TAL Education Group Q4 2025 Earnings Report

TAL Education Group EPS Results

• Actual EPS: $0.01
• Consensus EPS: $0.07
• Beat/Miss: Missed by -$0.06
• One Year Ago EPS: $0.08

TAL Education Group Revenue Results

• Actual Revenue: $610.24 million
• Expected Revenue: $639.89 million
• Beat/Miss: Missed by -$29.65 million
• YoY Revenue Growth: N/A

TAL Education Group Announcement Details

• Quarter: Q4 2025
• Date: 4/24/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, April 24, 2025
• Conference Call Time: 8:00AM ET

TAL Education Group (NYSE:TAL) provides K-12 after-school tutoring services in the People's Republic of China. It provides learning services primarily through small-classes services; personalized premium services; and learning content solutions, such as print books, smart books, mobile apps, and AI-driven learning devices. The company also operates www.xueersi.com, an online education platform; provides investment management and consulting services; develops and sells software and networks, as well as related consulting services; and sells educational materials and products. It offers its services under the Haoweilai and Think Academy brands. TAL Education Group was founded in 2003 and is headquartered in Beijing, the People's Republic of China.

TAL Education Group Q4 2025 Earnings Call Transcript

Key Takeaways

• Steady growth in learning services, adding offline centers and refining online products via user feedback, driving year-over-year enrollment increases and an 80% retention rate in Peiyou small classes.
• Expansion of learning devices with a broader portfolio and enriched content from 20+ publishing partners, integrated smart AI features, achieving ~80% weekly active rate and ~1 hour of daily use per device.
• Q4 net revenues reached RMB 4.44 billion (+44.3% y/y) with non-GAAP net income of $7 million, while FY25 net revenues were RMB 16.2 billion (+52.2%) with non-GAAP net income of $149.5 million.
• Going into FY26, the company will maintain high-quality offline/online enrichment, scale content solutions through AI-driven enhancements, explore new market segments, and deepen multi-channel engagement.
• Strong capital position of ~$3.2 billion and a renewed share repurchase program authorizing up to $490.7 million through April 2026, balancing strategic reinvestment with shareholder returns.

Presentation

[Operator]

Ladies and gentlemen, good day, and thank you for standing by. Welcome to Teleeducation Group's Fourth Quarter and Fiscal Year twenty twenty five 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 informed that today's conference is being recorded.

[Operator]

I would now like to hand the conference over to Ms. Fang Liu, Investor Relations Director. Thank you. Please go ahead.

[Fang Liu, IR Director at TAL Education Group]

Thank you all for joining us today for TAO Education Group's fourth quarter and fiscal year twenty twenty five 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 newswires. During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer and Mr. Jackson Ding, Deputy Chief Financial Officer.

[Fang Liu, IR Director at TAL Education Group]

Following the prepared remarks, Ms. Peng and Mr. Ding 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 US 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.

[Fang Liu, IR Director at TAL Education Group]

Potential risks and uncertainties include, but are 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 non GAAP measures to the most directly comparable GAAP measures. I would like to turn the call over to Mr.

[Fang Liu, IR Director at TAL Education Group]

Alex Peng. Alex, please go ahead.

[Alex Peng, President & CFO at TAL Education Group]

Thank you, Fang. I'd also like to thank all of you for participating in today's conference call. So I'll begin with an overview of our business progress for the fourth quarter and full fiscal year 2025. Next, Jackson will review our operational advancements and financial results. To conclude, I'll also provide a brief update on our strategic priorities and outlook moving forward.

[Alex Peng, President & CFO at TAL Education Group]

So, with that, let's get started with our core business performance this fiscal year. To begin with, our learning services delivered steady growth in fiscal year twenty twenty five. Really empowering learners through both offline and online enrichment programs. An uptick in user demand and our relentless focus on high quality learning experiences were really the key drivers of this progress. During the past quarter, we strategically added new enrichment learning centers in existing cities, providing local communities with more accessible and convenient learning opportunities.

