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spk06: Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter and full year of 2022 Tarina International Incorporated Earnings Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I must advise you that today's conference call is being recorded today. March 28, 2023. I would now like to hand the conference call over to your first speaker today, Ms. Sylvia Yang, the Investor Relationship Manager. Thank you. Please go ahead.
spk02: Thank you, Operator. Hello, everyone, and welcome to Tarina's Earnings Conference Call for the fourth quarter and fourth year of 2022. The company's earnings results were released earlier today and are available on our IR website, ir.edu.cn, as well as our newswire services. Today, you will hear from Ms. Nancy Ying Sun, our CEO, and Ms. Ping Wei, our CFO, who will take you through the company's operational and financial results for the fourth quarter and fourth year of 2022, and give revenue guidance for the first quarter of 2023. After their prepared remarks, Nancy and Ms. Wei will be available to answer your questions. Before we continue, please note that the discussion today will contain certain forward-looking statements made under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Terena does not assume any obligation to update any forward-looking statements except as required under applicable law. Also, please note that some of the information to be discussed includes non-GAAP financial measures as defined in Regulation G. The U.S. GAAP financial measures and information reconciling the non-GAAP financial measures to Terena's financial results prepared in accordance with U.S. GAAP are included in Terena's earnings release. which has been posted on the company's IR website, ir.tdu.cn. Finally, as a reminder, this conference call is being recorded. In addition, a webcast of this conference call is available on Terena's Investor Relations website. I will now turn the call over to Ms. Nancy Ying Sun, the CEO of Terena.
spk04: Thank you, Yang Shuang. Thank you, Sylvia, and thanks everyone for joining us. During this time, the dynamic change of the epidemic has added a seasonal impact of the Chinese Spring Festival, which has caused a certain temporary impact on our business. Our offline center has been closed for nearly two months. A considerable number of teachers and students have suspended classes due to the epidemic or illness. Some employees have also been unable to go to work normally for a while. The month around the end of 2022 was a challenging period for us as COVID-19 dynamics and the Chinese New Year temporarily impacted our daily operations.
spk03: Our offline centers closed for almost two months as a large number of teachers and students had to suspend classes due to pandemic restrictions or illnesses. Meanwhile, some employees were also unable to work for a period of time. To varying degrees, this affected our offline customer acquisition, our online and offline course delivery, and our offline center services.
spk04: In the face of the challenging financial environment, thanks to our timely financial stability, stable OMO education delivery capacity, and the continuous implementation strategy of the company, we have still achieved in the fourth quarter of 2022, 24 million RMB of positive financial flow and non-preventive financial profits before the full cost. In the fourth quarter of 2022, The overall net profit of the group is 58.4%, which is 8.4% higher than before. Among them, the basic stability of the business, the net profit reached 73.2%, which is 8.1% higher than before. And the youth digital education business continues to show its market resilience and model of expandability. This quarter, the number of readers has increased by 17%, and the net profit has also reached 48.6%, which is 13% higher than before. In this challenging business environment, we achieved a positive operating cash inflow of 24 million RMB and a non-GAAP operating income, excluding share-based compensation expenses in the fourth quarter.
spk03: This was due to our operational agility, our stable OMO-based course delivery system, and our consistent improvement of operational efficiencies. Our gross profit margin on the group level reached 58.4% in the fourth quarter, up 8.4 percentage points year over year. Specifically, our IT professional education business remained stable, with a gross profit margin of 73.2%. rising by 8.1 percentage points year-over-year. Our IT-focused, supplementary-themed education business continued to demonstrate market resilience and business model scalability, registering an enrollment growth of 17% and a gross profit margin of 48.6% in the fourth quarter, up 13 percentage points year-over-year. In addition, Despite the challenges from external headwinds throughout 2022, we achieved a turnaround from a net loss to a net profit of 85.23 million RMB and a non-GAAP net profit of 102 million RMB for the year. As a result of the continuous upgrade in our operating model, deliver quality and service capabilities.
spk04: In terms of income, due to the impact of the epidemic, our total income in the fourth quarter of 2022 was 5.52 billion yuan, while the 6.55 billion yuan in the same period in 2021 fell by 15.7%. Among them, the income of young people in digital education was basically even in the same period as last year, while the income of adults in professional education was reduced by 31.6% due to the impact of the epidemic and the economic environment.
