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) is a leading provider of after-school tutoring services in China, specializing in K-12 academic instruction. The company offers a range of programs designed to help primary and secondary school students strengthen their core competencies in subjects such as mathematics, English, Chinese language and science. TAL leverages both in-person learning centers and digital platforms to deliver its curriculum, aiming to support student progress through interactive lessons and personalized study plans.

Founded in 2003 and headquartered in Beijing, TAL Education Group has grown into one of China’s largest private education firms. The company went public on the New York Stock Exchange in 2010 and has since expanded its footprint across hundreds of cities. TAL’s branded offerings include small-class courses, one-on-one tutoring programs, and comprehensive test‐preparation services for key academic milestones such as the Zhongkao and Gaokao examinations.

In recent years, TAL has invested in educational technology to enhance classroom experiences and streamline learning outcomes. Its online platform integrates live teaching, adaptive exercises and extensive learning resources, enabling students to access quality instruction outside of traditional classroom settings. TAL also develops proprietary tools for teachers to monitor progress, tailor lesson plans and provide real-time feedback.

Serving major metropolitan and regional centers throughout mainland China, TAL Education Group continues to pursue growth through a combination of physical learning centers and digital expansion. The company is guided by a leadership team of education professionals and business executives focused on innovation, regulatory compliance and long-term student success.

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 TAL Education Group's Fourth Quarter and Fiscal Year 2025 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. I would now like to hand the conference over to Ms. Fang Liu, Investor Relations Director. Thank you. Please go ahead.

[Fang Liu, Director of Investor Relations at TAL Education Group]

Thank you all for joining us today for TAL Education Group's Fourth Quarter and Fiscal Year 2025 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 news wires. During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer, and Mr. Jackson Ding, Deputy Chief Financial Officer. Following the prepared remarks, Mr. 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 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.

[Fang Liu, Director of Investor Relations at TAL Education Group]

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. Alex Peng. Alex, please go ahead.

[Alex Peng, President at TAL Education Group]

Thank you, Fang. I'd also like to thank all of you for participating in today's conference call. 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. 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 2025, 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 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. For learning devices, we expanded our product offerings to reach a broader user base, making it easier for users to find the right learning solutions for their needs. We also integrated more smart features and learning resources to better support users on their self-learning journeys. Through monthly feature updates and content refreshes, we provided users with an increasingly intelligent and practical study companion, making at-home self-learning more engaging and efficient.

[Alex Peng, President at TAL Education Group]

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 $610.2 million, or RMB 4.44 billion, reflecting year-over-year growth of 42.1% and 44.3%, respectively. On a non-GAAP basis, loss from operations was $1.7 million, while net income attributable to TAL reached $7 million. For the full fiscal year, net revenues totaled $2.3 billion, or RMB 16.2 billion, up 51.0% and 52.2% year-over-year, respectively. Non-GAAP income from operations amounted to $61.8 million, with non-GAAP net income attributable to TAL at $149.5 million. 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 TAL's new independent director and chairman of the Compensation Committee.

[Alex Peng, President 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 TAL's strategic direction, governance, and operational excellence. We also want to express our deep appreciation to Dr. Weiru Chen for his outstanding service and invaluable contributions over the past decade. We look forward to continuing our collaboration with Dr. Chen in his new advisory role. 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. Jackson.

[Jackson Ding, CFO 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 2025, fueled by advancements across multiple product lines. 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 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, CFO 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 assistants. Additionally, by building diverse customer touchpoints 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.

[Jackson Ding, CFO at TAL Education Group]

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. 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.

[Jackson Ding, CFO at TAL Education Group]

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. 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. The company reported net revenues of $610.2 million, or RMB 4.44 billion, representing a year-over-year growth of 42.1% in US dollar terms and 44.3% in RMB terms.

[Jackson Ding, CFO at TAL Education Group]

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 $292.6 million from $202.2 million. When excluding share-based compensation expenses, non-GAAP cost of revenues moved 46.1% higher to $291.7 million compared to $199.6 million in the same quarter last year. Gross profit stood at $317.6 million, which was 39.7% above the prior year period. Gross margin was at 52.0% compared to 52.9% from the same period last year. Turning to operating expenses, selling and marketing expenses for the quarter were $218.0 million, up 73.1% from the prior year. The non-GAAP equivalent of these expenses increased 77.9% to $214.3 million.

