Earnings Call: Q4 2021

Apr 22, 2021

Good day and thank you for standing by. Welcome to TAL Education Group 4th Fiscal Quarter and Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. 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 4th fiscal quarter and the fiscal year 2020 one earnings conference call. The earnings release was distributed earlier today and you may find a copy on the company IR website or through the newswares. During this call, you will hear from Mr. Rong Luo, Chief Financial Officer Linda He, Vice President of Finance and myself, IR of PAL. 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 that the worst of the pandemic could be behind us all. Meanwhile, at PAL, our tutoring business, both online and offline, as well as our capacity expansion in all cities, devalued as planned for the Q4 of fiscal year 2021. Let me give you a quick overview of the key metrics. Net revenue growth in the 4th quarter was up by 58.9% year over year in U. S. Dollar terms to US1362.7 million dollars 47.7 percent in RMB terms. Total normal price long term courses student enrollments increased by 44% year over year, mostly driven by online as well as Xueersi Peiyou Small Class Enrollment. GAAP loss from operations was $297,200,000 compared to $41,300,000 in the Q4 last fiscal year. Non GAAP operating loss was $216,900,000 compared to $8,400,000 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 4th quarter. Nest Echo Yang, our IR Director, will review the Q4 and the fiscal year financials. After that, I will update you on our business strategy and discuss our business outlook. Linda, please. Thanks, Zhu. I will review the various revenue streams of our tutoring business for the Q4 of fiscal year 2021. Let me start with small class and other business, which consists of Xueersi Teiyou Small Class, First Leap, 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 4th 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 jyersi.com online courses, which accounted for 32% of total revenue in the quarter compared to 24% in the same period last year. 4th 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 price long term cost 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 job operate, remained very stable throughout the year, even in these unprecedented circumstances. In the Q4, normal priced long term Xueersi Keio 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 offline small class students to online small class. Xueersi Peiyou Small Class performed well in the various tiers of cities. Revenue from the top five 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 Keiyou Small Class Business. Revenue generated from cities other than the top five 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 1 on 1 Business. In the Q4, this business sector achieved year over year revenue growth of 28% in U. S. Dollar terms and 19% in RMB terms. Zhikang 1 on 1 accounted for approximately 6% of total revenue in the Q4 of fiscal year 2021 compared to 8% in the same year ago period. In the Q4, nonapplied long term Zhikang 1 on 1 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 offline students to online after the COVID-nineteen 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 Q4 as planned for this fiscal year. We added 8 new cities in the Q4, bringing the total to 110 cities, of which 40 were newly added during fiscal year 2021. These 8 new cities are: Li Bin, Nanchong and Zhaoqing. Similarly, we expanded our learning center network in the Q4 based on a healthy and sustainable approach and by following government guidelines and market demand. In Q4, we added 108 new learning centers on our night spaces to a total of 1098 learning centers. We opened 119 new Peiyou Small Class Learning Centers and closed 9, adding a net of 110 Keiyou Smart Class Learning Centers. We closed 5 morbi and full suite centers, and we opened 4 1 on 1 centers and closed 1 1 on 1 center, adding a net of 3 1 on 1 centers. During the quarter, we added 6 77 Peiyou small class classrooms. In all, by the end of February 2021, we had 1098 learning centers in 110 cities, of which 109 cities in China and 1 XueersiQIYU Learning Center in the United States. Among these learning centers, 879 were PeiYu Small Class and International Education Centers, 82 were the merged for sleep and mobile small class and 137 were Zhikang 1 on 1. 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-nineteen developments. Turning now to our online business. 4th fiscal quarter revenue from xueersi.com grew by 115% in U. S. Dollar terms year over year and 100% in RMB terms, while normal price long term cost enrollments grew by 71% year over year to over RMB 3,500,000. In the Q4, qs.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 price long term cost 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 retention 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 Heiko Yan for the financial updates. Heiko, please. Thanks, Linda. Let me now go through some key financial points for the Q4 and then briefly review the fiscal year 2021 financials. Gross profit increased by 72.9 percent to US781.2 million dollars from US451.8 million dollars in the same year ago period. Gross margin for the 4th 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 US650.5 million dollars from US2 US243.2 million dollars in the Q4 of fiscal year 2020. Non GAAP selling and marketing expenses, which excluded share based compensation expenses, increased by 100 and 68.4 percent to US635.5 million dollars from US236.8 million dollars in the same year ago period. The year on year increase of selling and marketing expenses in the Q4 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 US7.9 million dollars for the Q4 of fiscal year 2021 compared to other expense of US4.7 million dollars in the Q4 of fiscal year 2020. Other income in the Q4 of fiscal year 2021 was primarily due to the value added tax and the social security expense exemption offered by the government during the COVID-nineteen impacted period and partially offset by impairment loss of non current assets. Income tax benefit was US80.5 million dollars in the Q4 of fiscal year 2021 compared to US63.6 million dollars of income tax expense in the Q4 of fiscal year 2020. Net loss attributable to TAL was US169 $1,000,000 in the Q4 of fiscal year 2021 compared to net loss attributable to TAL of $90,100,000 in the Q4 of fiscal year 2020. Non GAAP net loss attributable to TAL, which excluded share based compensation expenses, was US88.7 million dollars compared to non GAAP net loss attributable to TAL of $57,200,000 in the same year ago period. From the balance sheet as of February 28, 2021, the company had US3243 1,000,000 dollars of cash and cash equivalents and US2694.5 million dollars of short term investments compared to US1873 point 9 million dollars of cash and cash equivalents and US345.4 million dollars of short term investments as of February 29, 2020. As of February 28, 2021, the company's deferred revenue balance was 1400 and $17,500,000 compared to $781,000,000 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 3w.jersi.