spk03: Our total net revenues amounted to 552 million RMB in the fourth quarter, down 15.7% compared with 655 million RMB in the same period of 2021 due to the factors I mentioned earlier. Segment-wise, our IT-focused supplementary STEAM education revenue was comparable with that of the fourth quarter of 2021, while our IT professional education revenue declined by 31.6% due to the impact of macroeconomic headwinds.
spk04: compared to the same period in 2021, which dropped by 29.8%. The overall net profit increased by 8.4%. The operating cost dropped by 15.7% compared to the same period last year, which caused our fourth quarter operating losses to be greatly reduced by 92.4% to 457,000 yuan. As for non-US non-US non-US non-US non-US non-US
spk03: With respect to cost control, during the period, we optimized our business management model to enhance operational efficiencies and effectively control expenses. In the fourth quarter, impacted by factors beyond our control, our revenue decreased. However, our cost decreased by 29.8% year-over-year. As a result, our gross margin rose by 8.4 percentage points year-over-year in the fourth quarter. Additionally, operating expenses decreased by 15.7% year-over-year, substantially narrowing our operating loss by 92.4% year-over-year to 4.57 million RMB. Our non-GAAP operating income, excluding share-based compensation expenses, was 233,000 RMB. Meanwhile, we realized an operating income of 93.04 million RMB for the full year of 2022, compared to an operating loss in 2021, as well as a non-GAAP operating income of 109.6 million RMB.
spk04: 接下来,我和大家介绍一下我们的青少年数字教育业务的情况。 Next, let me walk you through our IT-focused supplementary STEAM education business. I mean, I mean, I mean, I mean, I mean, I mean, thanks to our high-quality courses and delivery, as well as the continuous increase in brand influence, the number of readers increased by 17% from 15.13 million in the fourth quarter of 2021 to 17.7 million in the same period in 2022. At the same time, with the stable growth of revenue and the effective control of the operating costs of each center, our profit growth in the fourth quarter increased by 35.8% and the profit rate increased by In the fourth quarter of 2022, net revenue from our IT Funds Supplementary STEAM Education Program was 334 million RMB, comparable to 336 million RMB we recorded in the fourth quarter of 2021.
spk03: This represented a sixth This represented 60.5% of our total revenue during the period, an increase from the fourth quarter of 2021. Enrollment increased by 17% from 151,300 in the fourth quarter of 2021 to 177,000 in the same period of 2022, thanks to our high quality courses and delivery, as well as our growing brand Meanwhile, with steady revenue growth and effective cost control at our centers, our gross profit rose by 35.8% year-over-year in the fourth quarter, and our gross profit margin climbed by 13 percentage points to 48.6%.
spk04: In terms of customers, our local recruitment revenue has been affected by the shutdown of the current center. The total number of students is 3.8 million. Compared to the same period last year, it dropped by 10.7%. But the excellent courses and delivery quality of the new youth digital education business have formed a good reputation effect, which has brought us a relatively higher proportion of students from the reputation and training level. As a result, some of them have been canceled due to the decline in the number of new recruiters caused by the decline in the number of customers. At the same time, due to our online and offline customer interaction system and the indefinite OMO service model, we have ensured a higher quality of customer service and product service in the fourth quarter due to the limited number of business activities. The number of returnees has increased by 17%. In addition, the number of returnees who have spent more than a year in this quarter has remained at 78.7%.
