TCTM Kids IT Education Inc ADR (VSA) Q2 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the First Half 2020 Tarena International, Inc. Earnings Conference Call. At this time all participants are in listen-only mode. After speakers' presentation there will be a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, August 12, 2020. I would now like to hand the conference over to your first speaker today, Ms. Amanda Wang, Investor Relations Director. Thank you. Please go ahead.

Thank you, Operator. Hello, everyone, and welcome to Tarena's earnings conference call of the first half of 2020. The company's earnings results were released earlier today and are available on our IR website, ir.tedu.cn, as well as on Newswire services. Today, you will hear from Mr. Yongji Sun, our CEO; Ms. Nancy Sun, our Senior VP and Kelvin Lau, our CFO, who will take you through the company's operational and financial results for the first half of 2020 and give revenue guidance for the third quarter. After their prepared remarks, Mr. Sun, Nancy and Kevin 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. Tarena 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 US GAAP financial measures and information reconciling these non-GAAP financial measures to Tarena's financial results prepared in accordance with US GAAP are included in Tarena's earnings release, which has been posted on the company's IR website at ir.tedu.cn. Finally, as a reminder, this conference is being recorded. In addition, a webcast of this conference call is available on Tarena's Investor Relations website. I will now turn the call over to Mr. Yongji Sun, CEO of Tarena.

Thank you, Amanda and thank you everyone for joining us today. We are pleased to announce our first half of 2020 results. Due to the COVID-19 pandemic, total net revenue decreased by 29% from RMB882.6 million for the first half of 2019 to RMB626.8 million for the first half of 2020. Total professional education net revenue decreased by about 31.1% from RMB657.1 million for the first six months of 2019 to RMB452.5 million for the same period this year. On the K-12 education front, net revenue decreased by about 22.7% from RMB225.5 million for the first half of 2019 to RMB174.3 million for the first half of this year. To cope with the challenges arising from the pandemic, we have adopted more stringent cost control policies and procedures. Cost of revenue decreased by about 11.5% from RMB569.9 million for the first two quarters of 2019 to RMB504.5 million for the same period this year. Total operating expenses decreased by about 18% from RMB959.7 million for the first half of 2019 to RMB787 million for the first half of this year. For the first half hour 2020 as affected by Chinese New Year break, as well as the COVID-19 pandemic, the net loss of - the net loss was RMB612.6 million which was slightly less than the net loss of RMB625.1 million for the first half of 2019. There are two major reasons for the decline in that revenue, cost and operating expenses. Firstly, we have been making strategic adjustments to our adult education business. In the second half of last year, we have focused on improving the operational efficiency of our adult education learning centers. We have gradually closed down or combined underperforming learning centers, which were operating inefficiently, and had limited growth prospects. The number of our adult education centers decreased from 142 as of June 30, 2019, to 130 as of December 2019, and further decreased to 108 as of June 30, 2020, as a result of the adjustment, although student enrollment of adult education dropped by 18% from 62,900 for the first half of 2019 to 51,600 for the first half of 2020. Student enrollment per learning center increased by 7.9% from 443 for the first half of 2019 to 478 for the first half of 2020. As you may know we have been using the study in classroom, plus dual teachers live time broadcasting teaching mode for our adult education programs for years. Since February 2020, we have successfully transferred more than 90% of our adult education students to online lessons where we use the study at home plus dual teachers live broadcasting teaching mode. Due to the decrease in numbers of learning centers as well as stringent cost control measures, cost of revenue of our adult education business decreased by about 32.3% from RMB304.8 million for the first half of 2019 to RMB206.2 million for the first half of this year. Secondly, the COVID-19 pandemic has also adversely affected our K-12 education business. During the period from February to May this year, all of our K-12 education learning centers were temporarily closed. We have successfully transferred more than 60% of our K-12 students from offline classes to online lessons. No revenue has been recognized from the rest of about 40% students who did not attend online lessons. There were two main reasons for the non-transparent. First, some robotic programming classes which require physical facilities and equipment to assist learning cannot be transferred to online lessons and second, children between ages of three to six are not suitable for online lessons. However, during the first half of 2020, our K-12 education students enrollment number reached 105,500 an 80.7% increase over the same period of 2019. For the rest of 2020, we will continue to focus on improving our learning centers operational efficiency, increasing productivity and implementing effective cost and expenses controls. We do not plan to open new learning center in the second half of this year. Returning to profitability is our core. We believe that COVID-19 can be properly controlled and contained in China. Since June 2020, approximately 90% of our learning centers have been reopened and resumed normal business. With that, we felt that our business performance were gradually improved. With that, I will turn the call over to our Operations Senior VP Nancy Sun, who will present to you some details of our operating performance in the first half of this year. Nancy, please.