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 US4495.8 million dollars Gross profit grew by 35.6 percent to 2,000 $447,200,000 from US1,000 $804,700,000 in the fiscal year 2020. Gross margin for the fiscal year 2021 decreased by 70 bps to 54.4% as compared to 55.1% for the same period of last year. Loss from operations was US438.2 million dollars in the fiscal year 2021 compared to income from operations of 100 and $37,400,000 in the prior year. Non GAAP loss from operations, which excluded share based compensation expenses, was US233.3 million dollars for the fiscal year 2021 compared to non GAAP income from operations of US255.4 $1,000,000 in the fiscal year 2020. Net loss attributable to TAL was US116 $1,000,000 in the fiscal year 2021 compared to net loss attributable to TAL of US110.2 million dollars in the fiscal year 2020. Non GAAP net income attributable to DAL, which excluded share based compensation expenses, was US98 million dollars compared to non GAAP net income attributable to TL of US7.7 million dollars 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 the next quarter. Zhuang, please? Thank you, Echo. Fiscal year 2021 was indeed a precedential year due to the outbreak of COVID-nineteen. During the year, we timely respond to any government instructions related to public health and be whatever necessary to protect 50 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 percent revenue growth for the fiscal year 2021, which was in line with our long term growth rate expectations. 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 key investing in the quality of our products, services, teachers training and technologies, supported by sustainable marketing efforts. Thus, our evermore 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 Q1 of fiscal year 2022 is expected to be between $1,302,200,000 and $1,320,000 $20,500,000 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. Thank you. We will now begin the question and answer Your first question comes from Lucy Yu from Bank of America Securities. Please ask your question. Thank you, Lola, for taking my question. 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, etcetera. 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 future competition dynamic in this localized online class industry going forward? So that's question number 1. And then number 2 related to that is that could you please share with us the progressing status of Synergy or corporations among our different business lines, especially between xueers.com and Peiyou online. So do we have any targets, say that how much traffic we can divert or share between these two platforms? Thank you. I think the first question about localized, no matter its localized online class or localized offline class, I think which remind me, I think, last year, last year Q2, we talked about that. That's why we developed our Peiyou localized online class, Peiyou. So, because we when we read 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 Gong Kai exams. If we go down to the Gong Kai 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 what 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 tech schools. And even the same version of tax rules, we have different provinces and different cities, even within 1 city, different districts, maybe among different schools, they have different sequence. Some schools use the textbook to learn certain knowledge first followed by the other while the sequencing other schools may be different. And even same school, same test schools and set sequence and the 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 1 students, we will try to teach the best content fit their needs instead of only 1 version for all. So, in this specific, we need to know the localized content will be very helpful for that, no matter that's an online class or that's an offline 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 or Shanghai, they teach in this city. They know a lot about what's happening in this city. 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. We require a significant level of services. So, whatever services we provide to them should also be very tailor made and very localized. For example, the students 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 growing up possibly, there is some chance to have a so called self adaptive learning platform at that time, everyone can be teach individually and differently. But today, we are seeing at least compared to a purely online product, the 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 local office students, we believe that's the right direction to go. Need to know the students more and we need to teach them the most appropriate content students. The ideal cases will be they spend less of their time, but they learn more. On the other side, as some has going localized or maybe going closer to the needs, sometimes it's easy to say, but hard to execute. We as a company think as our counterpart in the industry for over 10 years. So, we have building a lot of learning centers and we have different team working in different cities. The local team will help us to get informations from the local geography and do some localized R and D, so which is the fundamental for providing the localized offers. Besides, which is quite different from the purely online part, it takes more time, it takes more