[Jackson Ding, CFO at TAL Education Group]

As a percentage of net revenues, non-GAAP selling and marketing expenses accounted for 35.1% versus 28.0% in the prior year period, with the change mainly resulting from increased selling and marketing activities through some online channels. General and administrative expenses increased 0.8% to $118.2 million compared to the same period last year. The non-GAAP measure showed a 3.5% rise to $108.5 million. 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 $14.3 million from $20.5 million in a comparable period. Loss from operations was $16.0 million for the quarter. This compares to a loss from operations of $11.1 million in the same period last year.

[Jackson Ding, CFO at TAL Education Group]

On a non-GAAP basis, the loss from operations was $1.7 million compared to non-GAAP income from operations of $9.4 million in the same period of last year. Net loss attributable to TAL was $7.3 million for the quarter, while in the same period last year, there was net income attributable to TAL of $27.5 million. Non-GAAP net income attributable to TAL was $7.0 million versus $48.0 million in the same period last year. Regarding our cash position as of February 28, 2025, we held $1.77 billion in cash and cash equivalents, along with $1.85 billion in short-term investments and $220.5 million in restricted cash. Our deferred revenue balance was $671.2 million at quarter end. In terms of cash flow, net cash used in operating activities was $226.3 million during the quarter.

[Jackson Ding, CFO at TAL Education Group]

For the full fiscal year 2025, net revenues were $2.3 billion or RMB 16.2 billion, reflecting year-over-year increase of 51.0% in U.S. dollar terms and 52.2% in RMB terms. Gross profit was $1.2 billion, 48.9% higher than the previous year. Loss from operations was $3.2 million in the fiscal year 2025, compared to loss from operations of $69.2 million in fiscal 2024. On a non-GAAP basis, income from operations was $61.8 million versus $19.7 million in the prior fiscal year. On the bottom line, net income attributable to TAL came to $84.6 million, compared to a net loss attributable to TAL of $3.6 million in fiscal 2024. Non-GAAP net income attributable to TAL was $149.5 million, while previous fiscal year showed $85.3 million. Finally, I'd like to briefly address our share repurchase program.

[Jackson Ding, CFO at TAL Education Group]

In April 2025, the company's board of directors approved a 12-month extension of its share repurchase program, originally launched in April 2021. Under the extended program, the company may spend up to approximately $490.7 million to repurchase its common shares through April 30th, 2026. In fiscal 2025, the company had repurchased 0.5 million common shares for a total consideration of approximately $13.1 million under the program. 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 at TAL Education Group]

Thanks, Jackson. Overall, we believe fiscal year 2025 laid a solid foundation for our future developments. Now, I'd like to share insights into the company's strategy and outlook for fiscal year 2026. First, we remain committed to sustainable growth in our core business lines.

[Alex Peng, President at TAL Education Group]

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. 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 line's 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 at TAL Education Group]

Through these efforts, we're consistently gleaning valuable insights from outstanding companies across various industries, and 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. 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.

[Alex Peng, President at TAL Education Group]

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. 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&D, sales, marketing, and beyond. 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 star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. We will now take our first question from the line of Eddy Wang from Morgan Stanley. Please ask your question, Eddy.

[Eddy Wang, Executive Director 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 should we view the growth strategy and expansion pace for Peiyou in the next fiscal year? Thank you.

[Alex Peng, President at TAL Education Group]

Thanks, Eddy. This is Alex. Let me take that one. 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, so let me instead focus more on our path forward. Okay.

[Alex Peng, President at TAL Education Group]

Looking ahead to the next fiscal year, really, as long as our key growth drivers, which are 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. I also want to just add, technology will play an increasingly important role in our strategy, right? You may have noticed we are expanding the rollout of our dual small and large screen solutions. It really brings smart classroom experiences to more students. I think, literally, it's reimagining the classroom learning experience. At the same time, we're continuing to innovate our products and refine our product-market fit to create solutions that are both loved by students and trusted by parents.

[Alex Peng, President at TAL Education Group]

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. It's not just user needs in a broad sense, but localized user needs. 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. Each decision to open a new learning center really carefully balances multiple factors: the local market demand—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. I think this disciplined methodology will continue to guide our business through fiscal year 2026.

