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spk05: Good evening and good morning, ladies and gentlemen, and thank you for standing by for 17 at Tech's first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there'll be question and answer session. As a reminder, today's conference call is being recorded. I'll now turn the meeting over to your host for today's call, Ms. Laura Chow. 17 at Tax Investor Relations Manager. Please proceed, Lara.
spk01: Thank you, operator. Hello, everyone, and thank you for joining us today. Our earnings release was distributed earlier today and is available on our IR website. Joining us today are Mr. Andy Liu, Founder, Chairman, and Chief Executive Officer, and Mr. Michael Du, Director and Chief Financial Officer. Andy will walk you through our latest business performance and strategies, followed by Michael, who will discuss our financial performance and guidance. They will be available to answer your questions during the Q&A session after their prepared remarks. Before we begin, I'd like to remind you that this conference call contains forward-looking statements as defined in Section 21 of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These four looking statements are based upon management's current expectations and current market and operating conditions and relates to events that involve known and unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the company's control. These risks may cause the company's actual results, performance, or achievements to differ materially. Further information regarding these and other risks and certainties or factors is included in the company's filings with the US SEC. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise except as required under applicable law. I will now turn the call over to our chairman and chief executive officer to review some of our business development and strategic direction. Andy, please go ahead.
spk03: Thank you, Lara. Hello, everyone. Thank you all for joining us on our first quarter 2023 earnings call. Before we begin, I would like to mention that the financial information and non-GAAP numbers in the release are presented on a continued operation basis. and all numbers are based on RMB unless otherwise stated. Before we go into the details, let me provide you with the quarter's business updates and financial performance across our business lines. The COVID outbreak in China in the fourth quarter of 2022 caused delays in the bidding and delivery processes of our major products, which adversely affected our financial performance in the last two quarters. However, our in-school SaaS business continues to advance beyond the financial results might indicate. During the quarter, we continued to explore various business models for growth, constantly developing and refining our offerings to meet the demand of regional regular use and promoting the signing and delivery of each project. At the same time, we actively expanded our distribution networks and enhanced our operational efficiency. We responded to challenges in a new environment through diversified distribution channels and flexible financial arrangements. As a result, Our business maintained its momentum and earned recognition from our customers. Beyond that, the financial statements might indicate. Beyond what the financial statements might indicate. In the past quarter, the impact of various pandemic containment measures were lifted across China. We saw business activities and projects relevant to our business returning to normal. The demand for our teaching and learning SAS offerings is guided by Chinese government's long-term policies and funded by dedicated government budgets. We believe this creates a rare opportunity for us to grow in this uncertain environment. We have made steady progress in our in-school teaching and learning SAS business during the first quarter of 2023. Despite the fact that the bidding and delivery of some of our major projects were delayed and our financial results were correspondingly affected. Part one, in-school teaching and learning SaaS business. Several of our key project original schedules for the fourth quarter of 2022 were delayed due to the COVID outbreak. However, through the joint efforts of our dedicated team, significant progress was made on these key projects in the first quarter of 2023. Notably, we won the RMB $116 million SmartPen and Intelligent Homework-Based Education Digital Transformation Project in Shanghai Minkang District. We have complemented the signing of the contract, and delivery has already started as of today. This represents a milestone in our company's development and showcases of our ability to provide industry-leading total solutions for one of the most demanding regions in China. We have received significant inbound inquiries about this project and offer offerings from various education bureaus and regional distributors. Xicheng District Cloud Classroom beat one and signed On April 3, we won the bid for the Cloud Classroom Evaluation System project in Beijing Xicheng District, with a contract value of RMB 20.22 million. This remarkable achievement closely follows our successful bid for the SmartPen and Intelligent Homework project in Shanghai Minkang District in March of this year. It's further reinforces the widespread recognition of the high-quality and diverse application of our teaching and learning thoughts offerings for China's educational digital transformation. The Cloud Classroom Evaluation System project is to be implemented across 41 schools in Xicheng District, leveraging our