[Interpreted] Thanks Yongji. Hello everyone. I am going to present to you some information regarding our operation performance in the first half of this year. Although all of our learning centers have been temporarily closed in a long period of time during the first half of this year, due to the outbreak of the COVID-19 pandemic, our student recruitment and education services businesses have not stopped. For our adult professional education business in the first half of this year, the number of new students recruited were 29,000 decreased by about 43.1% as compared to 51% new students recruited during the first half of 2019. As mentioned by our CEO, Yongji before, the decrease in numbers of new students recruited was mainly due to the decrease in numbers of our adult education learning centers and temporarily closure of all university campuses. Our major channels of recruiting adult education new students include SEM based online recruitment platforms, online classified advertisements, word of mouth promotion, university campuses and et cetera. Advertising and marketing expenses of adult education business decreased by about 34.1% in the first half of 2020 as compared to the advertising and marketing expenses incurred in the first half of last year. The average acquisition cost per each new student recruited was about RMB3800 in the first half of this year, increased by about 15.8% as compared to the average acquisition cost per each new students' recruited of about RMB3300 in the same period of last year. The total areas of our adult education learning centers decreased by about 36.4% from 220,000 square meters in the first half of last year to 140,000 square meters in the first half of this year. The decrease of 18% in numbers of students' enrollment was much lower than the decrease in percentage of the total areas of learning centers. During the COVID-19 pandemic outbreak period, the average six months post-course job placement rate was over 90%, which is better than what we expected. Outstanding job placement rate indicates that employers are satisfied with the qualifications of our graduates and can also attract more new students to our adult education programs. Our K-12 education business has also been adversely affected by the COVID-19 pandemic in the first half of 2020. Our ground force promotional activities, which normally contributes about 30% of the total new students recruited have been seized. Moreover, children with lower age group are not very suitable for online lessons. And robotic programming lessons cannot be transferred from offline classes to online lessons. Hence, the new students recruited in the first half of this year are limited to those elders' children who are able to attend the coding and programming lessons. However, the numbers of new students recruited and students' renewal in the first half of this year was 37,000, increased slightly by about 1.6% as compared to 36,400 new students recruited and the student renewal in the same period of last year. Our K-12 education student enrollment numbers reached 105,500, increased by about 18.7% as compared to the student enrollment numbers of 58,400 in the first half of 2019. The renewal rate of students who have completed one year course program was about an 84%. About 52% of the total number of students who have paid the tuition fee in the first half of this year came from student renewal or word of mouth promotional activity. This high percentage indicates that our students and their parents are satisfied with our K-12 education programs and services. Moreover, this could also help to maintain our acquisition costs of new students and student renewal at a comparatively lower level during the pandemic period. Advertising and marketing expenses of K-12 education business decreased by about 4.2% in the first half of this year, as compared to the advertising and marketing expenses incurred in the first half of last year. The average acquisition cost per each new student for student renewal was about RMB1840 in the first half of 2020, decreased by about 5.8% as compared to the average acquisition cost per each new student for student renewal of about 1950 RMB in the same period of last year. We have already implemented certain policies and procedures as staff restructuring, closure or combination of learning centers and et cetera to further control our costs and operating expenses of our K-12 education business. The total number of our K-12 education learning centers increased by 15 from 217 as of December 31, 2019 to 232 as of June 30, 2020. Those new learning centers were at pre-operating stages in the fourth quarter of last year and commenced to operate in 2020. Going forward, our goal is to turn our K-12 education business to be profitable. During the pandemic period, all of our adult education and K-12 education students have been attending and completing their lessons through our online study at home plus dual teachers live broadcasting digital teaching mode. We have fully utilized our accumulated experience on long distance teaching to ensure that our online programs can maintain a high teaching quality of standard. as we can successfully deliver our online education services during the pandemic period the class resumption rates were high. In February, the class resumption rate for adult education excluding the university cooperation projects was 92%. During the period from February to May, this year, the total class resumption rate for coding and robotic programming classes of K-12 education was close to 60%. Class resumption rate for coding programs was even over 80%. By the end of June this year, the class resumption rate of K-12 education was about 84%. We also noted that COVID-19 pandemic has stimulated and accelerated the growth of our K-12 online education business. Our K-12 online Education business revenue increased by about 332% as compared to the revenue number in the same period of last year. K-12 online education revenue represented about 23.9% of the total K-12 education net revenue in the first half of 2020 as compared to only 4.2% in the same period of last year. Our learning centers have been gradually reopened and resumed their classroom lessons and the student recruitment since this June, when the spread of COVID-19 has been properly contained and controlled in most of the areas in China up to the end of July, we have seen that class resumption rates of adult and K-12 education in our learning centers have further increased significantly. Except for some areas that are still affected by the COVID-19, most of our learning centers have resumed their offline classes. This shall further improve our business performance, especially our K-12 education business. We believe that with more and more offline classes are allowed to resume in Beijing and other cities in the mainland of China, our business performance can further be improved in the second half of this year. With that, I would like to turn the call to Kevin, our CFO, who will share with you our 2020 first half financial highlights. Thank you.