[Alex Peng, President & CFO at TAL Education Group]

Our online enrichment learning business also remained healthy, consistently providing engaging learning experiences through technology driven learning products. Over the past year, we conducted in-depth analysis of user preferences and tailored the development of new products to better meet their needs. We also continue to refine existing offerings based on user feedback. And we enhanced teaching effectiveness by integrating smart interactive features to boost user engagement. Then for learning devices, we expanded our product offerings to reach a broader user base, making it easier for users to find the right learning solution for their needs.

[Alex Peng, President & CFO at TAL Education Group]

We also integrated more smart features and learning resources to better support users on their self learning journeys. Through monthly feature updates and content refresh, we provided users with an increasingly intelligent and practical study companion, making a home self learning more engaging and efficient. So, with this operational momentum as a backdrop, let's turn to our financial highlights for the quarter and the full year. In the fourth quarter, we recorded net revenues of 6 and $10,200,000 4 point 4 4 billion RMB, reflecting year over year growth of 42.144.3% respectively. On a non GAAP basis, loss from operations was 1,700,000.0 US dollars, while net income attributable to TAL reached 7,000,000 US dollars.

[Alex Peng, President & CFO at TAL Education Group]

For the full fiscal year, net revenues totaled 2,300,000,000.0 US dollars or 16,200,000,000.0 RMB, up fifty one point zero percent and fifty two point two percent year over year respectively. Non GAAP income from operations amounted to 61,800,000.0 US dollars, with non GAAP net income attributable to Tau at $149,500,000 US dollars. Before Jackson takes us through the detailed operational and financial review, I'd like to share a brief update from the board. We are delighted to welcome Mr. Yi Wang as Tao's new independent director and chairman of the compensation committee.

[Alex Peng, President & CFO at TAL Education Group]

Mr. Wang brings extensive experience across both the business and education sectors, and we are confident that his insights will further strengthen Tao's strategic direction, governance, and operational excellence. We also want to express our deep appreciation to Doctor. Wei Ru Chen for his outstanding service and invaluable contributions over the past decade. We look forward to continuing our collaboration with Doctor.

[Alex Peng, President & CFO at TAL Education Group]

Chan in his new advisory role. So with that high level overview complete, I'll now pass the call to Jackson to delve deeper into our operational execution and detailed financial performance.

[Alex Peng, President & CFO at TAL Education Group]

Jackson?

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Thank you, Alex. Before diving into the details, I'd like to note that all quarterly financial figures discussed today are unaudited. I'll start with our learning services and others business, which includes a broad range of learning programs for our customers. Learning services sustained its revenue growth momentum in the fourth quarter of fiscal year twenty twenty five, fueled by advancements across multiple product lines.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Over the past few quarters, revenue from Peiyou small class enrichment programs has achieved year over year growth. We have consistently provided high quality services, earning positive feedback from both the learners and their parents. While we have expanded our learning center footprint, we've maintained a disciplined approach. We're carefully evaluating market demand, user feedback, and operational efficiency to balance growth with quality. This approach has been further validated by key operational metrics and has directly contributed to year over year enrollment growth.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Notably, the retention rate for Peiyou small class reached 80% this fiscal quarter. In our online enrichment learning business, ongoing innovation has helped us navigate the ever evolving market landscape and our users dynamic needs. Guided by user feedback and market insights, We're continually investing in strengthening our online product capabilities and refining our operational and marketing strategies. Through new products and interactive formats, we deliver tangible value to learners, enhancing both learning outcomes and user experiences. Recent initiatives include interactive learning modules and AI powered assistance.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Additionally, by building diverse customer touch points across multiple channels, we're expanding our market reach among current and potential users and gaining deeper insights into their needs. This has enabled us to scale our operations while laying the foundation for sustained long term competitiveness. Next, let's turn to our content solutions business. Our learning devices business grew year over year in the fourth fiscal quarter, fueled by our enhanced product development and go to market capabilities. We have expanded our learning devices product portfolio to appeal to a wider audience in the past year.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

