Good day everyone, and welcome to the First Quarter 2013 Earnings Conference for Xueda Education Group.
[Operator Instructions] This conference is being recorded.
I will now turn the call over to Mr. Ross Warner, the company's IR Director. Thank you. Please go ahead, Mr. Warner.
Hello everyone. Welcome to Xueda Education Group's first quarter 2014 earnings call. Our earnings release crossed the wire a few hours ago and is available on newswire services and our website. On our website you'll also find a PowerPoint presentation to follow along with today's call.
Before starting, I will remind you that all statements included in this conference call other than statements or characterizations of historical facts are forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future results and are subject to risks and uncertainties, and as such our results may be materially different from the views expressed here today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. Xueda does not undertake any obligation to update any forward-looking statements except as required under applicable law.
In today's call we will discuss various non-GAAP financial measures as defined by the SEC's Regulation G. A reconciliation of the differences between GAAP and the non-GAAP financial matters can be found in our earnings release.
Speaking today will be Mr. Xin Jin, Xueda's Co-Founder and Chief Executive Officer, and Ms. Christine Lu-Wong, the company's Chief Financial Officer.
I will now turn the call over to our CEO, Mr. Xin Jin.
Good morning and good evening to everyone. Thank you for joining today's earnings call.
As investors know, our clear goal for 2014 is to deliver healthy growth and sustained profitability. I'm pleased to report, in the first quarter, the initiatives we have set in place to deliver on this goal made reasonable progress and we are on track to meeting our goal. To support healthy growth and sustained profitability, we are focusing on two fronts: implementing our transformative Smart Tutoring System and improving student retention as a key component in growing our student base.
First, our Smart Tutoring System, on March 20 we led the industry with the nationwide launch of our cloud-based Smart Tutoring System which we have branded eXueda. We believe this tutoring platform is the most advanced technology in the domestic marketplace and provides unrivaled benefits to students, parents and instructors.
By way of quick review, eXueda allows students to study anywhere any time using any internet-enabled mobile devices. Students receive instant feedback and have access to hundreds of thousands of support exercises, problem sets and instructional mini-videos, all correlated to granular knowledge points within the curriculum.
eXueda allows instructors to see real-time homework progress and tailor each child's tutoring sessions to target precise needs and make optimal personal progress. Instructors can best-of-the-best instructional plans, resources, aids and notes for each curriculum knowledge point, all uploaded by seasoned Xueda instructors.
eXueda allows parents full transparency in their child tutoring process. The eXueda smartphone app allows parents to check homework assignments, scores, communicate with the instructors and study counselors as to their scheduled sessions and check tuition.
eXueda also has wide portion available for use by general public.
eXueda is critical in helping us deliver healthy growth and sustained profitability, which is more than online learning or blended learning. It's an entire platform empowering students, parents and instructors to create a superior tutoring experience. We are confident that it will become our differentiator in the market and a magnet for students seeking the best tutoring results.
eXueda is deeply changing the way we operate the business. If you turn to Slide 4, I'll highlight our development stats and near-term targets for eXueda.
As of today, 34% of our instructors use eXueda mainly to prepare assignments and deliver lessons and about 72% use eXueda to assign homework. We target to increase these percentages to 80% by end of June.
For students, currently above 40% of our students are using eXueda in the learning centers and to complete homework assignments. We target raise this to 50% at the end of June. Total study exercises completed by students have risen significantly, from 200,000 in March to 400,000 in April, and by May 13, the number has already reached 150,000.
In content development, we have expanded to over 500,000 questions, exercises and problem sets, and nearly 18,000 instructional mini-videos in our knowledge point system. We aim to grow our exercise bank to over 1 million by end of the year.
In the general public usage category, we now have 155,000 registered users and are adding well more than 2,000 users every day. We currently have 50,000 daily active users, and following the full-scale launch of our online promotion later this month, anticipate hitting 50,000 daily active user by end of June and 1 million registered users by end of the year. That's a very exciting number.
In terms of the general public students, eXueda O2O, that is online-to-offline recruitment potential is clearly significant. These students gain familiarity with Xueda while at the same time Xueda captures a study profile for each student through his or her online work. Armed with these profiles, Xueda sales consultants are in an ideal position to convert targeted high-potential leads into paying, learning center students. The potential for O2O student recruitment is vast. We have not begun to tap into the O2O channel, but plan to pilot efforts to extend efforts in the second half of the year.
Our second area of focus is student retention as a means to grow our student base. This focus has many parts. Two of these are incentivizing instructors and study counselors for student retention, and expanding our service offerings to give students more choices.
Starting in January, we began incentivizing our instructors and study counselors with student retention KPIs. Instructors and counselors have the closest contact and strongest influence with students.