Thank you, Nancy. Now, I would like to take you through our first half 2020 financial highlights. Net revenue decreased by 29% to RMB626.8 million in the first half of 2020, from RMB882.6 million in the same period in 2019. The decrease was primarily due to the reduction of class consumption for both adult and K-12 business during the COVID-19 pandemic. For our adult professional education business, the net revenue decreased by 31.1% from RMB657.1 million in the first half of 2019 to RMB452.5 million in the first half of 2024. For K-12 education business, the net revenue decreased by 22.7% from RMB 255.5 million in the first half of 2019 to RMB 174.3 million in the first half of 2020. Cost of revenue decreased by 11.5% to RMB504.5 million in the first half of 2020 from RMB569.9 million in the same period in 2019. The decrease was mainly due to the reduction of cooperation with tutoring service provider as most students are transferred to online studies during the COVID-19 pandemic. Furthermore, during the COVID-19 pandemic, the utility and offices fee declined as our employees worked from home, and the social security fees were exempted due to the preferential policies enacted by the government. Gross profit decreased by 60.9% to RMB122.3 million in the first half of 2020 from RMB312.8 million in the same period in 2019. Gross margin which is equal to gross profit divided by net revenues was 19.5% in the first half of 2020, compared with 35.4% in the same period in 2019. The decline in gross margin was primarily due to the decreased portion of total revenue contributed by our adult education business, which have a higher gross margin than our K-12 education business. Total operating expenses decreased by 18% to RMB787 million in the first half of 2020 from RMB 959.7 million in the same period in 2019. Total non-GAAP operative expenses, which exclude share-based compensation expenses decreased by 18.1% to RMB765.9 million in the first half of 2020 from RMB935.4 million in the same period in 2019. Total share-based compensation expenses allocated to the related operating expenses decreased by 13.3% to RMB21.1 million in the first half of 2020 from RMB24.3 million in the same period in 2019. Selling and marketing expenses decreased by 23% to RMB443.8 million in the first half of 2010 from RMB576 million in the same period in 2019. The decline was mainly due to a decrease in marketing activities and promotional spending. In addition, we also saw a decrease in personnel related expenses resulting from a low headcount. Social security fees were exempted thanks to the preferential policies enacted by the government. General and administrative expenses decreased by 0.8% to RMB292.2 million in the first half of 2020 from RMB294.7 million in the same period in 2019. The decline was mainly due to a decrease in personnel related expenses resulting from a low headcount. Research and development expenses decreased by 42.7% to RMB51 million in the first half of 2020 from RMB89 million in the same period in 2019. The decline was mainly due to a decrease in personnel related expenses resulting from a lower headcount. Operating loss was RMB664.7 million for the first half of 2020, compared to operating loss of RMB646.9 million in the same period in 2019. Non-GAAP operating loss, which excluded share-based compensation expenses was RMB643.4 million compared to non-GAAP operating loss of RMB622 .2 million in the same period in 2019. The company recorded an income tax benefit of RMB52.2 million in the first half of 2020 compared to RMB11.7 million in income tax benefit in the same period in 2019. The tax benefit was attributable to the different tax rates in other jurisdiction, the preferential income tax rate and judged by our subsidiary as well as the recognition of valuation allowance for deferred income tax excess of certain subsidiaries due to the cumulative loss position of adult education business in the comparable period. As a result of the foregoing, our that loss was RMB612.6 million in the first half of 2020 compared to a net loss of RMB625.1 million in the same period in 2019. Non-GAAP net loss, which excluded share-based compensation expenses was RMB591.3 million compared to a non-GAAP net loss of RMB600.4 million in the same period in 2019. Loss per ADS was RMB11.29 in the first half of 2020. Non-GAAP loss per ADS, which excluded share-based compensation expenses was RMB10.89. Cash and cash equivalents and time deposits, including current and non-current decreased by 33.2% from RMB621.2 million as of December 31, 2019 to RMB414.9 million as of June 30, 2020. The decrease in cash and cash equivalents and time deposits including current and non-current was mainly due to net cash of RMB183.6 million used in operating activities, which mainly composed of net loss of RMB 612.6 million incurred in the first half of 2020 and was partially offset by the increase in total deferred revenue of RMB402 million. Capital expenditure for the first half of 2020 was RMB43.8 million. In terms of financial guidance, based on our current operation, total net revenue for the third quarter of 2020 are expected to be between RMB5 70 million to RMB600 million, after taking into consideration the likely continuous impact of the COVID-19. The guidance is based on the current market conditions and reflects the company's current and preliminary estimates of market and operating conditions, particularly as to the potential impact of COVID-19 on the economy in China and elsewhere in the world, which are subject to change. This concludes my financial highlights section. Operator, we are ready for questions.