[Alex Peng, President at TAL Education Group]

Really, if I take a step back, I would say we remain optimistic about industry's growth potential. In this new sector, I think I've talked about before, we truly feel the enrichment learning is hitting the need with this new generation of parents and learners. We are optimistic about our ability to deliver high-quality products to meet that future need. Really, as we are operating from a significantly higher baseline than a few years ago, we expect Peiyou enrichment's year-on-year growth rate to probably gradually taper off moving forward. Our focus really remains on what I just said before, the sustainable, healthy growth rather than pursuing hypergrowth for growth's sake. Eddy, 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, Executive Director 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. When you look into fiscal year 2026, I'm just wondering if there's any updates on your strategy on these specific segments and what are the new plans or measures that you are going to take to further improve the profitability of the learning content solution segment? Thank you.

[Alex Peng, President 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&L in the fiscal fourth quarter and fiscal full year of 2025.

[Alex Peng, President at TAL Education Group]

It's a new product group that launched about two years ago, 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. If I move to our strategy for fiscal 2026, our efforts were focused on the following few areas, right? I would say first, enhancing the device functionality. 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? 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 at TAL Education Group]

Our effort in expanding the portfolio really would improve product-market fit and expand access. 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. Our expanding portfolio will aim to do that. Number three is go-to-market. I think we've been enhancing our distribution, our marketing to reach more users while deepening engagement with existing customers. Both are very crucial. You probably have seen, and we've discussed this on previous calls, when we look at a go-to-market, we look across different channel formats. You probably have noticed that there are more offline channel and points of sales available. These are a continuous effort to, I think, both expand channel capacity, but also really to deepen channel capabilities.

[Alex Peng, President at TAL Education Group]

With these, both user growth and user engagement are really priorities as we scale the learning device business. I would also say operational efficiency, as revenue scales will leverage economies of scale, will refine cost structures, and optimize operations to drive healthy and efficient business growth. I think 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. In summary, we view this as a multi-year capability building where every initiative was really designed to build sustainable competitiveness and pave the way for both future growth and profitability. Timothy, I hope that answered your question.

[Operator]

Thank you.

[Timothy Zhao, Executive Director at Goldman Sachs]

Thank you for the comprehensive.

[Operator]

Our next question comes from the line of Sophie Chung from CIBC. Please go ahead, Sophie.

[Sophie Chung, Director of Liquidity and Non-Trading Market Risk at CIBC]

Good evening, Alex and Jackson. Thanks for taking my question. Could you please break down the top-line growth by business line for the past quarter to help us better understand the respective drivers? 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, CFO at TAL Education Group]

Sophie, thanks for the question. This is Jackson. Let me take this one, and let me maybe unpack this question a little bit. I think you asked both about top-line and bottom line. Let me address top-line performance first. 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 contributor within content solutions while also serving as a key growth driver.

[Jackson Ding, CFO at TAL Education Group]

Let me maybe add additional color on these two businesses. Peiyou 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, 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 when we look at year-over-year growth, underscoring the business's momentum. When we look at full year fiscal 2025, both learning services and content solutions delivered year-over-year revenue growth, maintaining a stable business mix relative to fiscal 2024. Now, Sophie, let me address the second part of your question on margin profile.

[Jackson Ding, CFO at TAL Education Group]

Maybe let's look at first general administrative expenses. Non-GAAP G&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 is primarily due to increased activities in online channels aimed at market penetrations and product visibility enhancement. That was the main reason for year-over-year decline in our adjusted operating margin. 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 our strategy, we're committed to establishing and strengthening multi-channel communication mechanisms with our users. For digital products such as learning devices and Xueersi, these efforts are crucial in fostering deep customer engagement, reaching more users, and gaining broader acceptance.

[Jackson Ding, CFO at TAL Education Group]

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

[Sophie Chung, Director of Liquidity and Non-Trading Market Risk at CIBC]

Thank you, Jackson. That's very helpful. Just a quick follow-up on the bottom line. Should we expect improvement in profitability going forward? Thank you.

[Jackson Ding, CFO at TAL Education Group]

Sophie, thanks. That's a good question. 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.

[Jackson Ding, CFO at TAL Education Group]

First, our expanding revenue base naturally generates our operating leverage, which will allow for more efficient allocation of fixed costs. 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 grows and, for example, general 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 our workflow. This includes content creation, product R&D, service delivery, and sales and marketing, right? While these efforts will take a bit of time to fully impact our P&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.

[Sophie Chung, Director of Liquidity and Non-Trading Market Risk at CIBC]

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]

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

[Alex Peng, President 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. We've been talking about the AI, and I just want to go back to something that I've discussed maybe a year or even two ago. I think it really has multi-dimensional impact on us. Look, we really welcome every single advance in AI capabilities from the foundational models.

