and review our fourth fiscal quarter and for fiscal year’s financial results. After that, I’ll give an update on our go-forward strategy and plans for fiscal year 2024. We will then open the call for questions. Jackson, please go ahead.

Thank you, Alex. I’m pleased to share some details on the progress we’ve made in our 3 main business lines this past quarter. Before we start, please note that the financial data are based on our unaudited results report. First of all, let me talk about our learning services, which accounted for around 75% of our total revenues in this fiscal quarter. Our enrichment learning programs continue to develop in this quarter, and it is our largest revenue contributor within learning services. The net revenues generated from the enrichment learning programs grew quarter-over-quarter, primarily as a result of an increase in long-term "learner enrollment." During this quarter, we have observed signs of recovery in offline activity, which has had a positive impact on offline enrichment learning services. As a result, we expanded our learning center network in this quarter. Going forward, we’ll continue to manage our network expansion plan in accordance with market demand and business efficiency. With automatic learning services business continues on its development path. Think Academy, our overseas learning service business also maintained its growth momentum. For the fourth quarter of fiscal year 2023, Think Academy once again realized a year-over-year triple-digit growth in both total revenues and long-term development in learning. Moving on to our content solutions business, which accounted for more than 15% of total net revenues for the quarter. In this quarter, content solutions recorded year-over-year growth, driven by our product development and go-to-market capability. We continue to roll out new SKUs based on learner demand during different times of the year. In the fourth fiscal quarter, we launched a new smartphone that provides learners with a comprehensive and interactive learning experience for the winter -- a total of more than 40,000 copies -- sorry, a total of more than 400,000 copies have been…

Thanks, Jackson. As we move into fiscal year 2024, I would like to share with you 3 key directions that are really simple to our strategy. First, in terms of execution of our current business, some of our businesses such as [indiscernible] learning, really demonstrated the viable business model, while others are still in exploratory basis. As for the more mature businesses, we plan to balance growth and profitability and manage our operational efficiency. But the business is still in exploratory phases such as learning device, we’ll focus more on product markets and creating value for our customers. We expect our overall revenue to exhibit year-over-year growth in FY ‘24 and we’ll manage our profitability overall. AI technologies are broad and continue to bring profound changes to the learning industry, particularly with regards of how content will be developed and how services will be delivered. The adoption of AI technologies will create a new paradigm in our industry, and it presents significant opportunities as well as challenges. We’ll continue to innovate our business, adopt new technologies and aim to seize new opportunities well for by this new wave of technology. Whereas, we look for ways to generate shareholder return. In the last 12 months, under the share repurchase program from April 2022 through April 2023. The company spends approximately $66.4 million to repurchase 17.9 million shares of its American deposit ratio, representing 2.31% of total share outstanding of February 28, 2023. TAL’s Board of Directors has authorized to expand its share repurchase program by 12 months. As I come to the end of my prepared remarks, I’d just like to share with everyone that I’ve been doing quite some reading on artificial intelligence, academic papers, articles and actually books. And I actually found that particularly [indiscernible] that is widely attributed to ALK, the American Superior Sciences was also accredited of inventing upwards and intense learning. The best way to predict the future is to invent it. The best way to predict the future is to invent it. With this in the near where technology can evolve as a precedent and rather than reacting to the new opportunities brought forth by evolving technologies, we intend to proactively create them. So that concludes my prepared remarks. Operator, we’re now ready to open the call for questions.

Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question comes from the line of Felix Liu from UBS.

Thank you, Jackson, and thank you, Alex. I understand that we are investing a lot into the future, as you mentioned. And one of this area includes smart hardware. I noticed that you recently launched a new tablet and so a good development there. So I think my question is on the long-term addressable market for learning hardware. What do you think -- how big the market is? What is the unit economics that you would predict and what are the impact to our margin for the next fiscal year?

Thanks, Felix. This is Alex. Let me take on that question. I think on the TAM question, we’ve obviously been reading and doing research. And I think if you go with the narrow definition of smart learning pad, we are looking at an annual shipment of about 4 million to 5 million units per year. But I would also add to that, that the actual target market is not just that narrow definition of learning pad. We’re obviously seeing a lot of tablet -- general-purpose tablets are being used for the learning scenario. And if you add that to the total TAM, we’re probably looking at maybe $10 million and even north of $10 million in terms of shipment. So this is a significant market in terms of TAM. Right now, I think our focus is really on optimizing the functionality of smart devices to enable students to use them more actively. We’re also paying a lot of attention to managing the supply chain and optimizing costs. Right now, the business is really in it’s pretty early stages. And we’re confident that we’ll have a positive impact on our revenue growth. So I hope that answers your question.

Okay. Thank you.

Thank you. Our next question comes from the line of Howard Sun [ph] from Macquarie.

Can you hear me?

Yes.

Okay. I wanted to ask on the company’s cash balance. So I see that you have a strong cash balance continuing as before. What is going to be the future direction in terms of investments? And could you elaborate more on how and when you’re going to progress with your share repurchase plan?

