QuantaSing Group Limited

Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Qantas Sings earnings conference call. At this time, all participants are in listen-only mode. We will be hosting a question and answer session after management's prepared remarks. Please note that today's event is being recorded. I will now turn the conference over to Ms. Leah Guo, investor relations associate director of the company. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to Qantas Inc's earnings call for the second quarter of fiscal year 2023. With us today are Mr. Peng Li, our founder, chairman, and CEO, and Mr. Tim Xie, our CFO. Mr. Li will give a general business overview for the quarter. then Tim will discuss the financials in more details. Following their prepared remarks, Mr. Lee and Tim will be available for the Q&A session. I'll translate for Mr. Lee. If you refer to our second fiscal quarter financial results on our IR website at ir.theanswertriple.com, you can also access a replay of this call on our IR website when this becomes available a few hours after its conclusion. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call. As we will be making forward-looking statements, please be noted that all numbers stated in the following management prepared remarks are in R&D terms, and we'll discuss non-guest measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earnings release and followings with the SEC. I will now turn the call to the CEO and founder of Quarantine, Mr. Li.

Hello, everyone. I'm Matt. Thank you all for joining us on our first earnings call as a public company. It's been an exciting journey so far. Our desire to provide users with lifelong personal learning opportunities remains as strong as ever. We are grateful to our employees. They are highly committed to our mission of improving people's quality of life. We are also grateful to our enterprise customers and learners for putting their faith in us. They have chosen us to help them to meet the needs of the modern workplace and their personal goals. Thanks to all of them. We had a successful IPO and continue to deliver strong financial results. During the second fiscal quarter ended December 31, 2022, we grew our revenues on a pro forma basis. We also generated positive adjusted profit margins, showing our resilience in a challenging economic environment. During the quarter, our pro forma revenues excluded revenues from the disposed group increased by 19.3% quarter-over-quarter, and by 1.9% year-over-year, to only 786.4 million. Our gross bidding flow for individual online learning services was only 818.8 million. 3.1% quarter-over-quarter increase. We recorded RMB 21.8 million in non-GAAP-adjusted net income, a 2.8% adjusted net income margin for the quarter. Our strong growth and profitability are due to three factors. First, a systematic approach to creating an innovative learning journey for our users. Second, an intelligent content development system for our instructors and tutors. Third, an agile and scalable business model. Let's discuss the latest updates on Edge, starting with our systematic approach. It covers every step of the learner's journey with us. We use technology-driven tools for user engagement, interactive learning, in-class participation, and post-course assessment. For new learners, the learning journey usually begins by attending our introductory courses. For such courses, we have pioneered the dual instructor mode with a point a lead instructor who lectures online via live stream to a large class. The large class is then divided into smaller groups, which are supported by our off-class tutors. Tutors interact with our learners and answer questions. Under this dual instructor mode, we can easily connect over 100,000 learners at the same time. This has enhanced our user thickness and user engagement. It has also boosted demand for our premium coffees. Our registered users doubled from a year ago to 77.8 million as of December 31, 2022, paying learners grew by 33.3% year-over-year. to about 0.4 million for the quarter. Second, we developed an intelligence content development system for our instructors and tutors. This system helps us to hone their teaching skills. Using big data analysis, our instructors can observe user engagement in real time during lectures. We continue to invest in our technology and business intelligence. We have applied big data analysis to all key aspects of our business operations. These aspects include content development, live streaming, pre-recording, study cookies, customer engagement, sales conversion, and operation management. We are able to produce content with quality, depth, and freshness to attract the users, improve our commercial risk, and optimize our management processes. In addition, by leveraging our advanced technology infrastructure and business intelligence, we are able to develop new cost offerings within an average of three to four months. This allows us to launch our service offerings in a cost-effective manner. Each of our of-class tutors is able to serve more than 200 learners at the same time without impacting the learning experience. Third, our business model is agile and scalable. It fuels the engine of our business growth and revenue diversification. For new online courses, our online learning platform provides the backbone for our rapid expansion. Based on CNU's infrastructure, which underlies our success in financial literacy courses, we quickly introduced a new platform, including Jiangzhi and Qianqi. These platforms have supported our efforts to offer new personal interest courses in fields that are gaining popularity. Some examples are short video production, personal well-being, and electronic keyboard. Since the launch in August 2021, these courses helped us to accumulate about 17 2.2 million registered users as of December 31, 2022. Our revenues from this crisis grew six-fold year-over-year, reaching around $205.1 million in the second fiscal quarter. We are not resting on our laurels. Our team remains vigilant of economic hydrants and macro uncertainties. We are aware of longer sales cycles from enterprise customers, weak customer spending, and changing user behaviors to maintain our operational resilience and stability through all economic cycles. proactively adjusted our operational tactics in several ways. First, we have diversified our customer base to include both individuals and enterprises. We started to provide financial literacy learning services in July 2019. and quickly become the latest online financial learning service provider for adults in China. According to the report by Thorstein Affiliates, we held a market share of 36.9% in terms of revenue in 2021. In August 2021, we expanded our offerings into a carefully selected range of personal interest copies beyond financial literacy. By doing so, we leveraged the general public's growing interest in diverse areas of studying for personal development and lifelong learning. We launched our marketing services and enterprise talent management services to enterprise customers This allows us to provide the enterprise customers with online talent assessment, training, and learning services. These services have enabled us to broaden our service offerings into enterprise customers. We have evolved into a two-sided service provider for both individuals and enterprises. Our new platform, Johnson & Change, continues to serve as our main growth engine, and our pipeline for enterprise services is strong. We are encouraged by the continued strength of our businesses, which are spotted by a growing shift from offline to online skills development. Second, we have remained