TAL Education Group Q4 FY2026 earnings call

Ladies and gentlemen, good day and thank you for standing by. Welcome to Talent Education Group's fourth quarter and fiscal year 2026 earnings conference call. Learning services business remains the largest revenue contributor, committed to delivering quality learning services experiences and building content solutions including learning devices, with expansion into select international markets. Offline pay you enrichment programs had continued year-over-year growth in the fourth quarter and full fiscal year 2026, with a disciplined approach to expanding the learning center network. Online enrichment learning business enhanced user experience through technology upgrades. Learning device business achieved year-over-year revenue growth in the fourth quarter, transitioned to moderate growth, launched the X5 Ultra Classic. Financial results: In the fourth quarter, net revenues were $802.4 million, up 31.5% year over year in U.S. dollar terms; cost of revenues increased by 28.2%; gross profit increased by 34.5% to $427.2 million; non-GAAP income from operations was $82.2 million; net income attributable to TAO was $244.8 million. Balance sheet: As of February 28th, 2026, cash and cash equivalents were $1,523.9 million, short-term investments were $1,715.4 million, restricted cash was $262.2 million, and deferred revenue was $882.2 million. Share repurchase program: Board authorized repurchase of up to $600 million of common shares, with 101,371 shares repurchased for approximately $3.3 million between January 20, 2025 and April 22, 2026.

Learning services business is the largest revenue contributor. Offline pay you enrichment programs showed continued year-over-year growth in the fourth quarter and full fiscal year 2026. Online enrichment learning business enhanced user experience and service quality via technology, supporting sustained user growth. Learning device business achieved year-over-year revenue growth in the fourth quarter, transitioning from rapid expansion to moderate growth with strong key user engagement metrics. In the fourth quarter, net revenues were $802.4 million, a year-over-year increase of 31.5% in U.S. dollar terms; non-GAAP income from operations was $82.2 million, and non-GAAP net income attributable to TAO was $254.5 million.

As we move into fiscal 2027, strategy is centered on three priorities. First, drive quality growth across businesses, with learning services remaining the largest revenue contributor and emphasizing quality in both digital and in-person offerings. Second, AI is key, with application first to enhance user experience, improve operational efficiency, and strengthen products/services. Third, remain focused on disciplined execution as scaling to improve efficiency and profitability.

Potential risks and uncertainties include those outlined in public filings with the SEC, such as factors that may cause actual results to differ materially from current expectations, including but not limited to risks related to market conditions, competition, technological changes, and regulatory environment.

Q: Jenny Wan with UBS asked about financial strategic investments and other income.

A: Jackson explained that investments in the portfolio experienced valuation increase leading to investment gain in Other Income, a one-time event not to be used as a baseline for future projections.

Q: Timothy Zhao with Goldman Sachs asked about offline pay you class business in the fourth quarter of 2026 and expansion in fiscal year 2027.

A: Alex said offline pay you class had steady growth in the fourth quarter, retention rate over 80%, expanded to 5 new cities in fiscal year 2026, and fiscal year 2027 strategy is disciplined, focusing on existing cities with revenue growth to taper.

Q: Eddie Wong with Morgan Stanley asked about learning devices performance, memory cost, and competitive landscape.

A: Alex said learning devices had year-over-year revenue growth in the fourth quarter, addressed memory cost via inventory optimization and product portfolio refinement; competitive landscape is dynamic, strategy is innovation in product and user experience, with expanded lineup, enriched content, and software updates.

Q: Jing Wan with CICC asked about bottom line profitability driver.

A: Jackson said profitability driven by pay you class growth, margin profiles steady, other business lines' profitability improvement, and non-GAAP operating margin improved in the last few quarters.

Q: Candice Chan with Daiwa asked about top line growth breakdown across business lines and margin improvement outlook.

A: Alex broke down top line growth: PayU offline enrichment had steady growth, disciplined expansion in fiscal year 2027; online enrichment focused on interactive experiences and AI; learning devices had year-over-year revenue growth, focus on product innovation and channel development; outlook for growth: moderation in revenue growth rate as operations scale, focus on improving profitability; potential for further margin improvement through advancing strategic initiatives and strengthening core capabilities.