OneTeaching, OneLearning intelligence education platform and SmartPen technology. It enables the collection and analysis of interaction data between teachers and students during and after classes. This allows for comprehensive improvement of the overall quality of classroom instruction, ongoing enhancement of the original curriculum evaluation system, and the refinement of educational content and approaches. Product and service portfolio iteration. From a product and service offerings perspective, the company is committed to continually refining and enhancing our product and service portfolio to cater to needs for a solution that can achieve regular use in major teaching and learning scenarios. As a result, we have witnessed a constant improvement in the overall product experience. Moreover, our module-based SaaS projects have undergone a series of continuous optimization and iterations. propelling them to the forefront of the front market. These offerings have gathered widespread recognition and high praise from our customers as a top solution. Throughout the reporting period, we made efforts to optimize and iterate our product and service portfolio with a particular emphasis on developing a SaaS-based system and construction and portraying the user experience. We implemented updates to the core functionalities of our SaaS operations, resulting in noticeable improvements in our product experience indicators. Consequently, we observed a significant increase in user activity and retention rates, reflecting the growing satisfaction and engagement of our customer base. We are also implementing methods to ensure a more constant delivery and service experience, as well as managing associated expenses. Ongoing hardware optimization. Meanwhile, we are continuously enhancing the core functionalities of our proprietary smart hands to achieve a better user experience and additional application cases, providing an unparalleled user experience in our comprehensive internal business tests. The regular writing performance of our in-house developed DOT matrix plan has complemented the testing periods and expected to enter mass production in the fourth quarter of 2023 to further enhance the hardware performance of our total solutions. Additionally, the company is actively exploring various use cases with AI plus education in our businesses. with the great potential from integrating the latest AI technology with what we have accumulated in the space, creating novel applications and improving operational efficiency. During the quarter, the Ministry of Education held the World Digital Education Conference in Beijing. Representatives from over 130 countries and regions worldwide registered to attend the meeting. with hundreds of regional Chinese education bureaus invited to listen and exchange with industry peers and educational authorities. Seventy EdTech was honored to be invited as one of the only two smart educational technology service providers to present at this prestigious event. We showcased our industry-leading teaching and learning staff offerings with application cases in multiple leading cities in the education space, such as Beijing and Shanghai. Visitors were captivated by the professionalism and efficiency of our products and technical services. Our intelligent teaching and learning solutions left a lasting impression on attendees and received broad recognition from local educational authorities. Part two, other educational service business. In terms of other educational service business, we offer personalized self-learning products, membership services, and a range of digital products and services designed specially for students. Our in-house developed personalized self-directed learning product address the unique challenges associated with personalized learning in school. They empower students to tailor their learning strategies based on their unique interests, abilities, learning styles, and goals by providing a curated selection of learning content and styles that align with their progress. Students can choose the most fitting resources to support their educational journey. Our portfolio includes digital tools such as directional books, personalized experience books, which have proven instrumental in enabling students to excel in personalized learning. The demand for these products is highly dependent on the regulatory environment and the provision of completing services. Moving forward, we remain committed to exploring educational products and services that comply with regulatory requirements. We still consistently optimize and iterate our offerings in response to evolving market trends and the changing needs of our valued customers in our other educational service business. Now, I will turn the call over to Michael, our CFO, to walk you through our latest financial performance. Thank you.
