Tarena International, Inc. (NASDAQ:TEDU) Q3 2018 Earnings Conference Call - Final Transcript

Nov 19, 2018 • 08:00 pm ET

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Tarena International, Inc. (NASDAQ:TEDU) Q3 2018 Earnings Conference Call - Final Transcript

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Presentation
Executive
Dennis Yang

mentioned previously, the student enrollment of kid education business continued a rapid growth, achieving a 309% year-over-year increase, reaching 14,670. The company will accelerate the investment in K-12 education business, with nearly about 25 centers for kids education in this quarter. By the end of the third quarter, kids education business reached 124 centers. On top of that, we also have 20 shared learning centers with adult education business, where we provide additional classrooms. Our kids education business expanded to 46 cities by the end of this quarter. Tarena is continuously investing in course development, aiming to build a complete kids programming course system suitable for kids aged between four and 18. The course system will be adjusted and perfected with more and more practical class experiences. With its extensive application experience in IT area and solid talent reserves, we believe Tarena will be able to develop diverse courses to meet market demand to maintain its advantage with advanced course systems as well as to keep the leading position in key programming education market.

Executive
Shaoyun Han

(Foreign Language)

Executive
Dennis Yang

According to this quarters' financials, kids education business has made greater contributions to the Group. On one hand, cash received from enrollment reached RMB139 million, achieving 312% year-over-year growth and the development of approximately 20% of Group's total cash receipts. On the other hand, this quarter net revenue under US GAAP reached at RMB56.8 million, representing 8% of Group total net revenues. We believe that the contribution from kids education business will continue to grow in the following quarters and we expect it will gradually become one pillar of Tarena's business. In addition, the company's -- the standard kid business operation system has been productive with experiences accumulated through the past few years. Those have successful rate of opening new learning centers and operational efficiency of older centers are significantly improved.

Executive
Shaoyun Han

(Foreign Language)

Executive
Dennis Yang

We note the recent change in government regulation related in the K-12 education industry and believe that this will have positive impact on the quality oriented courses, including children programming education. Well, the increasing importance of information technology and artificial intelligence skills, programming courses become more and more important in providing quality and capability training to young people. We believe this industry will experience high speed growth. We expect that Tarena is able to achieve enrollment of more than 40,000 students and to achieve a cash receipt of more than RMB400 million for the full year 2018 in kids education business.

The company will accelerate investing in K-12 area in next two to three years, in terms of new course research and development, network expansion as well as talents recruitment. We expect to have in total of 150 kids education centers by the end of 2018 and we plan to open another 80 to 100 new centers in 2019. These initiatives require more investment and may affect margin levels in short-term as the new centers are still in a ramp up period before they break even. However, given the broad market