spk03: On the customer acquisition front, our total number of fee-paying students in the fourth quarter of 2022 was 38,200, a decrease of 10.7% year-over-year, as our student recruitment was affected by the temporary closure of our offline centers. However, our excellent course and delivery quality and our students' learning results in IT-focused supplementary STEAM education have translated into word-of-mouth referrals and an increase in the number of renewal students as a percentage of fee-paying students, partially offsetting the decrease in customer acquisition due to limited center access. Meanwhile, thanks to our integrated online and offline course delivery system and our nonstop OMO service model, we ensure high course and service quality to the maximum extent Despite the constraints imposed on our operations in the fourth quarter, in the fourth quarter, enrollment increased by 17% year-over-year. Notably, the percentage of renewal students who have enrolled for over a year continues to exceed 78.7% in the fourth quarter. 在中心运营上,虽然第四季度受疫情影响,部分中心暂停营业。
spk04: But we continue to improve the operation efficiency of the center, and thus achieve the operation target of optimizing the central operating cost and expanding the operating level of the single center. In the fourth quarter of 2022, The number of youth digital education centers has been reduced from 238 in the end of the fourth quarter of 2021 to 21 in the end of the fourth quarter of 2022. At the same time, the number of students studying in the single center has risen from 636 in the US center last year to 805 in the US center in the fourth quarter of 2022. In the fourth quarter, the average income of the single center rose by 7.8%,
spk03: Regarding the operation of our centers, although some of them suspended operations due to the pandemic in the fourth quarter, we managed to improve operational efficiency while ensuring course and service quality. This helped us reduce operating costs and expand single-center profitability. At the end of the fourth quarter of 2022, the total number of centers providing IT-focused supplementary scheme education services declined to 213 from 238 at the end of the fourth quarter of 2022, a net reduction of 21 centers. At the same time, the number of students enrolled per center increased from 336 in the fourth quarter of 2021 to 805 in the same period of 2022. In the fourth quarter, average revenue per center grew by 7.8%.
spk04: Next, moving to our IT professional education business. 第四季度的运营受到了影响。 In the fourth quarter, our adult business income decreased by 31.6% compared to the fourth quarter of 2021. Of course, after the Spring Festival, these funds have fully recovered. In addition, during this period, the company continues to promote a stable operating policy that reduces costs and improves operating efficiency. In the fourth quarter, the total cost and operating cost of adult businesses decreased by 23.7% compared to the same period of 2021.
spk03: During the fourth quarter, the pandemic impacted societal mobility in general, affecting our enrollments and operations as well. To cope with the situation, we suspended the operation of some offline centers for a period. This had a significant impact on our operations in the fourth quarter. Specifically, net revenue for our IT professional education business dropped by 31.6% year-over-year. Of course, our centers have resumed full operations since the Chinese New Year holiday. In addition, we continued to facilitate stable operations by reducing costs and improving operational efficiency. In the fourth quarter, the total costs and operating expenses of our IT professional education business decreased by 23.7% year-over-year.
spk04: We will also bring new ideas to develop the digital economy in the steady recovery of the economy. SharkGDP has started a new wave of AI technology around the world. The core of this AI model will also affect the development of business and society to some extent, and promote new technical layout. Since then, we have always maintained a high sensitivity to potential technology and market needs, and continued to innovate Guys, society places more emphasis on digitalization and information-based development.
spk03: We'll embrace new opportunities brought about by the digital economy during China's macroeconomic recovery. Chad GPT has set off a new wave of AI technology advancements worldwide, and its core generative AI model will promote the deployment of new technologies and influence how business and society develop. We always stay abreast of the latest cutting-edge technologies and market demands and continuously innovate our courses, services, and operations accordingly. Meanwhile, we have continued to explore the application of the latest technologies. Recently, we became one of the first approved ecosystem partners of the Ernie Bot developed by Baidu. Through this collaboration, we'll explore the application of smart dialogue technology in professional education, which marks the first application of the conversational language model in professional education in China. We believe that broader application and rapid development of AI technology are bound to drive the demand for high-standard IT talent and that they will fuel the development of the IT professional education industry. We will continue to stand at the forefront of technological innovations in industry and continue to create value for our students and their employers with our industry-leading courses and delivery services.
spk04: That concludes my review of the company's operations for the fourth quarter and full year of 2022. Next, I'll turn the call over to Ping to walk you through our financials for the fourth quarter and full year of 2022.