We also further upgraded our hardware and software, enriching our content library, refining the reading experience, and integrating practical AI features to create more immersive, self directed learning. This February, we further enriched our content across our entire range of learning devices by providing fresh and classic materials with progressively challenging exercises. We keep students engaged while developing their ability to question, analyze, and problem solve. Our unique ladder approach, which guides children step by step with tailored hints, helps them build confidence as they master new skills. To strengthen foundational literacy, we launched a seamless graded reading system covering early education through high school with age appropriate tools like phonetic aids for young learners and interdisciplinary content for older students.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Through partnerships with over 20 publishers, we have expanded our library to include thousands of titles. Thanks to our enhanced product capabilities. Our learning devices have sustained solid user engagement while reaching a broader audience. Notably, as our active user base continues to grow, the weekly active rate has remained stable at around 80% with an average daily time spent of approximately an hour per device throughout the quarter. Next, please let me now review our financial performance for the quarter.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

The company reported net revenues of 6 and 10,200,000.0 US dollars or 4,440,000,000.00 RMB representing a year over year growth of 42.1% in US dollar terms and 44.3% in RMB terms. These increases were attributable to the growth in both our learning services business and our content solutions business. Now looking at costs. Cost of revenues rose 44.7% year over year to $292,600,000 2 hundred and 2 point 2 million dollars When excluding share based compensation expenses, non GAAP cost of revenues moved 46.1% higher to 291,700,000.0 US dollars compared to 199,600,000.0 US dollars in the same quarter last year. Gross profit stood at 317,600,000.0 US dollars, which was 39.7 above the prior year period.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Gross margin was at 52% compared to 52.9% from the same period last year. Turning to operating expenses. Selling and marketing expenses for the quarter were 218,000,000 US dollars, up 73.1% from the prior year. The non GAAP equivalent of these expenses increased 77.9% to 214,300,000. As a percentage of net revenues, non GAAP selling and marketing expenses accounted for 35.1% versus 28% in the prior year period.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

With the change mainly resulting from increased selling and marketing activities through some online channels. General and administrative expenses increased 0.8% to a hundred and 18 point 2 million US dollars compared to the same period last year. The non GAAP measure showed a 3.5% rise to 108,500,000.0 US dollars. However, as a percentage of net revenues, non GAAP general and administrative expenses decreased from 24.4% to 17.8%. Total share based compensation expenses declined 30.1% to $14,300,000 20 point 5 million dollars in the comparable period.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Loss from operations was $16,000,000 for the quarter. This compares to a loss from operations of 11,100,000.0 US dollars in the same period last year. On a non GAAP basis, the loss from operations was 1,700,000.0 US dollars compared to non GAAP income from operations of 9,400,000.0 US dollars in the same period of last year. Net loss attributable to Tau was 7,300,000.0 US dollars for the quarter. While in the same period last year, there was net income attributable to Tau of 27,500,000.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Non GAAP net income attributable to TAU was 7,000,000 US dollars versus 48,000,000 US dollars in the same period last year. Regarding our cash position as of February 2825, we held 1,770,000,000 in cash and cash equivalents along with $1,850,000,000 in short term investments and 220,500,000.0 US dollars in restricted cash. Our deferred revenue balance was 671,200,000.0 US dollars at quarter end. In terms of cash flow, net cash used in operating activities was 226,300,000.0 US dollars during the quarter. For the full fiscal year 2025, net revenues were 2,300,000,000.0 US dollars or 16,200,000,000.0 RMB, Reflecting year over year increase of 51% in US dollar terms and 52.2% in RMB terms.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Gross profit was 1,200,000,000.0 US dollars. 40 8 point 9 percent higher than the previous year. Loss from operations was 3,200,000.0 US dollars in the fiscal year twenty twenty five, compared to loss from operations of 69,200,000.0 US dollars in fiscal twenty twenty four. On a non GAAP basis, income from operations was 61,800,000.0 US dollars versus 19,700,000.0 US dollars in the prior fiscal year. On the bottom line, net income attributable to Tau came to 84,600,000.0 US dollars compared to a net loss attributable to Tau of 3,600,000.0 US dollars in fiscal twenty twenty four.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Non GAAP net income attributable to Tau was 149,500,000.0 US dollars, while previous fiscal year showed 85,300,000.0 US dollars. Finally, I'd like to briefly address our share repurchase program. In April 2025, the company's board of directors approved a twelve month extension of its share repurchase program originally launched in April 2021. Under the extended program, the company may spend up to approximately 490,700,000.0 US dollars to repurchase its common shares through 04/30/2026. In fiscal twenty twenty five, the company had repurchased 500,000.0 common shares for a total consideration of approximately $13,100,000 the program.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

That concludes my review of our business performance and financial updates. Alex, I'll now hand the call back to you for our outlook.