prudent In our operating expenses, while upholding our commitment to product development, we applied closer scrutiny of our eyes on ourselves and the marketing and the J&A expenses. We also channeled more resources towards offering additional services to our existing customers at the same time. We maintained a careful approach to our investment in R&D. We are confident that by taking proactive steps to control expenses in the near term, we are boosting the durability and agility of our business operations in the long term. We have allocated more resources to explore cross-selling opportunities. We are constantly exploring new ways to cross-sell add-on services to enhance our customers' lifelong value. We have introduced our marketing services to enterprise customers on GNU, and we intend to replicate our proven business model on and other platforms. We will leverage our proprietary technology and supporting systems to launch such services to enterprises. In June 2022, we launched our enterprise talent management services, which integrated talent assessment, training, and management functions for enterprise customers. We are working with the top tier media group in China in the pilot program to further our sub-service initiatives. Looking ahead, we believe these strategies give us well sufficient to balance revenue growth and margin expansion. in a certain environment. Although we foresee 2023 as a challenging, challenging year, particularly in the first half, we are also uncovering many market trends favorable to our company. This includes the continued shift from offline to online to growing digital transformation, greater work-from-home flexibility, renewed business investment, and continued skill development for workforce. In addition, China's general public has more diverse personal development and lifelong learning needs, with more supportive government policies for vocational development This should continue to boost the growth trajectory of China's adult learning markets. As the industry leader in adult personal interest learning, we should be able to seize those emerging business opportunities and capitalize on their market potential. As we look to the remainder of the fiscal year 2023, we see the tolerance of upskilling and reskilling continue to sustain our revenue growth momentum. Our 18.8% year-over-year increase in pipeline should also provide a comfortable cushion for our revenue growth for the remainder of the fiscal year. This is evidenced by our RMB 457.5 million in contract liabilities at the end of the second fiscal quarter. In summary, we believe that we have developed the resilience and agility needed to strive regardless of market conditions. Our success will come from our emphasis on quality and our passion for improving our users' lives. The systems we have built are robust and flexible, and we are always focused on making improvements to our platform. Above all, we have a visionary citizen management team with a track record of entrepreneurial entrepreneurial success through various economic circles. The opportunity available to us is massive, well beyond 2023. We remain committed to our development as a territory, the exploration of new expansion avenues, and the creation of long-term value for our shareholders. With that, I will turn the call over to Tim. to discuss the details of our financials. Thank you all. Thank you, Dr. Aragoli. Before I go into the details of our financial results, please note that all amounts are in RMB, RMB terms. Next, the reporting period is the second quarter of fiscal 2023 that ended on December 31st, 2022. On that, in addition to gap merits, we will also be discussing non-gap merits to provide greater clarity on the change in our actual operations. For the second quarter of fiscal 2023, excluding the impact from revenues from the disposed group, we grew our total revenues by 1.9% year-over-year and 19.3% quarter-over-quarter to $786.4 million. mainly driven by growth within our individual online learning services. Among our revenues, revenues from individual online learning services grew by 4.7% year-over-year, to 704 million, or 89.5% of total revenues, mainly due to continued demand for other personal interest courses. Consistent with our strategy, to diversify course offerings. Our gross billing of individual online learning services increased by 23.1% from the first quarter of fiscal 2023 to $818.8 million. Revenues from enterprise services increased by 68.2% year-over-year to 82.3 million, or 10.5% of total revenues. primarily driven by enterprise customers, strong demand for marketing services, and talent management services. Gross profit was $687.2 million, representing a stable gross margin of 87.4% compared to 87.5% in the same period last year. The operating expenses increased to $700 and $31.7 million from $650.3 million last year. To break this down, sales and marketing expenses increased by 11.2% year-over-year to $622.9 million as we increase the spending on marketing and promotion activities for other personal interest courses. As a percent of total revenue, Non-GAAP sales and marketing expenses, which included share-based compensation, increased to 77.3% from 68.5% a year ago. Research and development expenses increased by 24.6% year-over-year to 64.3 million. As a result of our strategy of investing in technology and data analytics, As a percent of total revenue, non-GAAP R&D expenses, which excluded share-based compensation, increased to 5.6% from 5.2% a year ago. General and administrative expenses increased by 15.5% year-over-year to $44.5 million as they continued to operate efficiently. As a percentage of total revenue, Non-gas G&E expenses, which excluded share-based competition, decreased to 3.1% from 3.7% a year ago. Net loss was 41.4 million, excluding share-based competition. Adjusted net income was 21.8 million, representing an adjusted net margin of 2.8% during the quarter. and value-added net loss per share, with both RMBs 0.89. Adjusted basic and value-added net income per share with both RMBs 0.07 during the quarter. Turning to our balance sheet, as of December 31st, 2022, our company has 525.7 million in cash and cash equivalents and short-term investments. compared to $399.1 million as of June 30, 2022. We completed our initial public offering in January 2023, with a partial green shoot being exercised in February 2023, the proceeds of which will be recorded on our balance sheet for the next quarter. Lastly, I want to provide some color for our office for the third quarter of fiscal year 2023. That ends on March 31, 2023. We expect revenues to be between $750 million and $708 million, representing a year-over-year increase of between 8.6% and 13.9%, upticking into consideration the challenging market conditions across the industry. Our bottom line during the third fiscal quarter will also be impacted by the listing fees associated with our IPO. While we see some indications that the macro environment may improve in the quarter to come, the present situation remains uncertain and volatile. In the near term, we are adopting a prudent approach to our cost structure and expenses to maximize our operational agility and adaptability. to a macro volatility. In the long run, we strongly believe that our robust cash position, optimized cost structure, and diversified revenue streams have positioned us well to overcome challenges and seize growth opportunities. We remain confident in our ability to balance growth and profitability and deliver sustainable value to our shareholders. That concludes my prepared remarks. Margarita, let's open up the call for questions. Thank you very much.

And thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star, then 2. When asking a question in Chinese, please translate your question in English for the convenience of everyone on the call. Our first question today will come from Lai Ping Zhao of CICC. Please go ahead.

Hey, President Li, President Xie, good evening. Thank you for accepting my question. I will ask two questions in Chinese and then translate them into English. First of all, the first question is about our financial course. I don't know if the company has seen any signs of improvement in the demand for financial courses after the outbreak. And then how do you see this part of the business future? It's a growth drive. And then the second question is about the expansion of our multi-course category. Can you ask Mr. Li or Mr. Xie to talk about it? Good evening, Li Zong and Xie Zong. I have two questions here. First, do you see increasing demand of your financial literacy courses since the beginning of the year? And what are the future growth drivers for this business night? And second question is, how is your progress of other personal interest courses during the quarter? Thank you.

Okay, let me answer the first question. First of all, thank you for your question. This time, we revealed the data of Q2 of 2023. The time of this report is until the end of December 2022. If I remember correctly, in fact, all major cities in China are in the middle of December. I'll take the first question. First of all, thank you for your question. As our reporting period is for the fiscal year 2023 second quarter and the end of December 2022 calendar year,

So it means that if I remember it right, the major adjustment of the COVID prevention policies for majority of the cities here in China are adjusted at the mid or the end of December 2022. So the data for the second quarter fiscal year 2023 would hardly help us to shed any color or limited color on this subject. 然后对于这个公司未来的增长的这个驱动力,

It should be said that our diversified course strategy has improved our growth. The company's financial growth learning course is a very important component of our personal learning service business. Its growth scale is still stable. The income of the financial growth learning course is 23 years Q2 compared to Q1.

As for the growth drivers for our future business, our diversified offering strategy has boosted our revenue quality. Our financial literacy leaning courses are an important part of our individual learning services. They have maintained sound and healthy growth, with increase in the fiscal year 2023 second quarter compared to the fiscal year 2023 first quarter.

In August 2021, we expanded our offerings into a selective repertoire of other personal interest courses.

We also introduced brands like Jiangzhen and Tianchi. These income resources, other than the personal, these income resources beyond the financial literacy courses have diversified our revenue sources. Of course, we are preparing for the post-COVID market. After three years of development and learning, we concluded that there might be three big indicators that might influence our business.

First of all, the individual learners are more accustomed to the online paid services. Second of all,

People want to upskill themselves, and the demand is quite urgent. They are pursuing the higher competitiveness through continuous learning, which probably would be one of the best of the survival and thrive strategy against a new economic norm. Learning is a must-do for everyone in the post-COVID world. 第三点的话是人们开始更多的关注到他们的身体健康,心理健康等等领域。 In conclusion, we'll continue to expand our two-sided business strategy. We'll adapt to the market and introduce courses that will serve users' needs. We'll also continue to invest in enterprise services and strive to keep our business stable, sound, and fast-growing.

Then it's about the variety of courses, right? There is this question. I will also say this. Since August 2021, we have expanded the course from financial literacy courses to other interest courses. So our current interest courses have included courses such as video teaching, and then courses such as electronic piano. I would like also to take your second question. Since August 2021, when we expanded our courses from the financial literacy to other personal interest courses,

We have already rolled out and introduced courses like short video production, personal well-being courses, electronic keyboard, Chinese painting, data analysis, etc. We have already launched more than 10 courses. 在这个财年的这个季度,还有我们就是持续在为主要的这些课程

In this fiscal quarter and also in the near future, we are also investing our efforts to scale these courses to make them deepening and more thoroughly. We are also testing new courses

and for scalable introduction when the time is right.