spk03: Thank you, Nancy, and hello, everyone. Now, let me walk you through some of the financial highlights of the fourth quarter and fiscal year 2022. Please refer to the press release for more information as I'll try to be brief. For the fourth quarter of 2022, the company narrowed its operating loss to 4.6 million RMB or 0.7 million US dollars compared to operating loss of 60.4 million RMB in the same period of 2021. Now GAAP operating income, which excluded share-based compensation expenses was RMB 0.2 million or $0.03 million in the fourth quarter of 2022, compared to non-GAAP operating loss of 56.5 million RMB in the same period of 2021. The improvement in our operating profit was driven by our well-executed cost and expense controls during the quarter although we faced challenges from temporary uncertainties in the business environment. Our total net revenues reached 552.4 million RMB or 80.1 million US dollars in the fourth quarter of 2022, of which net revenue from our IT-focused steam, supplementary steam education business was 334.1 million RMB, representing about 60% of our total revenue. Meanwhile, thanks to our effective control measures, our cost of revenues decreased by 29.8% to 230.1 million RMB, or $33.4 million in the fourth quarter of 2022, from 327.7 million RMB in the same period of 2021. Total operating expenses decreased by 15.7%, to 326.9 million RMB, or $47.4 million in the fourth quarter of 2022, from 388 million RMB in the same period of 2021, as we achieved expense reductions across our organization. The main contributors to the cost and expense reductions include the following. we continuously closed the low-performing centers and optimizing personnel operations to improve efficiency. As a result, as Nancy mentioned earlier, our learning centers for both IT-focused, supplementary STEAM education and IT professional education businesses decreased to 217 and 86 centers, respectively. And our total headcount decreased by 20.5% year-over-year. Secondly, we reduced sales and marketing personnel as well as marketing spending while remaining focused on operational excellence. By endeavoring to up the quality of our course content, delivery, and services, we continue to generate more word of mouth referrals and renewal enrollment and maximize the lifetime value for our students. Thanks to the strong word of mouth referral effect, Our enrollment showed strong resilience despite social mobility restrictions during this exceptional period. As a result of the foregoing, we narrowed our net loss to 17.7 million RMB or 2.6 million US dollars in the fourth quarter of 2022, compared to a net loss of 182.5 million RMB in the same period of 2021. Non-GAAP net loss, which excluded share-based compensation expenses, was 12.9 million RMB or 1.9 million US dollars in the fourth quarter of 2022, compared to non-GAAP net loss of 178.6 million RMB in the same period of 2021. On an annual basis, Given our implementation of operational strategies that emphasize the profitable growth of the company, net income for the year has reached 85.2 million RMB or 12.4 million US dollars compared to a net loss of 475.8 million RMB for 2021. Non-GAAP net income was 101.8 million RMB or 14.8 million U.S. dollars for 2022 compared to a net loss of 456.7 million RMB in the same period of 2021. Now on the EPS side, basic and diluted loss per ADS was 1.72 RMB or 25 cents U.S. dollars in the fourth quarter of 2022, compared to loss per ADS of 16.12 RMB in the same period of 2021. On an annual basis, Basic income per ADS was 7.64 RMB or $1.11 US dollars in 2022, compared to loss per ADS of 42.17 RMB in 2021. Diluted income per ADS was 7.23 RMB or $1.05 US in 2022, compared to loss per ADS of 42.17 RMB in 2021. As of December 31, 2022, the total balance of cash, cash equivalents, and time deposits, including current and non-current, and restricted cash, was 380.5 million RMB, or $55.2 million US dollars, increasing by 38.4 million RMB from September 30th of 2022. The increase was mainly due to 24 million RMB of operating cash inflow generated in the quarter and 27 million RMB of inflow from financing activities as we drew down on our credit facilities. Capital expenditures in the fourth quarter of 2022 or 9.2 million RMB, or 1.3 million US dollars, mainly from purchasing IT equipment used in classrooms and payments to renovate learning centers. This concludes my financial highlights section. And Nancy will share with you the business outlook and revenue guidance for the first quarter of 2023. Nancy, please.
spk04: Thank you, Ms. Wei, for your summary of our financial performance for the fourth quarter and full year of 2022. Now turning to the company's outlook for 2023. In October of 2022, until the Chinese New Year, the epidemic environment has changed dramatically. At the same time, teachers, employees, students, and some parents have experienced the local epidemic since December until the Chinese New Year. Therefore, the company has taken relevant management decisions. In January 2023, most of the courses and services were suspended. Accordingly, in the first quarter of 2023, we only normally operated for nearly two-thirds of the time. Therefore, the income of the first quarter represents only about two months of income. In addition, we estimate that the company's cash collection during this period is about 2.8 billion yuan less than the normal situation. And because our business model is to collect money first and then serve, The pandemic evolved continuously from October 2022 through the Chinese New Year.