spk04: Thanks, Andy, and thank you, everyone, for joining the call. I will now walk you through our financial and operating results. Please note that all financial data I talk about will be based in RMB terms. I would like to remind you that the quarterly results we presented here should be taken with care in reference to our potential future performance as subject to potential impacts from seasonality and one-off events as a result of the series of regulations introduced in 2021 and corresponding adjustment to our business model, organization, and workforce. Our revenue and gross profit in the first quarter of 2023 were impacted due to the delay in the bidding and delivery of several projects. However, the recent waning of major projects have marked another key milestone in the company's new business strategies. These projects are expected to be delivered gradually over the upcoming quarters and reflected in our financial statements. As of March 31, 2023, we have cash reserves of RMB $639 million on our balance sheet, providing us with sufficient funds for future development. Next, I will go through our first quarter financials in greater detail. Our net revenues for the first quarter of 2023 were RMB $9.3 million. representing an over-year decrease of 96% from RMB $233.4 million in the first quarter of 2002. Our revenues are recognized based on delivery and service provided of our projects, and they were delayed by the significant delay in the bidding and delivery process of our major projects. which were affected by the COVID outbreaks in the fourth quarter of 2022. Our cost of revenues for the first quarters of 2023 was RMB 7 million, representing a year-over-year decrease of 92.4% from RMB 91.8 million in the first quarter of 2022, which was largely in line with the decrease in our revenues. Cross-profits for the first quarter of 2023 was RMB 2.3 million, representing a year-over-year decrease of 98.4% from RMB 141 million in the first quarter of 2022. Gross margin for the first quarter of 2023 was 24.4%, compared with 60.7% in the first quarter of 2022. Total operating expenses for the first quarter of 2023 were RMB 106.3 million representing a year-over-year decrease of 37.8% from RMB 170.8 million in the first quarter of 2022. Loss from operations for the first quarters of 2023 was RMB 104 million compared with RMB 29.1 million for the first quarter of 2022. Loss from operations as a percentage of net revenues for the first quarter of 2023 was negative 1,121.8% compared with negative 12.5% in the first quarter of 2022. Net loss for the first quarter of 2023 was RMB 92.5 million compared with net loss of RMB 24.8 million for the first quarter of 2022. Net loss as a percentage of net revenues was negative 997.9% in the first quarter of 2023 compared with negative 10.6% in the first quarter of 2023. Adjusted net loss on a NGAT basis for the first quarter of 2023 was RMB 64 million compared with adjusted net income of RMB 9.9 million in the first quarter of 2022. Please refer to the table captioned Reconciliations of NGAT Measures to the most comparable gap measures at the end of the press release for reconciliation of net loss and the US gap to adjust net income or loss on the gap basis. Looking ahead, we are optimistic about industry opportunities and the competitiveness of our teaching and learning SaaS offerings. And we are confident our financial performance will recover as our major winnings are being delivered to our clients. With that, that concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session. Thanks.
spk05: Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Once again, that's star 11 for questions.
spk06: As a reminder, to ask a question, please press star 1 1 on your telephone keypad.
spk07: Again, please press star 1 1 for questions.
spk05: Thank you. We have no questions. I'll now turn the conference back to Ms. Laura Zhao for closing remarks.
spk01: Thank you, operator. In closing, on behalf of Seventeen EdTech's management team, we'd like to thank you for your participation on today's call. If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call.
spk05: Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect. you Thank you.
spk00: Thank you. Thank you. Thank you.
spk05: Good evening and good morning, ladies and gentlemen, and thank you for standing by for 17 at Tech's first quarter 2023 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there'll be question and answer session. As a reminder, today's conference call is being recorded. I'll now turn the meeting over to your host for today's call, Ms. Laura Zhao. 17 at Tax Investor Relations Manager. Please proceed, Lara.
spk01: Thank you, operator. Hello, everyone, and thank you for joining us today. Our earnings release was distributed earlier today and is available on our IR website. Joining us today are Mr. MD Liu, Founder, Chairman, and Chief Executive Officer, and Mr. Michael Du, Director and Chief Financial Officer. Andy will walk you through our latest business performance and strategies, followed by Michael, who will discuss our financial performance and guidance. They will be available to answer your questions during the Q&A session after their prepared remarks. Before we begin, I'd like to remind you that this conference call contains forward-looking statements as defined in Section 21 of the Securities Exchange Act of 1934 and the US Private Securities Litigation Reform Act of 1995. These four looking statements are based upon management's current expectations and current market and operating conditions, and relates to events that involve known and unknown risks, uncertainties, and other factors, all of which are difficult to predict, and many of which are beyond the company's control. These risks may cause the company's actual results, performance, or achievements to differ materially. Further information regarding these and other risks and certainties or factors is included in the company's filings with the US SEC. The company does not undertake any obligation to update any forward-looking statements as a result of new information, future events, or otherwise except as required under applicable law. I will now turn the call over to our chairman and chief executive officer to review some of our business development and strategic direction. Andy, please go ahead.