[Alex Peng, President & CFO at TAL Education Group]

Thanks, Jackson. Overall, we believe fiscal year twenty twenty five laid a solid foundation for our future development. Now, I'd like to share insights into the company's strategy and outlook for fiscal year twenty twenty six. So first, we remain committed to sustainable growth in our core business lines. We will continue to uphold the high quality standards for both our offline and online enrichment learning products and services to deliver quality programs to an even broader user base.

[Alex Peng, President & CFO at TAL Education Group]

We anticipate that our learning services will continue to be our largest revenue stream in the new fiscal year. Beyond learning services, we're also focused on expanding our learning content solutions. We will continue scaling this business thoughtfully, refining our content and device features and leveraging technological advancements, particularly AI driven features to enhance learning outcomes. As our business continues to evolve and grow, we're actively exploring new fields and emerging sectors to extend our core business lines reach. Along the way, we're also steadily strengthening our channel capabilities, building brand recognition, and deepening our engagement with the new generation of parents and learners.

[Alex Peng, President & CFO at TAL Education Group]

Through these efforts, we're consistently gleaning valuable insights from outstanding companies across various industries. We'll continue to refine our growth strategies accordingly in the upcoming fiscal year. Secondly, we're committed to ongoing innovation at the intersection of learning and technology. By integrating cutting edge AI with pedagogical expertise, we seek to meaningfully improve both learning and teaching experiences. Looking ahead, we'll continue to enhance our products and services to meet the evolving demands of digital learning, redefining intelligent learning solutions for the AI era.

[Alex Peng, President & CFO at TAL Education Group]

Throughout history, every major technological breakthrough from television to computers and the Internet has found its way into education. Today, we are discovering and shaping how AI can transform learning and integrating these advancements into our products and services. We also remain open to collaboration and knowledge sharing, ensuring that our insights into smart learning contribute meaningful value to the education community. Finally, we will focus on refining operation details to boost overall efficiency and profitability. While we expect to benefit from economies of scale as our revenue grows, efficient management will be increasingly critical as our operations expand and become more complex.

[Alex Peng, President & CFO at TAL Education Group]

We'll closely monitor efficiency metrics across all business lines and make timely adjustments to optimize every aspect of our operations, including content creation, product R and D, sales, marketing, and beyond. So that concludes my prepared remarks. Operator, I think we are ready to open the call for questions.

[Operator]

Thank you. We will now begin the question and answer session. To ask a question, please press 11 on your telephone. You will then hear an automated message advising your hand is raised. We will now take our first question from the line of Eddie Wong from Morgan Stanley.

[Operator]

Please ask your question, Eddie.

[Eddy Wang, Analyst at Morgan Stanley]

Thank you, Alex, Jackson, Fang for taking my question. My question is regarding the Peiyou enrichment learning business. Could management provide an update on the progress of the fourth quarter Peiyou enrichment learning business? And how shall we view the growth strategy and expansion pace for Peiyou in the next fiscal year? Thank you.

[Alex Peng, President & CFO at TAL Education Group]

Thanks, Adi. This is Alex. Let me take that one. You know, really as we've seen in recent quarters, Peiyou continues to deliver a steady year over year growth. I think we've already covered the key highlights in our prepared remarks.

[Alex Peng, President & CFO at TAL Education Group]

So let me instead focus more on our path forward. Okay? So looking ahead to the next fiscal year, you know, really as long as our key growth drivers, which is market demand, product capability, our ability to recruit and train our instructors, as long as these key growth drivers hold up, we really expect to maintain this positive momentum for Peiyou. But I also want to just add, technology will play an increasingly important role in our strategy, right? So, you you may have noticed we are expanding the rollout of our dual small and large screen solutions.