spk03: As many of our teachers, employees, students, and their families fell ill from December until around the Chinese New Year, we made the decision to suspend most of our non-essential operations for January 2023, including the majority of our classes. That meant we only maintained normal operations for approximately two-thirds of the first quarter of 2023. As a result, our first quarter revenue represents only about two months of revenue. In addition, we estimate a 280 million RMB reduction in our cash receipts during this period compared with periods of normal operations. As customer payments precede services rendered based on our operating model, for both IT professional education and IT-focused supplementary team education services, this results in later recognition of accounting revenue than cash receipts. In addition, given that IT professional education courses last four to nine months, our gap revenue for subsequent quarters, particularly the first quarter of 2023, will also be affected.
spk04: With the gradual recovery of the macroeconomic environment, the number of students who are enthusiastic about reading has gradually increased, and the number of students who sign up for courses has increased. We have undergone a number of severe tests. Our OMO teaching and delivery capabilities, extracurricular capabilities, and operational capabilities have been upgraded in the process of dealing with challenges, and have laid a solid foundation for our year-round business in 2023. Based on the current situation, we are confident that the good performance since February
spk03: Of course, we believe the impact of suspending our center's operations is temporary. By the end of the Chinese New Year holiday in early February, we fully resumed normal operations. And as the steady recovery of macroeconomic conditions fueled students' enthusiasm to enroll in our courses, we have seen an enhanced level of course signups. Moreover, we emerged from the top challenges stronger with an upgraded OMO-based delivery system, as well as optimized customer acquisition and operational capabilities, laying a solid foundation for our four-year operations in 2023. This has given us confidence that from the second quarter onwards, Our great performance since early February will offset some of the earlier adverse effects of external headwinds on the company's financials in 2023.
spk04: Accordingly, with respect to financial guidance we estimate our total net revenues for the first quarter of 2023
spk03: to be between 365 million RMB and 380 million RMB, representing a decrease of 39.1% to 41.5% from the first quarter of 2022. The company's guidance reflects our preliminary estimate of the current market environment and the company's operating conditions, which may change.
spk04: Looking forward to the future, we are full of confidence in the future potential of the IT education service market. We will continue to optimize the product delivery and service of OMO online and offline, promote further improvement in the quality of courses and services, and bring more value and good experience to students. We are optimistic about the rebound and growth of the number of returnees in the future, and will continue to consolidate the reputation effect to drive more new students and old students. Looking ahead, we're fully confident about the potential of the IT education services market. We'll continue to optimize our OMO-based product delivery system and services
spk03: and further improve our course and service quality to bring more value and a better experience to our students. We are optimistic about the rebound in enrollment and will consistently reinforce word-of-mouth referrals to drive growth in new fee-paying students and renewal students while lowering customer acquisition costs. At the same time, we'll further enhance our operating efficiency and strive to achieve a new level of full-year profitability with healthy and sustainable businesses and operations. The statement above is our outlook for the future and our revenue guidance.
spk04: I would like to take this opportunity to thank you again for your attention and support.
spk03: We're now ready for questions.
spk06: Ladies and gentlemen, thank you. If you would like to ask a question, please press star and one on your telephones and wait for your name to be announced. If you wish to cancel your request, please press star and two. If you are on a speakerphone, we do ask that you please pick up your handset to ask your questions. Once again, that is star and then one to join the question queue. Our first question today comes from Edward Riley from EF Hutton. Please go ahead with your question.
spk08: Thanks for taking my question. So I'm trying to reconcile the first quarter guidance with the fourth quarter results, given the environment, kind of seemed the same. So there were virtually no classes in January, you said, but in the fourth quarter, it looks like you continued online classes during the lockdown. So I'm just kind of wondering if you could maybe provide some color on what gross margins might look like for the first quarter, given that you still had rental costs and probably some personnel costs in the quarter, but limited revenue in January.
spk05: Right. Okay.
