TAL(US:TAL)2023-07-27 16:00Q1 FY2024 Financial Results Announcement Financial Highlights For the first quarter of fiscal year 2024, TAL Education Group reported a 22.9% year-over-year increase in net revenues to US$275.4 million, while loss from operations widened significantly to US$57.8 million from US$28.3 million in the prior-year period, maintaining a strong liquidity position with over US$3.0 billion in cash, cash equivalents, and short-term investments Q1 FY2024 Key Financial Metrics (Unaudited) | Metric | Q1 FY2024 (US$ Million) | Q1 FY2023 (US$ Million) | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenues | $275.4 | $224.0 | +22.9% | | Loss from Operations | $(57.8) | $(28.3) | +104.0% | | Non-GAAP Loss from Operations | $(32.3) | $(1.8) | +1,649.5% | | Net Loss Attributable to TAL | $(45.0) | $(43.8) | +2.8% | | Cash, Cash Equivalents & Short-Term Investments | $3,044.7 | - | - | - Management highlighted ongoing efforts to refine core offerings and optimize operations, while also achieving progress in newer initiatives such as the smart device business4 Detailed Financial Results In Q1 FY2024, the 22.9% revenue growth was offset by a 31.6% increase in operating costs and expenses, primarily driven by a 57.5% rise in cost of revenues and a 62.7% increase in selling and marketing expenses, resulting in a wider operating loss of US$57.8 million despite a slight 0.3% increase in gross profit Net Revenues Net revenues increased by 22.9% year-over-year to US$275.4 million in Q1 FY2024 Net Revenues (YoY) | Period | Net Revenues (US$ Million) | | :--- | :--- | | Q1 FY2024 | $275.4 | | Q1 FY2023 | $224.0 | | YoY Increase | 22.9% | Operating Costs and Expenses Total operating costs and expenses rose 31.6% to US$342.1 million, driven by significant increases in cost of revenues and selling and marketing expenses Operating Costs and Expenses Breakdown (YoY) | Expense Category | Q1 FY2024 (US$ Million) | Q1 FY2023 (US$ Million) | YoY Change | | :--- | :--- | :--- | :--- | | Total Operating Costs & Expenses | 342.1 | 260.0 | +31.6% | | Cost of Revenues | 139.5 | 88.6 | +57.5% | | Selling and Marketing | 97.7 | 60.0 | +62.7% | | General and Administrative | 104.9 | 111.5 | -5.9% | - Total share-based compensation expenses, allocated across operating costs, decreased slightly by 3.6% to US$25.5 million10 Profitability Gross profit remained stable at US$135.9 million, but operating loss widened to US$57.8 million, leading to a net loss of US$45.0 million Profitability Metrics (YoY) | Metric | Q1 FY2024 (US$ Million) | Q1 FY2023 (US$ Million) | | :--- | :--- | :--- | | Gross Profit | 135.9 | 135.5 | | Loss from Operations | (57.8) | (28.3) | | Net Loss Attributable to TAL | (45.0) | (43.8) | - Basic and diluted net loss per ADS were both US$0.07 for the quarter16 Financial Position and Cash Flow As of May 31, 2023, TAL maintained a robust balance sheet with US$3.04 billion in cash, cash equivalents, and short-term investments, generated US$125.5 million in cash from operating activities, and saw deferred revenue increase to US$387.7 million, indicating future revenue potential Cash and Investments Position | Category | May 31, 2023 (US$ Million) | Feb 28, 2023 (US$ Million) | | :--- | :--- | :--- | | Cash and cash equivalents | 2,085.4 | 2,021.9 | | Short-term investments | 959.3 | 1,149.6 | | Total | 3,044.7 | 3,171.5 | - Net cash provided by operating activities for the first quarter of fiscal year 2024 was US$125.5 million17 - Deferred revenue increased to US$387.7 million as of May 31, 2023, up from US$237.4 million as of February 28, 202319 Corporate Actions The company actively returned value to shareholders, repurchasing approximately 25.9 million ADSs for US$151.3 million during the quarter, and extended its share repurchase program by 12 months, with approximately US$737.4 million remaining available for repurchases through April 30, 2024 - In Q1 FY2024, the company spent approximately US$151.3 million to repurchase 8,645,334 common shares (equivalent to ~25.9 million ADSs)520 - The