spk03: Thank you, Lara. Hello, everyone. Thank you all for joining us on our first quarter 2023 earnings call. Before we begin, I would like to mention that the financial information and non-GAAP numbers in the release are presented on a continued operation basis. and all numbers are based on RMB unless otherwise stated. Before we go into the details, let me provide you with the quarter's business updates and financial performance across our business lines. The COVID outbreak in China in the fourth quarter of 2022 caused delays in the bidding and delivery processes of our major products, which adversely affected our financial performance in the last two quarters. However, our in-school staff's business continues to advance beyond the financial results might indicate. During the quarter, we continued to explore various business models for growth, constantly developing and refining our offerings to meet the demand of regional regular use and promoting the signing and delivery of each project. At the same time, we actively expanded our distribution networks and enhanced our operational efficiency. We responded to challenges in a new environment through diversified distribution channels and flexible financial arrangements. As a result, Our business maintained its momentum and earned recognition from our customers beyond what the financial statements might indicate. In the past quarter, the impacts of various pandemic containment measures were lifted across China. We saw business activities and projects relevant to our business returning to normal. The demand for our teaching and learning SAS offerings is guided by Chinese government's long-term policies and funded by dedicated government budgets. We believe this creates a rare opportunity for us to grow in this uncertain environment. We have made steady progress in our in-school teaching and learning SAS business during the first quarter of 2023. Despite the fact that the bidding and delivery of some of our major projects were delayed and our financial results were correspondingly affected. Part one, in-school teaching and learning SaaS business. Several of our key project original schedules for the fourth quarter of 2022 were delayed due to the COVID outbreak. However, through the joint efforts of our dedicated team, significant progress was made on these key projects in the first quarter of 2023. Notably, we won the RMB $116 million SmartPen and Intelligent Homework-Based Education Digital Transformation project in Shanghai Mingtang District. We have complemented the signing of the contract and delivery has already started as of today. This represents a milestone in our company's development and showcases of our ability to provide industry-leading total solutions for one of the most demanding regions in China. We have received significant inbound inquiries about this project and offer offerings from various education bureaus and regional distributors. Xicheng District Cloud Classroom bit one and signed. On April 3, we won the bid for the Cloud Classroom Evaluation System project in Beijing Xicheng District, with a contract value of RMB 20.22 million. This remarkable achievement closely follows our successful bid for the SmartPen and Intelligent Homework project in Shanghai Minkang District in March of this year. It's further reinforces the widespread recognition of the high quality and diverse application of our teaching and learning thoughts offerings for China's educational digital transformation. The cloud classroom evaluation system project is to be implemented across 41 schools in Xicheng district, leveraging our one teaching, one learning intelligence education platform and smart pen technology. It enables the collection and analysis of interaction data between teachers and students during and after classes. This allows for comprehensive improvement of the overall quality of classroom instruction, ongoing enhancement of the original curriculum evaluation system, and the refinement of educational content and approaches. Product and service portfolio iteration, from a product and service offerings perspective, the company is committed to continually refining and enhancing our product and service portfolio to cater to needs for a solution that can achieve regular use in major teaching and learning scenarios. As a result, we have witnessed a constant improvement in the overall product experience. Moreover, our module-based SaaS projects have undergone a series of continuous optimization and iterations. propelling them to the forefront of the front market. These offerings have gathered widespread recognition and high praise from our customers as a top solution. Throughout the reporting period, we made efforts to optimize and iterate our product and service portfolio, with a particular emphasis on developing SaaS-based system and construction and portraying the user experience. We implemented updates to the core functionalities of our SaaS operations, resulting in noticeable improvements in our product experience indicators. Consequently, we observed a significant increase in user activity and retention rates, reflecting the growing satisfaction and engagement of our customer base. We are also implementing methods to ensure a more constant delivery and service experience, as well as managing associated expenses. Ongoing hardware optimization. Meanwhile, we are continuously enhancing the core functionalities of our proprietary smart pens to achieve a better user experience and additional application cases, providing an unparalleled user experience in our comprehensive internal business tests. The regular writing performance of our in-house developed DOT matrix plan has complemented the testing period and expected to enter mass production in the fourth quarter of 2023 to further enhance the hardware performance of our total solutions. Additionally, the company is actively exploring various use cases with AI plus education in our businesses. with the great potential from integrating the latest AI technology with what we have accumulated in the space, creating novel applications and improving operational efficiency. During the quarter, the Ministry of Education held the World Digital Education Conference in Beijing. Representatives from over 130 countries and regions worldwide registered to attend the meeting. with hundreds of regional Chinese education bureaus invited to listen and exchange with industry peers and educational authorities. Safety at Tech was honored to be invited as one of the only two smart educational technology service providers to present at this prestigious event. We showcased our industry-leading teaching and learning staff offerings with application cases in multiple leading cities in the education space, such as Beijing and Shanghai. Visitors were captivated by the professionalism and efficiency of our products and technical services. Our intelligent teaching and learning solutions left a lasting impression on attendees and received broad recognition from local educational authorities. Part two, other educational service business. In terms of other educational service business, we offer personalized self-learning products, membership services, and a range of digital products and services designed specially for students. Our in-house developed personalized self-directed learning product address the unique challenges associated with personalized learning in school. They empower students to tailor their learning strategies based on their unique interests, abilities, learning styles, and goals by providing a curated selection of learning content and styles that align with their progress. Students can choose the most fitting resources to support their educational journey. Our portfolio includes digital tools such as correctional books, personalized experience books, which have proven instrumental in enabling students to excel in personalized learning. The demand for these products is highly dependent on the regulatory environment and the provision of completing services. Moving forward, we remain committed to exploring educational products and services that comply with regulatory requirements. We still consistently optimize and iterate our offerings in response to evolving market trends and the changing needs of our valued customers in our other educational service business. Now, I will turn the call over to Michael, our CFO, to walk you through our latest financial performance. Thank you.