Certainly. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] We have the first question from the line of Wei Zhu. Please go ahead.

[Interpreted] So the question was about the cost and expenditures and the cost of revenues. From your financials we know - from the statements we know that we have been closing some adult education centers. And could you tell us what is the cost for closing those centers? And are there severance package or declaration costs involved in those respect? And my second question is about classroom assumption, especially for a kid education business. Could you share with us about the situation of that? Thank you.

Yeah, let me answer the first part of the question first, okay. The first one is relating to the cost and expenses predictor. Okay. As I mentioned, it might be marked okay. This year we successfully cut down our costs of revenue, and also our operating expenses, especially our selling and marketing expenses, and also we mentioned that we closed several adult learning centers. Yes correct. If we close down or shut down all those adult learning centers, we will incur some of the expenses in relation to the disposal of all those leasehold improvement, renovation costs and also equipment and also all those office equipments. All these costs are already included in our G&A expenses. This is why I think in the G&A expenses, you will see the decline in G&A expenses I think is very minimal, I think in the first half of this year because we charge somehow this type of learning center closed expenses in the G&A expenses. So I need to break down - I don't have to break down I think the detail - I think exact number of these type of expenses included in the G&A expenses. Maybe I think we can have a follow up call. I can give you some color on this, but I think you are correct. I think this type of cluster experiments is one-off expenses. Yeah. Okay for the first second part of the question I will ask Nancy to answer the question. Yeah.