[Alex Peng, President & CFO at TAL Education Group]

It really brings Smart Classroom experiences to more students. I think, you know, literally it's reimagining the classroom learning experience. And at the same time, we're continuing to innovate our products and refine our product market fit to create solutions that are both students, you know, loved by students and trusted by parents. We're firm really in our belief that sustainable growth in this market comes from developing and continuously developing these high quality products with strong performance metrics that really truly meet user needs. And it's not just user needs in a broad sense, but localized user needs.

[Alex Peng, President & CFO at TAL Education Group]

And this will remain central to our product development philosophy and strategy. I know many of you are interested in expansion. Regarding expansion, we're maintaining the same prudent approach that has served us well this past year. You know, each decision to open a new learning center really carefully balances multiple factors. The local market demand.

[Alex Peng, President & CFO at TAL Education Group]

You know, when I say local, it's truly local to a city, to a district, to a community. The customer adoption, operational capacity, and efficiency target. So I think this disciplined methodology will continue to guide our business through fiscal year twenty six. Really, if I take a step back, I would say we remain optimistic about the industry's growth potential. You know, in this new sector, I think I've talked about before, we we truly feel the enrichment learning is hitting that, you know, the need with this new generation of parents and learners.

[Alex Peng, President & CFO at TAL Education Group]

You know, and we're optimistic about our ability to deliver quality products to meet that future need. You know, really, as we are operating from a significantly higher baseline, right, than a few years ago, we expect PAO enrichment's year on year growth rate to probably gradually taper off moving forward. But our focus really remains on what I just said before, the sustainable, healthy growth rather than pursuing hyper growth for growth's sake. So Eddie, I hope that answered your question.

[Operator]

Thank you. Our next question comes from the line of Timothy Zhao from Goldman Sachs. Please ask your question, Timothy.

[Timothy Zhao, Equity Research Analyst at Goldman Sachs]

Great. Thank you, management, for taking my question. My question is regarding the Learning Devices or the Learning Content Solutions segment. Just wondering if management can give us some color on the profitability profile of this segment in the fourth quarter and also in the fiscal year last year. And when you look into fiscal year twenty nineteen, was just wondering if there's any updates on your strategy on this specific segment and what are the new plans or measures that you are going to take to further improve the profitability of the Learning Continent Solutions segment?

[Timothy Zhao, Equity Research Analyst at Goldman Sachs]

Thank you.

[Alex Peng, President & CFO at TAL Education Group]

Thanks, Timothy. This is Alex. Let me take this one as well. Look, our learning device business reported an adjusted operating loss in our P and L in the fiscal fourth quarter and fiscal full year of 2025. It's a new product group that launched about two years ago.

[Alex Peng, President & CFO at TAL Education Group]

And we believe this business still has room to really expand access to high quality learning experience that at home self learning experience we just talked about. Really, and that among a much wider range of customers. At this stage, our priority really remains building long term competitiveness and capabilities. So if I move to our strategy for fiscal twenty twenty six, our efforts were focused on the following few areas, right? So I would say first, enhancing the device functionality.

[Alex Peng, President & CFO at TAL Education Group]

We'll roll out artificial intelligence and power functionality upgrades continuously. We continuously expand our content library. We believe these are the core values we deliver to our learners, right? And, you know, I think that's been our track record in the past two years of regular and continuous updates to functionalities and to the content library. Secondly, I think we're going to expand our portfolio.

[Alex Peng, President & CFO at TAL Education Group]

Our effort in expanding the portfolio really would improve product market fit and expand access. You know, as I said, we're very convinced that there is ample room to expand access and thereby expand the access to high quality learning experiences, high quality content. So our expanding portfolio will aim to do that. Number three is go to market. I think, you know, we've been enhancing our distribution on marketing to reach more users while deepening engagement with existing customers.

[Alex Peng, President & CFO at TAL Education Group]

Both are very crucial. And you probably have seen, and we've discussed this on previous calls, when we look at the go to market, look across different channel formats. And you probably have noticed that there are more offline channel and points of sales available. So these are a continuous effort to, I think, both expand channel capacity, but also really to deepen channel capabilities. And with these, both user growth and user engagement are really priorities as we scale the learning device business.

