TAL Education Group Q4 FY2025 earnings call

• Core Business Performance: Learning services delivered steady growth in fiscal year 2025 via offline and online enrichment programs. Learning Devices expanded product offerings and integrated smart features. - Financial Highlights: Q4 net revenues were $610.2 million (+42.1% Y/Y), full year net revenues $2.3 billion (+51% Y/Y). Non-GAAP loss from operations was $1.7 million in Q4, and non-GAAP income from operations was $61.8 million for the full year. - Operational Advancements: Peiyou Small Class had an 80% retention rate, online enrichment had interactive modules and AI, Learning Devices upgraded hardware/software and expanded content. - Share Repurchase: Board extended share repurchase program to $490.7 million by April 2026, with $13.1 million spent in fiscal 2025.

Learning Services and Others: In the fourth quarter of fiscal year 2025, Learning Services sustained revenue growth. Peiyou Small Class Enrichment programs saw year-over-year growth, with a retention rate of 80% this fiscal quarter. Online enrichment learning had ongoing innovation with interactive modules and AI-powered assistants, and expanded customer touchpoints. Content Solutions (Learning Devices): The Learning Devices business grew year-over-year in the fourth fiscal quarter. It expanded its product portfolio, upgraded hardware and software, enriched the content library, and had a weekly active rate of around 80% with an average daily time spent of approximately an hour per device. Learning Services was the largest revenue contributor within its segment, while Learning Devices was the largest in Content Solutions.

• Fiscal 2026 outlook: Continue sustainable growth in learning services, with learning services expected to be the largest revenue stream. Expand Content Solutions, leverage AI in learning, and refine operations for efficiency. Focus on sustainable growth rather than hyper growth, maintaining a prudent approach to expansion of learning centers. Anticipate leveraging AI to improve learning and teaching experiences, and refine operations across all business lines for better efficiency and profitability.

• Forward-looking statements are subject to risks outlined in SEC filings, including uncertainties in non-GAAP measures, market dynamics, and operational challenges in scaling businesses such as managing growth while maintaining quality and efficiency.

Q: Regarding the Peiyou enrichment learning business, provide an update on Q4 progress and growth strategy for fiscal year 2026.

A: Alex Peng stated Peiyou continues steady growth. Technology will play an important role, with expansion of dual screen solutions. Expansion is done prudently, balancing local market demand, customer adoption, etc. Year-over-year growth rate may taper, but focus is on sustainable growth.

Q: About the Learning Devices segment, color on profitability profile and strategy for fiscal 2026.

A: Learning devices had adjusted operating loss in 2025. Strategy for 2026 includes enhancing device functionality, expanding portfolio, improving go-to-market, and optimizing operational efficiency. Viewed as multi-year capability building for future growth and profitability.

Q: Break down top-line growth by business line and reasons for operating profit decline and sales/marketing spend growth.

A: Jackson Ding said Peiyou Small Class was largest revenue contributor and growth driver in learning services. Learning Devices was largest in Content Solutions. Operating profit decline due to increased selling and marketing expenses (35.1% of revenue vs 28% prior year) for online channel penetration. Selling and marketing spend up due to market penetration and brand building efforts.

Q: AI implementation in business, near-term learning scenarios and impact of DeepSeek.

A: Alex Peng said AI impacts content creation, service, and R&D. AI is a learning companion, DeepSeek V3 used in Mass GPT. Focus on fine-tuning for pedagogical scenarios, improving user interface, and contributing to intelligent learning ecosystem.

Q: Cash usage, future investment strategy, and shareholder returns.

A: Jackson Ding said cash position is $3.2 billion. Focus on balanced investment in existing products/services, integrating new technologies, and shareholder returns via extended share repurchase program, evaluating market conditions for further repurchases.