Okay, that's all for my answer. Thank you for your attention.

Our next question today will come from Sammy Chen of CLSA. Please go ahead.

Hi. Thank you, Megan, for the opportunity. So basically, I have two questions here. The first one is, about, would you have a target of the revenue proportions of your individual online learning segment and the enterprise segment in the longer term future? Like, would you like to maintain the revenue contribution of your individual segment of about 80% or 90%? Or would you like to increase the contribution from the enterprise segment to our second level? And my second question is this, about the GP marketing by segment. So would you mind sharing about what is the GP marketing cycle of your financial literacy courses and also enterprise service segment, or what are the relative levels of these segments? Thank you.

Okay, thank you for your question.

In the past three years, we have been deepening the market of personal online learning. And we have already accumulated a very large user base and a lot of experience serving our users. The IT and infrastructure that we pay attention to now makes us build a model that can be expanded.

Thank you for your question. For the past three years, we have been continuously investing our efforts in the individual online learning service market. We have accumulated a large user base and extensive service experiences. We have always focused our efforts in developing our IT system and infrastructure, which empowers our business model to become scalable. 同时我们也一直在各个方面进行探索。

We hope to use the experience, tools, and systems we have accumulated to serve more types of customers. We will continue to expand the diversification courses that serve our individual users, continuously polish and upgrade our courses, and expand our business scale.

We have been exploring in all aspects to take full advantage of our experiences, tools, and systems to expand our customer base. We continue to diversify our core software for individual customers, upgrade core core services, and expand scale.

In addition, we have made several progresses in serving enterprise customers.

We'll continue to invest our efforts. However, we have also to consider the elongated pipeline time and revenue recognition. That's why we expect a continuous growth in our revenues from enterprise services. We also see that revenues from individual customers will still take the lion's share. 对于个人服务和企业服务在我们总收入的占比这个问题,

We're not pursuing a specific share target between these two revenue sources, like whether to maintain the current 80%, as you mentioned.

We focus our efforts on maximizing the synergy between serving our individual customers and enterprise customers in order to create the maximized value for our shareholders.

Okay, that's all. Thank you. Okay, regarding your second question, I will answer in terms of the GT margin for our group. First, thanks for your question. And our GP margin, I think, is a pure financial indicator. Generally speaking, due to the different pricing base and cost structure, GP margin would differ between individualized learning services and enterprise services. And currently, I think, as a whole group, we take a holistic perspective when allocating resources and performance appraisal. for the different business. All are based on the QSG group as a whole. We currently do not distinguish business segments at present, technically, because at the current stage, the enterprise services business deals take the minority part of the total business. And our financial figures are also based on the group as a whole, according to the disclosure requirements from the accounting perspective. According to the financial report figures of the fiscal year 2023, quarter two, the GDP margin of this quarter as a whole remained stable at 87.4 percent compared to that of the last quarter for fiscal year 2022. Lastly, I want to add a point that we, as a whole, we treat the net profit margin more important than the GDP margin because each product mix and each business has its own profit margin characteristics if you trade off and to aim to achieve a better net profit margin currency. Hope that helps. Thank you.

Thank you.

Our next question today will come from Michelle Feng of Citi. Please go ahead.

Michelle, your line is open.

Hi. Thank you for the opportunity for me to ask you questions. I just have a small question that do we have the repurchase rate for different courses? Could you give us some color on that? Thank you.

Michelle, your question is about the repurchase?

Yeah, repurchase rate.

Yeah, OK. Thanks much for your question. I think the company is continuously committed to providing users with better quality than services. So extending the lifecycle value of users on the platform is our major business objective. Our strategy is to expand and deepen the scale of the courses. For example, Xinyu, we started the repeat purchase firstly under the Xinyu plan. The repeat purchase rate has maintained stable and for the past 12 months it has risen about 60% and we have been keeping it at a very stable level, about 60% recently. Though it just has been months after we introduced our personal interest courses under the Tianjin brand and Chenchi brand, we have made very good progress in the repeat purchase activity because since the early stage of the two brands, our major objective is to enlarge the scale of the first purchase And we only started the pre-purchase promotion since the second quarter of fiscal year 2023. And under the current operation strategy and planning, we will carry out the pre-purchase business of our courses in due course. Though the two brands were launched not so long ago, we still adhere to the strategy of continuously expanding and deepening the scale of the curriculum content and developing the small-scale testing, the new curriculum. At present, the Jiangzhen Central Business is growing strongly, and the last curriculum is doing the process of income growth. We have third corresponding resources, which will be launched, courses, which will be launched in the future. In terms of the repeat purchase, I think in the recent quarter, we have made a big progress in terms of the soft-bead production cost and the Zhangjian brand. And we will make more progress in terms of our other kind of courses and the two brands when the first purchase becomes flexible in the future, which will also make a very sizable revenue growth potential in our future business.

I hope that helps. Okay, thank you so much.