[Alex Peng, President & CFO at TAL Education Group]

I would also say operational efficiency. Look as revenue scales, we'll leverage economies of scale or refine cost structures and optimize operations to drive healthy and efficient business growth. I think, you know, while I said it's new, for just two years I think we've gained experience across all these dimensions to really drive further operational efficiency gains. So in summary, we view this as a multi year capability building where every initiative is really designed to build sustainable competitiveness and pave the way for both future growth and profitability. So Timothy, I hope that answered your question.

[Operator]

Thank you.

[Timothy Zhao, Equity Research Analyst at Goldman Sachs]

Thank you. Thank you for the comprehensive.

[Operator]

Our next question comes from the line of Sophie Zhang from CICC. Please go ahead, Sophie.

[Wenbin(Sophia) Zhang, Discretionary Portfolio Management Analyst at China International Capital Corporation (CICC)]

Amitya, Allison Jackson. Thanks for taking my question.

[Wenbin(Sophia) Zhang, Discretionary Portfolio Management Analyst at China International Capital Corporation (CICC)]

So could you please break down the top line growth by business line for the past quarter to help us better understand the respective drivers? And also could you elaborate on what led to the year over year decline in operating profit? And what were the key reasons behind the growth in sales and marketing spend? Thank you.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Sophie, thanks for the question. This is Jackson. Let take this one and let me maybe unpack this question a little bit. I think you asked both about top line and bottom line. So, me address top line performance first.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Similar to last quarter, our Peiyou small class enrichment programs remain both the largest revenue contributor and the primary growth driver within our learning services business line. Meanwhile, learning devices continue to be the largest revenue contributors contributor within content solutions, while also serving as a key growth driver. So let me maybe add additional color on these two businesses. Pale enrichment delivered solid quarter over quarter and year over year growth this quarter and this year. While we now operate from a significantly higher baseline than in prior years, which as Alex talked about, will naturally moderate year over year growth rate over time.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

We expect continued expansion in this business supported by expanding market demand and our enhanced product capabilities. Learning devices saw a sequential fourth quarter decline quarter over quarter, reflecting typical seasonality after a peak in Q3, due to e commerce festivals. However, this business remained healthy here, when we look at year over year growth, underscoring the business's momentum. When we look at full year fiscal twenty twenty five, both learning services and content solutions delivered year over year revenue growth, maintaining a stable business mix relative to fiscal twenty twenty four. Sophie, let me adjust the second part of your question on margin profile.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Maybe let's look at first, general and administrative expenses. Non GAAP G and A expenses have decreased from 24.4% to 17.8% this quarter, demonstrating leverage achieved through a larger revenue base. However, as you touched on, non GAAP selling and marketing expenses rose to 35.1% of revenue, up 7.1 percentage points year over year. That's primarily due to increased activities in online channels aimed at market penetrations and product visibility enhancements. That was the main reason for year over year decline, in our adjusted operating margin.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Additionally, we conducted brand building initiatives that may not yield immediate revenue, but are expected to promote customer awareness and our market positioning. As part of a strategy, we're committed to establishing and strengthening multi channel communication mechanisms with our users. For digital products such as learning devices and surest.com, these efforts are crucial in fostering deep customer engagement, reaching more users, and gaining broader acceptance. Looking ahead, we're refining our market approach and diversifying our channels to align with business maturity, product cycles, and market conditions. Through this process, we aim to steadily strengthen our channel capabilities, enhance brand recognition, and deepen connections with the next generation of parents and learners.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

We believe that by upgrading our channel strategies, diversifying our distribution networks, and driving user engagement will drive long term business growth. I hope that answers your question.

[Wenbin(Sophia) Zhang, Discretionary Portfolio Management Analyst at China International Capital Corporation (CICC)]

Thank you, Jackson. And that's very helpful. So, just a quick follow-up on the bottom line. So, should we expect improvement in profitability going forward? Thank you.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Sophie, thanks. And that's a good question. You know, I would say moving forward, improving overall profitability remains a key priority for us. As our business continues to develop, we expect two primary drivers of profitability. First, our expanding revenue base naturally generates our operating leverage, which will allow for more efficient allocation of fixed costs.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

And you can probably see that in some of the financial results we printed in the last few quarters, right? We continue to unlock our operating leverage as our business grow and general, for example, general and administrative expenses as a percentage of revenue has largely come down in the last few quarters. The second growth driver of our profitability would be us implementing targeted operational refinements, at every stage of a workflow. This includes content creation, product R and D, service delivery, and sales and marketing. Right?