[Alex Peng, President at TAL Education Group]

I think every single advance is welcoming news to us. Let me explain why. First of all, we think AI has a huge, huge impact on educational content creation. The entire creation process is benefiting tremendously from AI. I think, number one, it has tremendous implications in terms of efficiency gain, in terms of speed gain. We are witnessing that every single day in the last two years. I think that has, and 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. I think that is just something that we did not think was quite possible.

[Alex Peng, President at TAL Education Group]

I think we are getting very close to being able to use AI to generate interactive, high-quality content real-time. Again, that was not even a cost issue. I think that was just basically not possible before.

[Alex Peng, President at TAL Education Group]

These, I think, offer really raising up the ceiling of what's possible while doing it with a tremendously different cost structure than before, right? I think that's just the first thing I want to really walk with everybody on the call. I think, look, secondly, with every single advance of AI, we just see more possibilities of leveraging it to enhance our services. We're a very large services provider. Our touch space with customers on service goes from instruction to customer service to after-sales service across the board. I think in these areas, again, we have the—it's not even the possibility. I think we're pushing this every day in terms of both raising the level of customer service while gaining more efficiency. I think that's also been tremendously helpful. Again, I think we're just expecting more as the capability of AI gets even more advanced.

[Alex Peng, President at TAL Education Group]

I think number three, in terms of research and development, we're really seeing so much more code generated by AI that is advancing speed, gaining efficiency. We are a large research and development and education technology. I think AI is really giving us a very different way of developing this. 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&D process versus before, right? I just want to lock those three. 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.

[Alex Peng, President at TAL Education Group]

Going back to the integration in learning scenarios, look, I think we're increasingly seeing AI becoming a learning companion. I think the Xueersi chat assistant really embodies that fact that it is there. 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. Currently, DeepSeek-V3 service is one of the foundational models for our MathGPT or in Chinese Jiûzhãng Dà móxíng, right? Beyond its general intelligence capabilities, we've also fine-tuned it on learning content, enhancing its ability to support really subject-specific tasks. Also, let me add this. I think we need to fine-tune it and to support those pedagogical scenarios. For a model to be able to produce the answer is one thing.

[Alex Peng, President at TAL Education Group]

For it to be able to actually make the solution more accessible, easier to understand, liked by students, these are actually, we believe, fundamentally vertical capabilities to an education player. That is how we look at it, right? 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 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. Lastly, I would just say, look, we'll also remain committed to contributing to the broader intelligent learning ecosystem, advancing new educational paradigms, supporting future schools and third-party institutions as we've done in the past.

[Alex Peng, President at TAL Education Group]

We really look forward to reimagining the future of learning and shape a more dynamic forward-thinking education ecosystem as a whole. Felix, I hope that answered your question.

[Operator]

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

[Operator]

Thanks, Management, for taking my question. How are we considering cash usage? Could you please give us more color about the future investment strategy and also shareholder returns? Thank you so much.

[Jackson Ding, CFO 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 February 28, 2025, the company holds approximately $3.2 billion in cash, cash equivalents, and short-term investments and restricted cash, while excluding deferred revenue. Given our cash position, we think we are well-positioned to fund both growth and returns.

[Jackson Ding, CFO at TAL Education Group]

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, maintaining operational flexibility is one of our key priorities. As we assess investment opportunities for fiscal 2026, 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.

[Jackson Ding, CFO at TAL Education Group]

We believe these investments will drive long-term value creation for shareholders. Alongside of these investments, we remain equally focused on shareholder returns. As previously mentioned, the board has extended our share repurchase program for an additional year, authorizing purchases of up to $490.7 million. Going forward, we'll prudently evaluate market conditions, our business needs, and other relevant factors before executing further repurchases. To summarize, our philosophy centers around a disciplined, forward-looking approach, one that fosters sustainable development while maintaining the agility needed to navigate this dynamic market. We'll keep you guys posted as appropriate. I hope that answers your question, Alice.

[Jackson Ding, CFO at TAL Education Group]

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 at TAL Education Group]

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

• Alex Peng, President
• Fang Liu, Director of Investor Relations
• Jackson Ding, CFO

Analysts

• Analyst at Citi
• Felix Liu, Executive Director at UBS
• Eddy Wang, Executive Director at Morgan Stanley
• Timothy Zhao, Executive Director at Goldman Sachs
• Sophie Chung, Director of Liquidity and Non-Trading Market Risk at CIBC