patience, and it takes a significant amount of the investment for the new team, for the new channels and for the new way to attract students and the sectors. So which means, if we say the purely online power is kind of like Air Force, then if you want to go in more localized, which means you need to do more kind of materials and even hard work. So, everyone need to get prepared for that, especially in China, we have a huge geography. We need to carry the students equally for every city. So, all in all, we're happy to see more and more companies are going more localized and try to teach the students use the 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 etcetera 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 Xueers online school and and the 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! School 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 what we build the Peiyou small class business. We try to analyze every process of the lending, both online and offline, and we try to standardize the operations. And for the standard operations, which has a lot of similarity among online and offline, we try to integrate them as one. But as of today, I think these 2 things, they have some synergies and they share some of the infrastructures in the back end in the brand perspective. But in the front end, in the operation perspective, they still tend to be more independent. That is because today they target different markets. The Xueers Teo small class business today will 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 operations are quite independent, by the backend functions we try to do more integrations and we try to drive more synergies. But these synergies is now simply in the traffic, but more in the infrastructure side. Thank you, Lucy. Thank you, Laurent. Thank you. Our next question comes from Sheng Zhong from Morgan Stanley. Please ask your question. Hi, good evening. Thank you for taking my question. I also want to follow-up on the Peiyou online. So as you look at your Peiyou offline capacity, it's very clear that your class per learning center is much less than before, especially this quarter. So will we see a new normal for your new capacity in the future? So with that, I think part of the reason should be your offline and online strategy. So what's 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. Thank you, Zhongxing. I think the Peiyou Life and Peiyou today is under one thing and we try to integrate them together even maybe not only in the big cities, but also go down to the low tier cities. I suggest you guys doing to the Peiyou revenue as a hope both online and offline. I think that is a more kind of proper way to look into our business. I show one example, for example, in Beijing Shanghai. In Beijing Shanghai, actually, we have a very high percentage of offline students that using PayU Live operating now. So sometimes it's difficult to separate what is Peiyou live or what is Peiyou online, what is Peiyou offline. So the best way to look at that is we combine them 2 together and we're going to Peiyou total growth. And on the other side is, I think when we're doing Shura TLI, part of the reason they are quite successful is because they use 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 class in the peer online channels, not only the big class, but also we try to pilot some small class in the top cities. And even today, I think the Peiyou online Peiyou Life has not covered all the cities. They only cover the top several cities Payoh small class cities. 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 look into all of this, I think the way to manage business need to change according to the customers' behavior. I think 2 years ago, online and offline, even in Peiyou space are relatively more independent. But coming to today, we have seen the Pei students and parents buying these offers both online and offline merged together. So our way is very clear. We don't have a special target to say how much PayU online we need to deliver or how much PayU offline we need to deliver. The only target we have is we need to use the best way to fit parents and students' needs. So we need to provide them more feasibility 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 the Peiyou can leverage both online and offline growth drivers to grow to drive healthy growth in the coming few years. Thank you. Our next question comes from Felix Liu from UBS. Please ask your question. Hi, good evening management. Congratulations on the very strong quarter and thank you for taking my questions. 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 the online, I think, shirts it ended up performing very well. You might 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 at business line? And given the strong momentum, is there any update to our FY 'twenty two growth outlook? Thank you very much. Okay. Thank you for the question. I think when you're only looking to the Q4 numbers, sometimes the people will say the number is very good. I need to draw attention to be back to the kind of the details of numbers. In Q4, if you remember what we present just now in our screen, 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's the outbreak quarter of the COVID-nineteen. So at that time, we moved all of our offline business to online. But French 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 offline to online pricing, which is a significant less than the online price is much lower than offline price, so which drives the last year's Q4 space 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 right top line of COVID-nineteen, the Peiyou smartphone class binge is recovering as set. And we're also seeing the recovery pretty much on track in the coming quarter, the Q1 for fiscal year 2022. And the second part is our online power. I see our online power performed a little bit better than what we expected. Part of the reason is because of the online offers, it can feed students' needs. And we're also seeing a fair amount of the marketing dollars to drive the growth. And moving to the Q1, we probably see that the Q1 online school enrollment growth will be similar to this year Q4. So, we're pretty much on track in both online and offline. There is no