At this time, we will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks. The conference has now concluded. We do thank you for attending today's presentation, and you may now disconnect your lines. Music Playing I'm sorry. Thank you. Good morning and good evening, ladies and gentlemen. Thank you for standing by and welcome to Qantas Sings earnings conference call. At this time, all participants are in listen-only mode. We will be hosting a question and answer session after management's prepared remarks. Please note that today's event is being recorded. I will now turn the conference over to Ms. Leah Guo, Investor Relations Associate Director of the company. Please go ahead, ma'am.

Thank you. Hello, everyone, and welcome to Cornerstone's earnings call for the second quarter of fiscal year 2023. With us today are Mr. Peng Li, our founder, chairman, and CEO, and Mr. Tim Xie, our CFO. Mr. Lee will give a general business overview for the quarter, then Tim will discuss the financials in more detail. Following their prepared remarks, Mr. Lee and Tim will be available for the Q&A session. I'll translate for Mr. Lee. If you refer to our second fiscal quarter financial results on our IR website at ir.ramsatukos.com, you can also access a replay of this call on our IR website when it becomes available a few hours after its conclusion. Before we continue, I would like to refer you to our safe harbor statement in our early press release, which also applies to this call. As we will be making forward-looking statements, please be noted that all numbers stated in the following management preparatory marks are in R&D terms and we'll discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earnings release and followings with the SEC. I will now turn the call to the CEO and founder of Quarantine, Mr. Lee.