spk03: I'll have Cassie translate the question first, then I will take the question. Thank you for accepting my question. Just now, when I was introducing the management, I also mentioned that it was affected by the failure of the business environment. The income of the fourth quarter will indeed be affected. My question is mainly to understand the interest rate of the first quarter of 2023, as well as the opening situation of the course and the cost of labor. That's actually a great question because, you know, as Nancy mentioned, we basically didn't have any non-essential classes open for January. And, you know, a lot of our staff had to take sick leave, et cetera. So overall, for first quarter, we won't be able to match the margin we achieved in Q1 of 2022. we are more looking for a gross margin slightly below 40%. So that's sort of what we expect. Now, you mentioned that the personnel cost, the rent, We actually got some rental relief in Q4 and in the other quarters of 2022. We don't expect that to be repeated in January and 2023. So rent expense or cost for Q2 will be about the same as the last year, but we were So progressively improving efficiency and optimizing organization. So from personnel front, first of all, as I mentioned earlier, we already had 20% of headcount reduction during the year. So the first quarter of 2023, people related cost will be much lower. One is with the 20% reduction in headcount. Two is also some of them take sick leave. So overall, on cost and expense adding together, we should be able to say like more than 100, probably around 130 to 150 million of cost and expenses for the first quarter as compared to a normal quarter. So through all means. So while we will have a significant lower top line revenue for the quarter, loss-wise, we probably will be losing money. for the quarter, but it won't be as significant. Also, on a more sort of longer horizon, we actually expect our full-year sort of margin, both on growth and net size, will be sort of better. And on operating income, absolute dollar number-wise as well, we actually expect to, for 2023, after Q1 and on annual basis, will be better than 2022. So I hope that answers your question, Eddie.
spk08: Yep, yep, absolutely. Thanks so much for that. And just some housekeeping. I'm wondering what enrollment was for the professional segment in the fourth quarter. I might have missed it. 我想再补充问一下次季度成人业务的报读情况如何。
spk03: Right, the enrollment for adults is around 27,000, give or take a few hundred. It's about 10% lower than the same period of last year, primarily because of what we mentioned, you know, like from October onwards, social mobility is much lower as compared to a normal period.
spk09: Okay, got it.
spk08: And then students enrolled per center continues to grow pretty strong within the adolescent segment. Should we expect this to continue going forward throughout 2023? And is there any specific target or capacity constraint that you have on the centers or the target in terms of what you're looking to hit for students enrolled per center?
spk05: Again, very good question, Eddie.
spk03: After we resume normal operation in February, we do see fairly strong momentum with enrollment, et cetera. So we still expect on a run rate basis, like for kids especially, enrollment growth probably hiking to even low 20 percentage point. Now the second part of the question is about whether the current number of centers Will we be able to accommodate this kind of enrollment growth? The answer for this is yes, for sure. At the same time, we have a fairly scalable model because we have an OMO model. While some of our students come to centers for classes, We have some of the classes taught purely online. We have some of the classes with combined online and offline learning. So central utilization certainly has room for those enrollment growth. At the same time, since the country is now back to normal, we are exploring expansion plans with our children's segment. We are operating in a huge market with great growth potential and we certainly won't want to forgive the expansion opportunities because we want to just drive profit. So we want to drive sustainable profitable growth. So, yes.
spk09: Okay, got it.
spk08: I mean, should we expect total centers to continue to decline going forward, remain flat, or it seems like there might be some growth there?
spk03: Right. For the first half of this year, I would say we probably will stay on relatively stable numbers. And then heading into second half, yes, you should expect some growth in center numbers. Won't be a lot. You know, like we'll primarily drive courier growth from existing centers.
spk08: Okay. Gotcha. And then regarding some of the cost reductions taken during the year, How much of these reductions are permanent or should we expect cost to revert back to normal levels in 2023?