big surprise to that. But again, I suggest we are moving to the education company's growth, the best way to do that is rolling 12 months. If you're moving 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 our total business. And all of these numbers is based on what we see today. I also need to draw attention is actually you probably see that some more policies was 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 starts to change if the policy has any new updates. Thank you. Thank you very much. Thank you. Our next question comes from DS Kim from JPMorgan. Please ask your question. Hi, good evening, everyone, and congrats on such a massive revenue feed. My first question is actually related to your last question just now, little bit indirectly. I know it's impossible to predict at this point, but in an unlikely scenario of government limiting advertisement significantly, what do you think will be the sustainable growth rate for sirs.com or online tutoring industry as a whole in a mass advertisement or low advertisement environment? And how do you think we can achieve such a run rate, I. Could you please possibly break out new student enrollment or new student contribution currently from online performance ad versus organic versus referral or any way so that we can have a sense that no advertisement would still be giving us extra amount of work. And I have one follow-up. Thank you very much. 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, but we're moving to our online part, specifically we talk about advertisements and promotions and online marketing. I think, French speaking, we are now a company very good at promotions, French speaking, or maybe advertisements in the past. And so we are typically an education company. We prefer we teach the students where we make people satisfied and we drive our growth through our high quality services. That's the typical way we drive our 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 policy, it was clearly 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 will always have more students coming from the branding channels because we share the brand of shares 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 students directly to rest 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 study 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 our platform. So again, we still believe the only way to make our classes more competitive is teach the students wear high quality, high retention rate, low drop rate and all of that. So, we work very hard on operations to measure our efficiencies better than 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 were created 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're complying with the guidelines, we make necessary adjustments. But again, we focus on students, we focus on parents to let them rate high quality services. That is the fundamentals for us and never change. Thank you. 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 have one center there. And may I ask what's driving the strategy? I talked about Peiyou. And what's driving this strategy? Is it because we want to set up home base for the Peiyou live for the nearby cities or like OMWF? Or are we seeing offline market share opportunity in that specific cities and want to build brand equity there as soon as possible? That's it from me. And thank you so much. Thank you. I think no matter you're in Beijing or Shanghai or maybe you're in Zhejiang or Yibing, 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 had the offline growth drivers, ran the classrooms, have a lot of teachers and do offline trainings, which is very operation intensive and very difficult to be scalable. But when you have the online parts, so you can move some of the elements, only some percentage of the workflows to online, which make the model easier to be flexible, more flexibility to the scale and which also encourage 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 tend to enter more new cities in the future. We wish we can provide equal access to the high quality teaching services for our platform, and we wish we can hire and support more students to achieve their goals in the future. So, our sensor technology, which give us some possibility to go into more places and teach more students, but this is not the end. During the online offline 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 what takes us the other several years, maybe 3 or 5 years, even longer to make this happen. Thank you. Thank you. Our final question today comes from Alex Xie from Credit Suisse. Please ask your question. Thank you, management, for taking my questions and congratulations on the good performance in this quarter. So firstly, I'd like to ask about ASP in I think this is the first time for the online business to achieve significant ASP growth in 2 years. So if you can 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 centers have obtained approvals to reopen? And what are your expectations for the rest of them? Thank you. Yes. Thank you. In the first place, let me make it clear of the online ASP. Online ASP lose grew 9% growth. That's because of the exchange rates. That's because of the exchange rates. That currency is set now. In R and D terms, our normal price ASP for the short online school is only around 1% increase, very stable, very, very stable. And we don't see any major changes in the ASP percentage 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 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 as we will comply with government guidelines and follow their requirements to do the offline learning centers. By the same time, we leverage the online platform, we use the online way to teach the students in Beijing. So far, the growth is quite stable. And we also see the retention rates and the dropout rates all of that is quite pretty much on track. We don't see any big differences. And looking forward, when the new policy was out and we would absolutely follow the policy to make necessary adjustments. Based on what we see today, we are pretty much on track. Thank you. Thank you, Kale. All right. Thank you. So with that, we conclude our conference for today. Thank you for participating. You may all disconnect.