Hello, everyone. I'm Matt. Thank you all for joining us on our first earnings call as a public company. It's been an exciting journey so far. Our desire to provide users with lifelong personal learning opportunities remains as strong as ever. We are grateful to our employees. They are highly committed to our mission of improving people's quality of life. We are also grateful to our enterprise customers and learners for putting their faith in us. They have chosen us to help them to meet the needs of the modern workplace and their personal goals. Thanks to all of them, we had a successful IPO and continue to deliver strong financial results. During the second fiscal quarter ended December 31st, 2022, we grew our revenues on a pro forma basis. We also generated positive adjusted profit margins, showing our resilience in a challenging economic environment. During the quarter, our pro forma revenues, excluding revenues from the disposed group, increased by 19.3% quarter-over-quarter and by 1.9% year-over-year. to RMB 786.4 million. Our gross bidding for individual online learning services were RMB 818.8 million, a 23.1% quarter-over-quarter increase. We recorded RMB 21.8 million in non-GAAP-adjusted net income. a 2.8 adjusted net income margin for the quarter. Our strong growth and profitability are due to three factors. First, a systematic approach to creating an innovative learning journey for our users. Second, an intelligence content development system for our instructors and tutors. an agile and scalable business model. Let's discuss the latest updates on each, starting with our systematic approach. It covers every step of the learner's journey with us. We use technology-driven tools for user engagement, interactive learning, in-class participation, and post-course assessment. For new learners, the learning journey usually begins by attending our introductory courses. For such courses, we have pioneered the dual instructor mode. We appoint a lead instructor who lectures online via live stream to a large class. The large class is then divided into smaller groups, which are supported by our off-class tutors. Tutors interact with our learners and answer questions. Under this dual instructor mode, we can easily connect over 100,000 learners at the same time. This has enhanced our user and user engagement. It has also boosted demand for our premium copies. Our registered users doubled from a year ago to 77.8 million as of December 31, 2022. Hanging learners grew by 33.3% year-over-year to about 0.4 million for the quarter. Second, we developed an intelligence content development system for our instructors and tutors. This system helps us to hone their teaching skills. Using big data analysis, our instructors can observe user engagement in real time during lectures. We continue to invest in our technology and business intelligence. We have applied big data analysis to all key aspects of our business operations. These aspects include content development, live streaming, pre-recording, study cookies, customer engagement, sales conversion, and operation management. We are able to produce content with quality, depth, and freshness to attract users, improve our conversion rates, and optimize our management processes. In addition, By leveraging our advanced technology infrastructure and business intelligence, we are able to develop new cost offerings within an average of three to four months. This allows us to launch our service offerings in a cost-effective manner. Each of our of-class tutors is able to serve more than 200 learners at the same time. without impacting the learning experience. First, our business model is agile and scalable. It fuels the engine of our business growth and revenue diversification. For new online courses, our online learning platform provides the backbone for our rapid expansion. Based on CNU's infrastructure, which underlies our success in financial literacy courses. We quickly introduced a new platform, including Jiangzhi and Qianqi. These platforms have supported our effort to offer new personal input courses in fields that are gaining popularity. Some examples are short video production, personal well-being, and electronic keyboard. Since the launch in August 2021, this course has helped us to accumulate about 17.2 million registered users as of December 31st, 2022. Our revenues from this course grew six-fold year over year, reaching the 205.1 million in the second fiscal quarter. We are not resting on our laurels. Our team remains vigilant of economic hydrants and macro incentives. We are aware of longer sales circles from enterprise customers. Weak customer spending and trending user behaviors to maintain our operational resilience and stability through all economic circles. We have proactively adjusted our operational tactics in several ways. First, we have diversified our customer base to include both individuals and enterprises We started to provide financial literacy learning services in July 2019 and quickly become the latest online financial learning service provider for adults in China. According to the report by Thorsten Sullivan, we held a market share of 36.9% in terms of revenue in 2021. In August 2021, we expanded our offerings into a carefully selected range of personal interest copies beyond financial literacy. By doing so, we leveraged the general public school interest in diverse areas of studying for personal development and lifelong learning. We launched our marketing services and enterprise talent management services to enterprise customers. This allowed us to provide the enterprise customers with online talent assessment, training, and learning services. These services have enabled us to broaden our service offerings into enterprise customers. We have evolved into a two-sided service provider for both individuals and enterprises. Our new platforms, Johnson & Johnson, continue to serve as our main growth engines. And our pipeline for enterprise services is strong. We are encouraged by the continued strength of our businesses. which are spotted by a growing shift from offline to online skills development. Second, we have remained prudent in our operating expenses while upholding our commitment to product development. We applied closer scrutiny of our lives and ourselves under marketing and G&A expenses. We also channeled more resulted towards cross-selling additional services to our existing customers. At the same time, we maintained a careful approach to our investment in R&D. We are confident that by taking proactive steps to control expenses in the near term, We are boosting the durability and agility of our business operations in the long term. Lastly, we have allocated more resources to explore cross-selling opportunities. We are constantly exploring new ways to cross-sell add-on services to enhance our customers' lifelong value. We have introduced our marketing services to enterprise customers on Jinyu. And we intend to replicate our proven business model on and other platforms. We will leverage our proprietary technology and supporting systems to launch SaaS services to enterprises. In June 2022, We launched our enterprise talent management services, which integrated talent assessment, training, and the management functions for enterprise customers. We are working with the top tier media group in China in the pilot program to further our sub-service initiatives. Looking ahead, we believe these strategies You are well-positioned to balance revenue, growth, and margin expression in a certain environment. Although we foresee 2023 as a challenging, challenging year, particularly in the first half, we are also uncovering many market trends favorable to our company. This includes the continued shift from offline to online, the growing digital transformation, greater work-from-home flexibility, renewed business investment, and the continued skill development for workforce. In addition, China's general public has more diverse personal development and lifelong learning needs. with more supportive government policies for vocational training. This should continue to boost the growth trajectory of China's adult learning markets. As the industry leader in adult personal interest learning, we should be able to seize both emerging business opportunities and capitalize on their market potential. As we look to the remainder of the fiscal year 2023, we see the tolerance of upskilling and reskilling continue to sustain our revenue growth momentum. Our 18.8% year-over-year increase in pipeline should also provide a comfortable cushion for our revenue growth for the remainder of the fiscal year. This is evidenced by our RMB 457.5 million in contract liabilities at the end of the second fiscal quarter. In summary, we believe that we have developed the resilience and agility needed to strive regardless of market conditions. Our success will come from our emphasis on quality and our passion for improving our users' lives. The systems we have built are robust and flexible, and we are always focused on making improvements to our platform. Above all, we have a visionary season management team with a track record of entrepreneurial success through various economic circles. The opportunity available to us is massive, well beyond 2023. We remain committed to our development as a territory. The exploration of new expansion avenues and the creation of long-term value for our shareholders. With that, I will turn the call over to Tim to discuss the details of our financials. Thank you all. Thank you. Before I go into the details of our financial results, please note that all amounts are in RMB, RMB terms. that the reporting period is the second quarter of fiscal 2023 that ended on December 31st, 2022. On that, in addition to gap merits, we will also be discussing non-gap merits to provide greater clarity on the change in our actual operations. For the second quarter of fiscal 2023, excluding the impact from revenues from the disposed group, it grew our total revenues by 1.9% year-over-year and 19.3% quarter-over-quarter to 786.4 million, mainly driven by growth within our individual online learning services. Among our revenues, revenues from individual online learning services grew by 4.7% year-over-year to 704 million, of 89.5% of total revenues, mainly due to continued demand for other personal interest courses, consistent with our strategy to diversify course offerings. Our gross billing of individual online learning services increased by 23.1% from the first quarter of fiscal 2023 to $818.8 million. Revenues from enterprise services increased by 68.2% year-over-year to 82.3 million or 10.5% of total revenues, primarily driven by enterprise customers' strong demand for marketing services and talent management services. Gross profit was 687.2 million, representing a stable gross margin of 87.4% compared to 87.5% in the same period last year. The operating expenses increased to 731.7 million from 650.3 million last year. To break this down, sales and marketing expenses increased by 11.2% year-over-year. to $622.9 million as we increase the spending on marketing and promotion activities for other personal interest courses. As a percent of total revenue, non-GAAP sales and marketing expenses, which excluded share-based compensation, increased to 77.3% from 68.5% a year ago. Research and development expenses increased by 24.6% year-over-year to $64.3 million as a result of our strategy of investing in technology and data analytics. As a percent of total revenue, non-GAAP R&D expenses, which excluded share-based compensation, increased to 5.6% from 5.2% a year ago. General and administrative expenses increased by 16.5% year-over-year to $44.5 million as they continued to operate efficiently. As a percentage of total revenue, non-gas G&E expenses, which excluded share-based compensation, decreased to 3.1% from 3.7% a year ago. Net loss was 41.4 million, excluding share bid competition. Adjusted net income was 21.8 million, representing an adjusted net margin of 2.8% during the quarter. Basic and diluted net loss per share were both RMB 0.89. Adjusted basic and diluted net income per share were both RMB 0.89. during the quarter. Turning to our balance sheet, as of December 31st, 2022, our company held $525.7 million in cash and cash equivalents and short-term investments compared to $399.1 million as of June 30th, 2022. We completed our initial public offering in January 2023. with a partial green shoot being exercised in February 2023, the proceeds of which will be recorded on our balance sheet for the next quarter. Lastly, I want to provide some color for our office for the third quarter of fiscal year 2023. That ends on March 31, 2023. We expect revenues to be between $750 million and $708 million. representing a year-over-year increase of between 8.6% and 3.9% after taking into consideration the challenging market conditions across the industry. Our bottom line during the third fiscal quarter will also be impacted by the lifting fees associated with our IPO. While we see some indications that the macro environment may improve In the quarter to come, the present situation remains uncertain and volatile. In the near term, we are adopting a prudent approach to our cost structure and expenses to maximize our operational agility and adaptability to a macro volatility. In the long run, we strongly believe that our robust cash position, optimized cost structure, and diversified revenue streams have positioned us well to overcome challenges and seize growth opportunities. We remain confident in our ability to balance growth and profitability and deliver sustainable value to our shareholders. That concludes my prepared remarks. Operator, let's open up the call for questions. Thank you very much.

And thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star, then 2. When asking a question in Chinese, please translate your question in English for the convenience of everyone on the call. Our first question today will come from Lai-Ping Zhao of CICC. Please go ahead.

Okay, Lai-Ping. Good evening, President Li and President Xie. I have two questions here. First, do you see increasing demand of your financial literacy courses? since the beginning of the year, and what are the future growth drivers for this business night? And second question is, how is your progress of other personal interest causes during the quarter? Thank you.

I will answer the first question. First of all, thank you for your question. This time, we are revealing the data of Q2 of 2023. The time of this report is until the end of December 2022. If I remember correctly, in fact, all major cities in China adjusted the policy of epidemic prevention and control in mid-December. I'll take the first question. First of all, thank you for your question. As our reporting period is for the fiscal year 2023 second quarter and the end of December 2022 calendar year, so it means that if I remember it right,

the major adjustment of the COVID prevention policies for majority of the cities here in China are adjusted at the mid or the end of December 2022. So the data for the second quarter fiscal year 2023 would hardly help us to shed any color or limited color on this subject. 然后对于这个公司未来的增长的这个驱动力,

It should be said that our diversified course strategy has improved our growth. The company's financial growth learning course is a very important component of our personal learning service business. Its growth scale is still stable. The income of the financial growth learning course is compared to Q2 and Q1 in 2023.

As for the growth drivers for our future business, our diversified offering strategy has boosted our revenue quality. Our financial literacy leaning courses are an important part of our individual learning services. They have maintained sound and healthy growth, with increase in the fiscal year 2023 second quarter compared to the fiscal year 2023 first quarter.

In August 2021, we expanded our offerings into a selective repertoire of other personal interest courses.

We also introduced brands like Jiangzhen and Tianchi. These income resources, other than the personal, these income resources beyond the financial literacy courses have diversified our revenue sources. Of course, we are preparing for the post-COVID market. After three years of development and learning, we concluded that there might be three big indicators that might influence our business.

First of all, the individual learners are more accustomed to the online paid services. Second of all,

People want to upskill themselves, and the demand is quite urgent. They are pursuing the higher competitiveness through continuous learning, which probably would be one of the best of the survival and thrive strategy against a new economic norm. Learning is a must-do for everyone in the post-COVID world. 第三点的话是人们开始更多的关注到他们的身体健康,心理健康等等领域。 In conclusion, we'll continue to expand our two-sided business strategy. We'll adapt to the market and introduce courses that will serve users' needs. We'll also continue to invest in enterprise services and strive to keep our business stable, sound, and fast-growing.

And then it's about the variety of courses, right? There's this question. Let me tell you about this. Since August 2021, we have expanded the course from financial literacy courses to other interest courses. So our current interest courses have included courses such as short video teaching, and then courses such as electronic piano. I would like also to take your second question. Since August 2021, when we expanded our courses from the financial literacy to other personal interest courses,

We have already rolled out and introduced courses like short video production, personal well-being courses, electronic keyboard, Chinese painting, data analysis, etc. We have already launched more than 10 courses. 在这个财年的这个季度,还有我们持续在为主要的这些课程

In this fiscal quarter and also in the near future, we are also investing our efforts to scale these courses to make them deepening and more thoroughly. We are also testing new courses

and for scalable introduction when the time is right.

Okay, that's all for my answer.

Thank you for your question.

Our next question today will come from Sammy Chen of CLSA. Please go ahead.