spk03: Again, on the cost reduction side, you can see that both for sales and marketing, And for GNA as well as cost of revenue, we actually achieved a sizable reduction from 2021 to 2022. On a going forward basis, on cost of revenue side, basically we don't anticipate overall cost of revenue to be higher than 2022. simply because, one, there's overall headcount reduction of 20% kicking full gear for this year. And secondly, for most part of this year, we will be running and optimizing our operations with the existing centers rather than center expansion, so there won't be a lot more structural cost from that front. So basically rent will stay pretty stable. And then on marketing side, again, headcount reduction achieved and marketing spending optimized. So what you will see is some additional spending as our scale grow, as we generate more leads and convert more leads. But other than that, it will be fairly conservative control on spending. On the sales and marketing side, I think actually, and the G&A side, I think both will also deliver lower overall annual numbers as compared to 2022. Yeah, I think 10 to 15% saving on sales and marketing side. And on G&A, yeah, I forgot to mention on G&A, While overall, we probably would stay flat, but in 2022, there are about $15 million of one-time expenses. One is to remember the one-time litigation settlement charge of $3 million. That's a one-time charge. And secondly, we have some provisions taken on balance sheet. That's also a one-time thing. I would say G&A side will probably stay flat compared to the excluding one-time G&A expense level for 2023.
spk08: Okay, great. That's great, Keller. And then I was wondering if you could maybe provide us with some details on what taxes might look like for the next year.
spk01: Yes.
spk05: Eddie, are you asking about income tax?
spk01: Yes.
spk05: OK. Yeah, for 2022, we estimated our effective tax rate to be around 18%.
spk03: But through sort of the We have various level of tax rates for different legal entities within the organization. So for 2023, because of the mixed shift, we actually expect around 16% of effective tax rate for the year.
spk01: Okay, great. That's it for me. Thank you.
spk05: Thank you, Eddie.
spk07: And, ladies and gentlemen, we don't have any other questions at the moment. Presenters, please continue.
spk05: Are there more questions, operators?
spk07: We do have an additional question, actually, from G. Dave from Super Bowl. Please go ahead with your question.
spk00: My question is, in the current market competition of both adults and children's education services, what are Arena's differentiated advantages? Nancy, please answer this question.
spk04: Okay, thank you very much for your question. In 2023, indeed, the track of our children's business, the track of science and technology quality education, and the track of IT training have all undergone some new changes, but Danai continues to maintain competitive advantages in two fields. First, in the field of children's science and technology quality education, Thank you for your question. Actually, in 2023, some changes have taken place in both
spk03: children's and adult education businesses, but Terena has maintained our leading advantages mainly in two areas. Firstly, in terms of STEAM education, our advantages mainly lie in our diverse education scenarios and our high delivery quality. These two advantages will continue to help us win trust from our customers.
spk04: Secondly, again, in our STEAM education business, we have been increasing recognition and word of mouth from parents because
spk03: of our highly professional services and growing brand influence.
spk04: Third, we have
spk03: an expansive national offline customer acquisition network that have boosted our customer acquisition capabilities, and this will continue to be our advantage. 第四点,我们持续提高效率的业务体系也将会构建我们新的这种竞争能力。
spk05: Of course, our highly efficient operational system will continue to increase our competitiveness.
spk03: 我们的少儿业无面向2023年是满怀信心的。 So we are fully confident about the development of our STEAM education business in 2023. 那么下面再跟您分享一下我们在
spk04: And now moving on to our advantages in IT professional education for adults. The 20 years of operating experience has made us deeply aware of the changes in IT technology. The emergence of new IT technology will trigger new business changes and bring new applications. At the same time, new needs will be born in the IT talent attacking system. In this respect, we have very rich experience.
spk03: We have been developing our IT professional education business for 20 years. And over these past years, we have accumulated ample experience and insights into the changes of technology and market demands. Along with the birth of new technologies always come changes in business models and the applications of technologies. And we have been able to to keep abreast of these latest developments, including new technologies and new market demands, and we have rich experience in these areas. stable and strong OMO-based course delivery system and experienced teacher's team, these are all our advantages in IT professional education.
spk05: Okay. I hope I've answered your questions. Thank you. Thank you, operator. There are no further questions.
spk06: I was just going to say that there are no additional questions at the moment and you may continue.
spk02: If you are known for the questions at present, we would like to conclude by thanking everyone for joining our conference call. We welcome you to reach out to us directly by emailing at ir.edu.cn. Should you have any questions or requests for additional information, we encourage you to visit our investor relations site at ir.edu.cn. Thank you.
spk05: Thank you all.
spk07: Ladies and gentlemen, that does conclude our call for today. Thank you for participating. You may all disconnect.
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