[Interpreted] Thank you very much for your question. I am very glad to have this opportunity to answer some of your questions. Previously, our CFO has just answered some of your - the first question, which is about the cost of closing centers for adult education and I will now add up some data regarding that question. First of all, in the first half of this year, we have been perfecting our call centers and we have closed some centers both for adult education and for kid education. In total we have been closing 22 centers in terms of 2C center we have closed 18 of them for a university partnership, which has 2B we have closed for centers. So I want to mention that the 22 centers that we closed are all adult education centers. In the meantime, we also closed 11 kid learning centers. And let me mention in terms of the detailed costs and expenditures closing centers, our finance guys will give you a detailed data and depends on different regions and different policies the cost of closing and expenditure for closing centers are also different. For adults, it takes about 500,000 to 800,000 to close a center. For kids, it takes about RMB500,000 to close a center. So for those costs, those costs involve severance package to those employees if we close the centers, but that only takes only a small amount and some of the cost comes from the default - the penalty for the default of contract of rent. And also there are some students in those centers that cannot transfer to online or they cannot go online or they cannot be transferred those students we have to refund the tuition to them. Let me answer your second question about the resumption for the kid education. As we all know Tarena is very experienced in terms of remote education, live broadcasting, this is very disruptive force to the education sectors. When it comes to our adult business, let me first tell you that there are several kinds of resumption to course. One is we transfer some of the offline students into online and the resumption rate for adult education in February - until February is 92% raise. So when it comes to adult business, just like our CEO Yongji has said, up until the late June or early July we have already transferred most of our own offline adult business into online. When it comes to kid education business because of the COVID-19 pandemic those who took the most hit are those young kids who are six years old and below and those course - those programming course or robotic course, however, from February to May this year, we have reached 60% of resumption rate for our coding or programming and the robotics course. So until 31 of June this year, we have reached 84% for our kid education resumption rate and our programming course have reached a 90% resumption rate - more than 90% retention rate. Lastly, I want to mention that until July of this year, more than 90% of our learning centers resumed our offline delivery locally. So thank you very much. Hopefully I answered your question.

Thank you. We have our next question from the line of Mr. Chen. Please go ahead.

[Interpreted] Hello. Yeah. So, first of all, as a small shareholders, I want to say that our CFO are very experienced and we are very glad to see such a very experienced veteran to be part of Tarena team and management. We're also very glad to see CEO Yongji and our SVP, Nancy to be on the team. I have a small suggestion for you. We hope that in the future, we can open more channel like this, a channel of communication like this between management of Tarena and investor of Tarena. Because Tarena as an IPO company, our last com call was two years ago. So we need more of this. My first question is about kid business. Until July to August this year, we want to understand that - we've heard that the kid programming course is recovering in China's education market. So can the management share with us what is the situation? What is the recovering situation for kid coding course? And my second question is that can - what is the model for kid profitability model? Are there expectations from the management of Tarena in terms of the profitability of kid business? My third question is about the - also about the kid business. We know that kid business in China or kid education business in China is a very good way for us to earn profit. However, it seems that only rely on the kid business themselves is very slow. So are there financing plans from the management of Tarena to boost kid business? My fourth question is about University partnership. It seems to the investors that this is not so transparent. So could the management of Tarena share with us a model of profitability for university partnership project? Can you share with us for the investors? My next question is about the online business. We are still a little bit confusing about the online business model. And we know that Tarena management have shared with us in the past, but could you please elaborate more on the online business going forward? Do you have further plan for online business, especially for kid education? My last question is about are there plans to carry out road shows in the future? Thank you.