spk04: Thanks, Andy, and thank you, everyone, for joining the call. I will now walk you through our financial and operating results. Please note that all financial data I talk about will be based in RMB terms. I would like to remind you that the quarterly results we presented here should be taken with care in reference to our potential future performance as subject to potential impacts from seasonality and one-off events as a result of the series of regulations introduced in 2021 and corresponding adjustment to our business model, organization, and workforce. Our revenue and gross profit in the first quarter of 2023 were impacted due to the delay in the bidding and delivery of several projects. However, the recent waning of major projects have marked another key milestone in the company's new business strategies. These projects are expected to be delivered gradually over the upcoming quarters and reflected in our financial statements. As of March 31, 2023, we have cash reserves of RMB $639 million on our balance sheet, providing us with sufficient funds for future development. Next, I will go through our first quarter financials in greater detail. Our net revenues for the first quarter of 2023 were RMB $9.3 million. representing a year-over-year decrease of 96% from RMB $233.4 million in the first quarter of 2022. Our revenues are recognized based on delivery and service provided of our projects, and they were delayed by the significant delay in the bidding and delivery process of our major projects, which were affected by the COVID outbreaks in the fourth quarter of 2022. Our cost of revenues for the first quarters of 2023 was RMB 7 million, representing a year-over-year decrease of 92.4% from RMB 91.8 million in the first quarter of 2022, which was largely in line with the decrease in our revenues. Cross-profits for the first quarter of 2023 was RMB 2.3 million, representing a year-over-year decrease of 98.4% from RMB 141 million in the first quarter of 2022. Gross margin for the first quarter of 2023 was 24.4%, compared with 60.7% in the first quarter of 2022. Total operating expenses for the first quarter of 2023 were RMB 106.3 million, representing a year-over-year decrease of 37.8% from RMB 170.8 million in the first quarter of 2022. Loss from operations for the first quarters of 2023 was RMB 104 million compared with RMB 29.1 million for the first quarter of 2022. Loss from operations as a percentage of net revenues for the first quarter of 2023 was negative 1,121.8% compared with negative 12.5% in the first quarter of 2022. Net loss for the first quarter of 2023 was RMB 92.5 million compared with net loss of RMB 24.8 million for the first quarter of 2022. Net loss as a percentage of net revenues was negative 997.9% in the first quarter of 2023 compared with negative 10.6% in the first quarter of 2022. Adjusted net loss on a NGAT basis for the first quarter of 2023 was RMB 64 million compared with adjusted net income of RMB 9.9 million in the first quarter of 2022. Please refer to the table captioned Reconciliations of NGAT Measures to the most comparable gap measures at the end of the press release for reconciliation of net loss and the U.S. gap to adjust net income or loss on the gap basis. Looking ahead, we are optimistic about industry opportunities and the competitiveness of our teaching and learning SaaS offerings, and we are confident our financial performance will recover as our major winnings are being delivered to our clients. With that, that concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session. Thanks.
spk05: Thank you. We will now begin the question and answer session. To ask a question, please press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Once again, that's star 11 for questions.
spk06: As a reminder, to ask a question, please press star 1 1 on your telephone keypad. Again, please press star 1 1 for questions.
spk05: Thank you. We have no questions. I'll now turn the conference back to Ms. Laura Zhao for closing remarks.
spk01: Thank you, operator. In closing, on behalf of Seventeen EdTech's management team, we'd like to thank you for your participation on today's call. If you require any further information, please feel free to reach out to us directly. Thank you for joining us today. This concludes the call. Thank you. That concludes today's conference call.
spk05: Thank you for participating. You may now disconnect.
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