Hi. Thank you, Megan, for the opportunity. So, basically, I have two questions here. The first one is, about would you have a target of the revenue proportions of your individual online learning segment and the enterprise segment in the longer term future? Like would you like to maintain the revenue contribution of your individual segment of about 80% or 90% or would you like to increase the contribution from the enterprise segment to our second level? And my second question is about the GP marketing by segment. So would you mind sharing about what is the GP marketing cycle of your financial literacy courses and also enterprise service segment? Or what are the relative levels of these segments?

Thank you. Okay, thank you for your question.

In the past three years, we have been deepening the market of personal online learning. We have already accumulated a very large user base and a lot of experience serving our users. The IT and basic facilities that we value have now led to the establishment of a model that can be expanded.

Thank you for your question. For the past three years, we have been continuously investing our efforts in the individual online learning service market. We have accumulated a large user base and extensive service experiences. We have always focused our efforts in developing our IT system and infrastructure, which empowers our business model to become scalable. 同时我们也一直在各个方面进行探索。

We hope to use the experience, tools, and systems that we have accumulated to serve more types of customers. We will continue to expand the diversified courses that serve our individual users, continuously polish and upgrade our courses, and expand our business scale.

We have been exploring in all aspects to take full advantage of our experiences, tools, and systems to expand our customer base. We continue to diversify our core software for individual customers, upgrade core core services, and expand scale. In addition, we have made several progresses in serving enterprise customers. We'll continue to invest our efforts. However, we have also to consider the elongated pipeline time and revenue recognition. That's why that we expect a continuous growth in our revenues from enterprise services. We also see that revenues from individual customers will still take the lion's share. 对于个人服务和企业服务在我们总收入的占比这个问题,

我们可能不会特别追求像您刚才提到的个人业务占比维持80%左右这样一个目标。 但是我们更多的是关注如何最大化我们的个人服务和企业服务的协同效果,从而能够最大化我们的股东利益。 We are now pursuing a specific share target between these two revenue sources, like whether to maintain the current 80% as you mentioned.

We focus our efforts on maximizing the synergy between serving our individual customers and enterprise customers in order to create the maximized value for our shareholders.

Okay, that's all.

Thank you.

Okay, regarding your second question, I will answer in terms of the GT margin for our group. First, thanks for your question. And our GP margin, I think, is a pure financial indicator. Generally speaking, due to the different pricing base and cost structure, GP margin would differ between individualized learning services and enterprise services. And currently, I think, as a whole group, we take a holistic perspective when allocating resources and performance approval. for the different business. All are based on the QSG group as a whole. We currently do not distinguish business segments at present, technically, because at the current stage, the enterprise services business still takes the minority part of the total business. And our financial figures also based on the group as a whole according to the disclosure requirements from the accounting perspective. According to the financial report figures of the fiscal year 2023 Quarter 2, the GDP margin of this quarter as a whole remained stable at 87.4% compared to that of the last quarter for fiscal year 2022. And lastly, I want to add a point that we, as a whole, we treat the net profit margin more important than the GP margin because every, each product makes and each business has its own profit margin characteristics if you trade off and to aim to achieve a better net profit margin currency. Hope that helps. Thank you.

Thank you.

Our next question today will come from Michelle Feng of Citi. Please go ahead.

Michelle, your line is open.

Hi. Thank you for the opportunity for me to ask you questions. I just have a small question that do we have the repurchase rate for different courses? Could you give us some color on that? Thank you.

Michelle, your question is about the repurchase?

Yeah, repurchase rate.

Yeah, okay. Thanks much for your question. I think the company is continuously committed to providing users with better quality than services. So extending the life cycle value of users on the platform is our major business objective. Our strategy is to expand and deepen the scale of the courses. For example, Chino, we started the repeat purchase firstly under the Chino plan. The repeat purchase rate has maintained stable. And for the past 12 months, it has risen about 60%. And we have been keeping it at a very stable level. about 60% recently. Though it just has been months after we introduced our personal interest courses under the Jiangjin brand and the Chenchi brand, we have made very good progress in the repeat purchase activity because since the early stage of the two brands, our major objective is to enlarge scale of the first purchase, and we only started the repeat purchase promotion since the second quarter of fiscal year 2023. Under the current operation strategy and planning, we will carry out the repeat purchase business of our courses in due course. Though the two brands were launched not so long ago, we still adhere to the strategy of continuously expanding and deepening the scale of the curriculum content and developing the small-scale testing, the new curriculum. At present, the Jiangzhen Central Business is growing strongly, and the last curriculum is doing the process of income growth. We have third corresponding resources, which will be launched, courses, which will be launched in the future. In terms of the repeat purchase, I think in the recent quarter, we have made a big progress in terms of the soft-bead production cost and the Zhangjian brand. And we will make more progress in terms of our other kind of courses and the two brands when the first purchase becomes flexible in the future, which will also make a very sizable revenue growth potential in our future business. I hope that helps.

Okay, thank you so much.

Thanks.

At this time, we will conclude our question and answer session. I would like to turn the conference back over to management for any closing remarks. The conference has now concluded. We do thank you for attending today's presentation, and you may now disconnect your lines.