Okay, thank you for your questions. I think you're supposed to limit to two questions, okay. Okay, I will try to answer three questions and then I'll give the remaining questions to Yongji and also Nancy. First of all, communication with investors, to be honest, okay, I have to say we love. We really love to communicate with investors. This is exactly our job to communicate as a CFO, as Yongji, CEO and Nancy, SVP, but in think in the past two years, I think you may have already noticed that we - there's a lot of things happened to in Tarena. We got to be usual - we issue our financial statements and also, we got to meet all the deadlines and also according to rules and regulations, we are not allowed. We are not allowed to communicate or - and the announcement or disclosure with our financial numbers. So I think - please forgive us. I think love to communicate, but I think we got to comply with all the rules and regulations issued by SEC and NASDAQ. So I think going forward, starting from now on we will compile all the requirements and also the compiling rules issued by SEC and NASDAQ. And also, I think NASDAQ already confirmed - issued a letter as that listing status is already confirmed. So after this call and also after the issuance of the quarterly results, we can actively communicate with you and also other investors. So we are happy with this. This is number one. Number two regarding our financial plan, I think I can tell you up to now we still haven't had any financial plan related to our K-12 education or use our K-12 education assets to - as a tool for financing. If we have any financial plan, we will make the announcement immediately, so up to now confirm - we have no such financial plan. The last question is I think we can do a road show. Yes. We are planning to organize some road show especially in China or US, to meet with our investor and we love to communicate. Okay, so after that Nancy, the remaining questions. Yeah.

So first of all, let me say that I want to thank you very much for all those questions you have asked. It seems that you have paid a lot of attention to our business as an investor. Thank you very much for that. So I will answer some of your questions related to Investor Relations and so on will be answered by Yongji and Kelvin. So in terms of the first question, I can tell you that I'm very optimistic and happy because indeed, the kid education business is recovering. Just like I shared with you before, until July, more than 90% of our offline kid centers have been recovered. And in the meantime, we're focusing on cutting the loss of those centers in July. From an operation point of view, we have reached more than 100 million cash revenues and incurred revenues. And we have - and kid center profitability is one of the most important part of our group profitability. Right now our focus is to cut loss or reduce loss. And when it comes to our overall business, our adult education business is rather stable because of the seasonal issues and also COVID-19 happened in the first half of this year. Our adult revenue is decreasing, but I believe with all the good conditions accumulated our adult revenue will cut a lot of loss in the second half of this year. Also I want to share with you some data about our kids business. For our one-year existing students, the tuition fee renewal rate is 84%, like I've mentioned before, and our word of mouth enrollment rate is 22% in that regard. Although our ground promotion was taken a hit in the first half of this year due to COVID-19, and other reasons, we're using existing message to boost our enrollment and the rate is - the enrollment rate is 30%. And when it comes to our kids business, first of all, I want to say that our kid business promotion capacity is very large. And also our course content was highly recognized by our students and also by their parents. So that is why we have very high renewal rates and that is also why our per-student cost for acquisition is very low. And just like they shared with you before, our cost for revenues per student is 1850, which is 5% lower than the same period of last year about - last year nice 1950. So our second half of this year, our main focus for kids business is to enhance the efficiency of operations, enhance productivity and profitability. And also I want to probably share with you some of our kids online business, we call it [indiscernible] here. And we are proud to share with you that although COVID-19 pandemic really takes a hit on our offline business, but it really provides a very huge opportunity to our online business. For example, our kid online business enrollments in the first half of 2020, we reached 11,397, which is a 359% growth. And our course consumption revenue increased by 340%, year-on-year. And we have already reached course profitability in the first half of this year in this business. Another good data that I want to share with you about our online business or kids on business is that our refund rate in this business is only 4.9%. And lastly, I want to share with you a little bit about our university partnership business. We all know that this business started from 2007. And the demand for our course is changing because the course of university is changing regarding computing and programming. And we have collaborated with companies intensively to provide opportunity for our students in order for them to find a better career in the future. When it comes to university partnership, we divided into two channels of cooperation. The first one is 2B, the second one 2C and when it comes to 2B, we collaborate with companies and we set up majors in the university together with the company. Another one is 2B-2C, which is we provide students with a major that can prepare them for future careers. It starts from freshman year of the students. And the third one when it comes to university partnership is AI and the next one is the artificial intelligence major also meeting the demand of the society. So that is why, whenever we give you some financials about our university partnership, we're talking about hands on practice and also the major that we set up with the corporation. So although that in 2020 COVID-19 really take a hit on our university partnership business, but we hope that we can close some loss and we can recover in the second half of this year.