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

While these efforts will take a bit of time to fully impact our P and L, I would just like to reiterate again that operating efficiency will remain a priority for us in the next fiscal year. I hope that answers your question, Sophie.

[Wenbin(Sophia) Zhang, Discretionary Portfolio Management Analyst at China International Capital Corporation (CICC)]

Thank you, Jackson. That's very clear.

[Operator]

Thank you. Our next question comes from the line of Felix Liu from UBS. Please ask your question, Felix.

[Felix Liu, Executive Director at UBS Group]

Good evening, management. Thank you for taking my question. My question is on AI. So what learning scenarios does management anticipate that AI can be implemented to your business in the near term? What are the impacts that integrating deep seek into your business model will present particularly in our learning services and the learning devices business?

[Felix Liu, Executive Director at UBS Group]

Thank you.

[Alex Peng, President & CFO at TAL Education Group]

Thanks, Felix. This is Alex. Let me take this one on. I will actually take a step back a little bit. You know, we've been talking about the AI and I just want to go back to something that I've, you know, discussed maybe a year or even two ago.

[Alex Peng, President & CFO at TAL Education Group]

I think it really has multi dimensional impact on us. Look, we are, we really welcome every single advance in AI capabilities from the foundational models. I think every single advance is welcoming news to us. And let me explain why. So first of all, we think AI has a huge, huge impact on educational content creation.

[Alex Peng, President & CFO at TAL Education Group]

The entire creation process is benefiting tremendously from AI. I think number one, it has tremendous implication in terms of efficiency gain, in terms of speed gain, And we're witnessing that every single day in the last two years. You know, I think that, you know, it also, by the way, has made things that previously seemed impossible to be possible, right? Leveraging this capability, you can develop multi language, multi curriculum adapted learning content material. So I think that's just, you know, something that we didn't think was quite possible.

[Alex Peng, President & CFO at TAL Education Group]

I think we are getting very close to be able to use AI to generate interactive, high quality content real time. Again, that wasn't even a cost issue. I think that was just basically not possible before. So these, I think offer really, you know, raising up the top, you know, the ceiling of what's possible while doing it was a tremendously different cost structure than before, right. So I think that's just the first thing I want to really, you know, walk with everybody on the call.

[Alex Peng, President & CFO at TAL Education Group]

I think, look, secondly, with every single advance of AI, we just see more possibilities of leveraging it to enhance our services. We are a very large services provider. You know, our touch base with customers on service, it goes from instruction to customer service to after sales service and across the board. I think in these areas again we have the, it's not even the possibility. I think we are pushing this every day in terms of both raising the level of customer service while gaining more efficiency.

[Alex Peng, President & CFO at TAL Education Group]

So I think that's also, you know, been tremendously helpful. And again, I think we're just expecting more as the capability of AI, you know, it gets even more advanced. I think number three, in terms of research and development, we're really seeing so much more, you know, code generated by AI that is, you know, advancing speed, gaining efficiency. We are a large, you know, research and development and education technology. And I think AI is really giving us a very different way of developing this.

[Alex Peng, President & CFO at TAL Education Group]

It's faster, it's nimble, you get very fast prototyping, and you get more efficiency not only from using AI to code by itself, but that nimble and fast prototyping is actually removing a lot of friction in the R and D process versus before, right? So I just want to lock those three. You know, those are things that we probably didn't discuss in a whole lot of detail in the last few calls, but I think those are actually very tangible, meaningful, and we expect more benefit and more impact from those. So going back to the, you know, integration in learning scenarios, look, you know, I think we're increasingly seeing AI becoming a learning companion. I think the Shao Fu Chat assistant, you know, that really embodies that fact that it is there.