Small group tutoring is pivotal in expanding our service offering and retaining students. Launched fourth quarter 2013, small group tutoring is growing much faster than anticipated. In Q1, student headcount grew 103% sequentially to approximately 15,000 students from roughly 7,400 students in the fourth quarter of 2013.
We have also shifted our sales focus. Our strategy now centers on student volume to gain as many students as possible to sign up. We believe once students are in the door, experience our superior quality and see their results, we are confident that with a broader range of services we can keep them longer and sell them more services.
With our initiatives in place, we believe we can increase our total student enrollment by 20% to 30% year over year by end of June. This total student enrollment phase will give us a firm foundation for success in the second half of the year. We are already seeing strong results with our Q1 year-over-year results. New student sign-ups increased 9.3% as student retention rate increased 3.9%.
In closing, we are beginning to see results and traction for our initiatives. eXueda's impact is far reaching and its recruitment potential and ability to have retained students will become more evident in Q3. Our KPIs incentivizing retention are also producing results. These initiatives are large and will take time to fully develop. But we can see that we are working and we are on track to deliver a strong second half of the year, and our goal of healthy growth and sustained profitability in 2014.
I'll now turn the call over to Christine.
Thank you, Xin.
Welcome to everyone on the call. I'd like to now share with investors highlights of our first quarter 2014 financial results. All financial figures I will discuss today are in U.S. dollars, unless otherwise noted.
First, please turn to Slide 6. Total net revenues for the first quarter 2014 increased 1.6% year over year to $85.3 million from $83.9 million. Our average hourly course fee, or ASP for one-on-one, for the first quarter increased 8.3% year over year to $32.2 from $29.7. Our blended ASP for one-on-one tutoring and small group tutoring was $30.50 compared to $29.30 for the first quarter of 2013.
Now please turn to cost of revenues and gross margin details on Slide 7. Cost of revenues for the first quarter 2014 increased 1.6% year over year to $61.2 million from $60.2 million. Our gross profit for the first quarter 2014 increased 1.6% year over year to $24.1 million from $23.7 million. Gross margin for the first quarter was 28.3%, flat from the year-ago period.
I'm particularly pleased that we were able to contain costs and margin pressure during this period of learning center expansion. If we exclude the impact of the new learning center openings in the quarter, our gross margin was 29%. We were also able to show increases in labor and space efficiency metrics during this period, which is a testament to the solid practices and process established in 2013.
Let's look a little further into our productivity metrics. Please turn to Slide 8.
In the first quarter we opened 24 new learning centers and closed 2, for a net gain of 22. This compares to first quarter 2013 during which we opened 8 and close 2 learning centers for a net gain of 6.
We are opening more learning centers now and estimates by the end of Q2 we will have roughly net 40-plus new learning centers opened. For the first quarter we have on average approximately 282,000 square meters of learning center space, compared to approximately 292,000 square meters of learning center space for the year-ago period. For the first quarter we had on average approximately 8,400 full-time instructors, down from approximately 9,000 full-time instructors for the year-ago period.
For the first quarter, net revenues per full-time instructor was $8,260, compared to $7,930 for the year-ago period. For the first quarter, net revenues per square meter of learning center were $300, compared to $290 for the year-ago period.
Turning to Slide 9, non-GAAP general and administrative expenses were $12.5 million for the first quarter, compared to $12.4 million for the same period in 2013. As a percent of total net revenue for the first quarter, year-over-year non-GAAP general and administrative expenses was 14.7%, unchanged from the same period of 2013.
Non-GAAP sales and marketing expenses were $8.5 million for the fourth quarter, compared to, for the first quarter -- for the first quarter, compared $8.7 million for the same period in 2013. The percentage of non-GAAP sales and marketing expenses of total net revenues for the first quarter was 9.9%, slightly down from 10.3% for the first quarter 2013.
Non-GAAP operating income for the first quarter 2014 was $3.1 million, compared to $2.7 million for the year-ago quarter.
GAAP diluted EPS for the first quarter of 2014 was $0.02 compared to $0.03 for the first quarter 2013. Excluding foreign exchange loss of $3 million and income of $0.4 million for the first quarter of 2014 and 2013, respectively, GAAP diluted net gain attributable to Xueda Education Group per ADS was $0.06, compared to net gain of $0.03.
Non-GAAP diluted EPS for the first quarter of 2014 was $0.06, compared to $0.05 for the year-ago quarter. Excluding foreign exchange loss of $3 million and income of $0.4 million for the first quarter of 2014 and 2013, respectively, the non-GAAP diluted EPS was $0.10, compared to net gain of $0.04 a year ago.