[Interpreted] So I want to say that we want - we thank all the investors for your consideration, attention and support to our group. Although today time - today the time is quite limited, however, if any investors want to contact our company, please feel free to do that. We welcome any communication or request of communication in any form. If you have those requests, please contact Amanda which is our Investor Relations Director.

Can we move to the next question sir? Excuse me sir, this is the operator can we move to the next question? Hello, this is the operator can you hear me? We have next question. Yeah. Can we move to the next question?

Yes, please.

Yeah, the next question comes from the line of Lei Yang. Please go ahead.

[Interpreted] My question is about the Q3 cash flow. From your financial statements we know the revenue situation. So what is your expectation about the cash flow in Q3? Could you share - and cash revenue in Q3, could you share with us about that? And my second question is that - about the kids business like Nancy has shared with us that the group has no further plan to open new center for kid education business. So we want to understand when can we reach overall profitability?

Okay, first of all I think regarding your first question is the cash flow forecast and also the cash revenues. I've got to say that okay according to our disclosure policy we are not going to disclose any cash revenue or cash flow forecast because in my financial numbers all the numbers are prepared according to US GAAP, which is core business revenue. So okay, I'm not going to give any color on the cash revenue. So that's why - say that in my remark in the revenue guidance okay, we expect - we estimate our Q3 revenue will be between 570 million to 600 million. Based on that forecast, I think we are still good on a cash position. We still have sufficient cash to support our business I think in the foreseeable future. That's why according to the discussion with auditor we don't have any going concern issue at this moment. So I would say I think we are still healthy I think on - in terms of cash position. So regarding your second question I think our estimation on when will we get our kid business to be profitable? So I think as what we mentioned in our remark, okay, one of our major objectives I think, got the strength to meet our K-12 education business to profitable as soon as possible. So I think it depends on a lot of factors. It depends on the COVID-19 pandemic situation and also it depends on the market situation I think in the kid education business, but I think as what Nancy said, we are quite optimistic with the kid education market in China. So we are trying to take a more conservative step I think on developing our kid education business. Well, we can do this and we're trying to make it profitable ASAP.

[Interpreted] So thank you for your question. Just like I mentioned before, according to our kid business team, we have already reached a very good status in terms of our incurred revenue and cash revenue. We expect that we can make new breakthroughs in August, meaning that we can reach course consumption profitability. And from an operation point of view, our goal is to make our kid education business develop in a healthy fashion, meaning that lowering the cost and reach profitability point as soon as possible. So our goal for kid business operation in the second half of this year is first, increase our course consumption revenue. Secondly, which is also very important is to better manage our cost. So worry not for COVID-19, we originally planned to see the profitability points for kids business this year. Lastly, I want to say that for Tarena kid education business, it is still developing and expanding. Basically, we divide our learning centers for kids businesses into three categories; first one is the new centers; second sub-new centers; third old or existing centers. So we still have rather away - we still have some new centers right now and we're trying to cut loss and reach profitability in the foreseeable future. Thank you.

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation today. Thank you.