[Alex Peng, President & CFO at TAL Education Group]

Know, more and more students who are native in this AI age are getting comfortable to get on the spot help and support, learning support from AI as they learn. So currently, you know, DeepCV3 service is one of the foundational models for our MassGPT or in Chinese, Jiugangao Muxing. Right? You know, beyond its general intelligence capabilities, we're also finding that on learning content, enhancing its ability to support really subject specific tasks. And also, you know, let me add this, I think we need to fine tune it and to support those, you know, pedagogical scenarios.

[Alex Peng, President & CFO at TAL Education Group]

For a model to be able to produce the answer is one thing. For it to be able to actually make the solution more accessible, easier to understand, like by students. These are actually, we believe, fundamentally vertical capabilities to an education player. And that's how we look at it. Right?

[Alex Peng, President & CFO at TAL Education Group]

That we're going to continue to work and invest on those, really lowering the barrier to accessing these AI capabilities, improving the user interface, making it easier for users to provide their input to the large language model, but also working really hard to make the output, the output from AI, not the raw straight output from these large language models, but make the output really serve a learning purpose and serve it well. And lastly, I would just say, you know, look, we'll also remain committed to contributing to the broader, you know, intelligent learning ecosystem, advancing new educational paradigms, supporting future schools and third party institutions as we've done in the past. And we really look forward to reimagining the future of learning and shape a more dynamic forward thinking education ecosystem as a whole. So, Felix, I hope that answers your question.

[Operator]

Thank you. Our next question comes from the line of Please ask your question, Alice.

[Alice Cai, Analyst at Citigroup Global Markets Inc.]

Thanks management for taking my question. How are we considering cash usage?

[Alice Cai, Analyst at Citigroup Global Markets Inc.]

Could you please give us more color about the future investment strategy and also shareholder returns? Thank you so much.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Alice, thank you for the question. This is Jackson. Let me take this one. Let me maybe first address our current cash position. As of 02/28/2025, the company holds approximately $3,200,000,000 cash, cash equivalents, and short term investments and restricted cash while excluding deferred revenue.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Given our cash position, we think we're well positioned to fund both growth and returns. When it comes to deploying this capital, very much like how we do a lot of things, we take a thoughtful and balanced approach when evaluating potential uses of cash. We consider multiple factors to strike the right balance between short term needs and long term development. Our focus remains on optimizing resource allocation, reinvesting strategically into the business, while also delivering value to shareholders. Given our current margin profile, which remains relatively thin and with a meaningful portion of our operations and businesses still in growth phases.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Maintaining operational flexibility is one of our key priorities. As we assess investment opportunities for fiscal twenty twenty six, we're particularly interested in areas that enhance our existing products and services. Strengthening our core capabilities and support business expansion. Additionally, as our industry evolves and new technologies emerge, we'll invest in integrating these advancements into our operations. We believe these investments will drive long term value creation for shareholders.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

Alongside of these investments, we remain equally focused on shareholder returns. As previously mentioned, that the board has extended our share repurchase program for an additional year. Authorizing purchases of up to 490,700,000.0 US dollars. Going forward, we'll prudently evaluate market conditions, our business needs, and other relevant factors before executing further repurchases. So, to summarize, our philosophy centers around a disciplined forward looking approach.

[Jackson Ding, Deputy Chief Financial Officer at TAL Education Group]

One that fosters sustainable development while maintaining the agility needed to navigate this dynamic market. And we'll keep you guys posted as appropriate. I hope that answers your question, Alice.

[Alice Cai, Analyst at Citigroup Global Markets Inc.]

Thank you so much.

[Operator]

We have now reached the end of the question and answer session. Thank you all very much for your questions. I'll now turn the conference back to the management team for closing comments.

[Alex Peng, President & CFO at TAL Education Group]

So again, thanks everybody on the call for joining us today and we'll see you next quarter. Thank you. Bye bye.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Participants

Executives

• Fang Liu, IR Director
• Alex Peng, President & CFO
• Jackson Ding, Deputy Chief Financial Officer

Analysts

• Eddy Wang, Analyst at Morgan Stanley
• Timothy Zhao, Equity Research Analyst at Goldman Sachs
• Wenbin(Sophia) Zhang, Discretionary Portfolio Management Analyst at China International Capital Corporation (CICC)
• Felix Liu, Executive Director at UBS Group
• Alice Cai, Analyst at Citigroup Global Markets Inc.