board of directors extended the existing share repurchase program by 12 months, authorizing up to approximately US$737.4 million in repurchases through April 30, 202420 Unaudited Condensed Consolidated Financial Statements Unaudited Condensed Consolidated Balance Sheets As of May 31, 2023, total assets were US$4.71 billion, a slight decrease from US$4.72 billion as of February 28, 2023, while total liabilities increased to US$1.09 billion from US$0.90 billion, primarily due to a significant rise in deferred revenue from US$237.4 million to US$387.7 million, resulting in total equity decreasing to US$3.63 billion Key Balance Sheet Items (in US$ thousands) | Account | May 31, 2023 (US$ thousands) | Feb 28, 2023 (US$ thousands) | | :--- | :--- | :--- | | Total Assets | $4,714,247 | $4,724,354 | | Cash, cash equivalents & restricted cash | $2,425,591 | $2,294,907 | | Short-term investments | $959,310 | $1,149,607 | | Total Liabilities | $1,088,103 | $903,441 | | Deferred revenue (current & non-current) | $387,667 | $237,354 | | Total Equity | $3,626,144 | $3,820,913 | Unaudited Condensed Consolidated Statements of Operations For the three months ended May 31, 2023, the company reported net revenues of US$275.4 million, a 22.9% increase year-over-year, but a 57.5% surge in cost of revenues to US$139.5 million kept gross profit nearly flat at US$135.9 million, with higher operating expenses leading to a loss from operations of US$57.8 million, wider than the US$28.3 million loss in the prior-year period, and a net loss attributable to TAL of US$45.0 million Statement of Operations Summary (in US$ thousands) | Line Item | Q1 FY2024 (US$ thousands) | Q1 FY2023 (US$ thousands) | | :--- | :--- | :--- | | Net revenues | $275,440 | $224,045 | | Gross profit | $135,927 | $135,487 | | Loss from operations | $(57,773) | $(28,323) | | Net loss attributable to TAL | $(45,037) | $(43,829) | | Net loss per ADS - Basic & Diluted | $(0.07) | $(0.07) | Unaudited Condensed Consolidated Statements of Comprehensive Loss For the quarter ended May 31, 2023, the company's comprehensive loss attributable to TAL was US$69.5 million, including a net loss of US$45.2 million and other comprehensive loss of US$23.8 million, net of tax Comprehensive Loss (in US$ thousands) | Item | Q1 FY2024 (US$ thousands) | Q1 FY2023 (US$ thousands) | | :--- | :--- | :--- | | Net loss | $(45,227) | $(42,912) | | Other comprehensive loss, net of tax | $(23,813) | $(60,826) | | Comprehensive loss attributable to TAL | $(69,501) | $(106,252) | Unaudited Condensed Consolidated Statements of Cash Flows In the first quarter of fiscal 2024, TAL generated US$125.5 million in net cash from operating activities, a significant improvement from a US$44.9 million use of cash in the same period last year, with net cash provided by investing activities of US$160.9 million and financing activities using US$151.2 million, primarily for share repurchases, resulting in a net increase in cash, cash equivalents, and restricted cash of US$130.7 million Cash Flow Summary (in US$ thousands) | Activity | Q1 FY2024 (US$ thousands) | Q1 FY2023 (US$ thousands) | | :--- | :--- | :--- | | Net cash from operating activities | $125,516 | $(44,880) | | Net cash from investing activities | $160,915 | $(51,335) | | Net cash used in financing activities | $(151,237) | $(49,768) | | Net increase/(decrease) in cash | $130,684 | $(164,720) | Reconciliation of Non-GAAP Measures This section reconciles GAAP to non-GAAP financial measures by excluding share-based compensation expenses, which totaled US$25.5 million for Q1 FY2024, resulting in a non-GAAP loss from operations of US$32.3 million and a non-GAAP net loss attributable to TAL of US$19.5 million GAAP to Non-GAAP Reconciliation (in US$ thousands) | Metric | Q1 FY2024 GAAP (US$ thousands) | Share-based Compensation (US$ thousands) | Q1 FY2024 Non-GAAP (US$ thousands) | | :--- | :--- | :--- | :--- | | Loss from operations | $(57,773) | $25,513 | $(32,260) | | Net loss attributable to TAL | $(45,037) | $25,513 | $(19,524) |