Howard, thank you for the question. And this is Jackson. I’ll take this one. We have about $3.4 billion in cash, cash equivalents, short-term investments and restricted cash, both current and non-current. In terms of use of cash, there are 3 main areas in the next -- in this new fiscal year where we intend to invest -- intend to use the cash. One is that some of the new -- some initiatives are still in exploratory phases, such as learning device, such as overseas learning services. So we’ll continue to fund these initiatives. And secondly, as Alex talked about earlier, our industry is evolving and new technologies are developing. So we’ll seek opportunities to make strategic investments into adopting new technologies in our business. And lastly, we continue to look for ways to generate shareholder returns. We used about a total of $66 million in total considerations in the last year in our share buyback program. We’ll continue to seek to -- we’ll continue to seek opportunities to generate return for our shareholders through our share buyback program. I hope that answers your question, Howard.

Yes. Thank you for the detailed explanation.

Our next question comes from the line of Tommy Wong from CMS.

Can you hear me?

Yes.

I just have 2 questions. First, can you share with us any operating data on the enrichment learning program? And my second question is that recently, investors have kind of a very mixed feeling about kind of consumption recovery in China, some good some bad. I’m just wondering what’s your feel on the ground? And how is that looking going into the summer high season.

Tommy, this is Jackson. I’ll take this one. And just to clarify, the second part of your question was with regard to our perspective on consumer behaviors in China or consumption recovery in China? Was that your question?

Yes. But kind of more to, obviously, to our business -- relating to our business, not the overall macro, obviously. Yes.

Right. Got it. Okay. So I’ll take your first -- the first part of your question first. Operating metrics for enrichment learning. I would say, if we look at the quarter-over-quarter trend, enrichment learning grew both in terms of revenue and long-term course learner enrollment. And if we look at retention, I would say at the current retention rate, enrichment Learning has a viable business model. quarter-over-quarter retention rate has been fairly stable and various variants in retention rate across different subject areas for enrichment learnings has also been converging. With regards to the second part of your question, general consumption behavior, I’ll just limit that question to how that reflects in our business. I would say in this last quarter, we did see some signs of increasing offline activities, and that has had a positive impact on our offline learning services business. I hope that answers your question, Tommy.

Thank you. Our next question comes from the line of Lucy Yu from Bank of America Securities.

Alex and Jackson. This is Lucy from [indiscernible]. Two questions here. First of all, we are approaching the new year of FY ‘24. Could you please give us some guidance on the outlook in terms of revenue and margins? And secondly is that on the enrichment courses or enrichment segments, how should we think about the expansion in the following year as well. So like how many teachers we are going to recruit, how many learning centers that we are going to expand.

Thank you, Lucy, for the question. I’ll take the second part -- this is Jackson again. I’ll take the second part of the question first; in terms of expansion plan. I guess, first on the capacity side, we did expand our learning center network in this past quarter. And going forward, in the new fiscal year, we’ll manage our expansion plan according to market demand and operating efficiency. You also asked about personnel and specifically teacher recruiting plans. I would just say that, that will be a -- we will -- we do intend to recruit additional teachers -- and the pace at which we do that will primarily depend on our business progression for enrichment learning. Lucy, the first part of your question was about guidance -- of guidance for fiscal ‘24. I would just say, in fiscal ‘24, we do expect revenue to grow year-over-year, and we’ll manage profitability closely. I hope that answers your question, Lucy.

Thank you. Our next question comes from the line of Liping Zhao from CICC.

Sure. Alex and Jackson. So AI and large language model are really hot topic these days. Just wondering whether AIGP will change your business? And does the company have any specific product plans in the future?

Thanks, Liping. This is Alex. Let me take this one on. I think the short answer is yes, yes. I think the long answer, I’ve actually been traveling overseas, spent about 10 days overseas very recently talking to a number of mature and evolved companies and start-ups -- and really people in academics in the technology area, I think there’s a profound sense of how the long-term impact of generative AI and large language model moves to the learning space. I think purposefully speaking, humans have managed to help machines learn. And this is very important. And this actually can combat and help us rethink and reimagine how we help other teams work. I think this is a very interesting but important context to this. fundamentally learning is based on knowledge and content. And this is exactly in the area of generative AI and large language models. So we think the impact will be very fundamental to the industry and to every learner’s experience. TAL will for sure, actively and proactively embrace these changes. I think it’s going to come in a few different areas. First of all, we are a large services provider -- and a number of operational efficiencies that come from utilizing large language model to assess to become essentially copilots to our teacher assistants and service providers. Secondly, as we mentioned before, we are also a content solutions provider. So again, there is going to be, I think, improvement in both the quality and quantity. And then as a result, the operational efficiency in terms of content production. And thirdly, I think we really look forward to bringing a new type of interaction between students and content based on the large language model and natural language interface. So all of these, I think, will have a pretty profound impact to the industry. Now I would hasten to add that this is going to be a journey. It’s not going to happen tomorrow. It’s going to be a continuous journey, and I think we’re going to see the impact in the coming months and years to come. So Liping, I hope that answers your question.

Got it.

Great. We have reached the end of the question-and-answer session. We thank you all very much for your questions. I’d now like to turn the conference back to the management team for closing remarks.

Thank you, operator. One quick clarification before we end this call. Non-GAAP net loss attributable to TAL -- when I was going over the full fiscal year financial performance, I want to clarify that non-GAAP loss attributable to TAL, which excluded share-based compensation expenses, was $27.0 million compared to non-GAAP net loss attributable to TAL of $961.3 million in the fiscal year 2022. With that, thank you again for taking your time today, and we look forward to speaking with you next quarter.

This concludes today’s conference call. Thank you for participating. You may now disconnect.