We continue to have a healthy cash position. As of March 31, 2014, cash, cash equivalents, short-term investments totaled $220.5 million or $3.30 per ADS net of dividend payable in an amount of $9.9 million, compared to $246.7 million or $3.71 per ADS a year ago. Please note that there was a $29.6 million company buyback program completed in March this year.
Next, I'd like to bring investor up to date on our learning center growth plan. Please view Slide 10.
Our plan for 2014 is to open net 40 to 50 learning centers, which represents approximately 10% of learning center base at the end of 2013. We will have essentially met this goal by end of 2Q with approximately 40 net new learning centers opened. We will remain opportunistic to open additional centers in certain geographies as well as new markets.
In closing, we are confident that we are well-positioned to deliver our growth targets for the year. Our confidence is fueled by the following: growing student headcount by 20% to 30% year over year by end of June; improving student retention rate; and estimated roughly 40-plus new learning centers opened by the end of Q2, growing new student headcount, and providing additional delivery points for our services.
And now financial guidance on Slide 12. For the second quarter of 2014, we currently forecast net revenues to be at least $120.4, an increase of at least 5% from Q2 last year. We estimate the non-GAAP diluted EPS to be at least $0.30, representing a year-over-year growth of at least 7.1% based on the exchange rate of U.S. dollar $1 equal to RMB6.23. In our estimate, we assumed an effective income tax rate of 20% and weighted average ADS of 67.6 million.
For the full year 2014, we estimate net revenues to be at least $394 million, an increase of at least 13.5% from the previous year. For the full year 2014, we estimate non-GAAP diluted EPS to be at least $0.42, compared to $0.32 from the previous year, representing a year-over-year EPS growth of at least 31%. This estimate assumes an effective tax rate of 20% and weighted average diluted share of $67.9 million.
Please note that our guidance is based on the current market conditions in respect to company's current and preliminary estimate of market and operating conditions and customer demand which are all subject to change.
This concludes our prepared remarks. Operator, please open the call up now for questions.
Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator Instructions)
And the first question comes from the line of Fei Fang of Goldman Sachs. Please ask your question.
Fei Fang - Goldman Sachs
Good morning, Xin and Christine. Thanks for the opportunity. I have a couple of questions here on the enrollment and ASP trend. So in the first quarter your new student sign-up grew by about 9%, but the number of students serviced seemed to have declined year on year. Can you talk about the trend? And also, are there any particular seasonality issues that we need to be aware of? Thanks.
Okay. Yes, good morning, Fei. Thank you for joining the call.
For our -- this call we had done -- the purpose we had observed a few metrics different from before. One is that the -- because of the mix of the small group and the one-on-one services that we had expanded. So in terms of the students served, I think right now we have a mixture of the one-on-one and the small group. And in terms of ASP, that's the same situation.
So let's go by the ASP first. The ASP we had also break out by one-on-one and by small groups. In one-on-one we continue to see a strong ASP year-on-year trend. So we saw the 8.3% year-on-year on the one-on-one increase, even with the blended with the small group, which has typically a lower ASP, but we still have an increase on the ASP. So that was the ASP side.
In terms of the students served, from what I see, we actually also have quite significant improvement for the number of students served. So, Q1 last year, we have roughly 83,000, which is 82,900. So that was the last year's students served. And right now we are seeing 92,410. So in that sense we also saw that the students served have increased quite significantly as well. However, we don't think it's an apple-to-apple comparison as we're going forward. So in short, we still have higher students served. But going forward, we see that the student spending, like per student spending or our revenue per teacher or revenue per square meter, these are more apple-to-apple going forward. I hope that answers your question.
Fei Fang - Goldman Sachs
Yes, that helps. Thanks a lot. Very quickly a follow-up on that, on the ASP trend, you grew by about 8% in U.S. dollar terms. I'm wondering if the recent RMB appreciation -- depreciation against the U.S. dollars, will that have an impact on your full-year ASP growth?
Okay. So in terms of second -- in terms of first quarter 2014, in U.S. dollar term, ASP year-on-year growth is 8.3%; in RMB terms, it's 7.4%. So, still a meaningful ASP increases in our first quarter in RMB.
Going forward, in terms of our exchange rates for the rest of the year, I actually think that Q1 is the most volatile time period for the exchange. Going forward, we see that the exchange rate stabilize around 6.23 this time. So I think the ASP continuously in the U.S. dollar terms should be quite -- still quite meaningful.
However, I don't want to use the 8.3% as a benchmark for this year because there are seasonality in terms of the season we raise price. We had estimated around 4% to 5% as a blended -- as for blended one-on-one and small group class, the ASP trend for the full year might be more a practical trend to use for your model.
Fei Fang - Goldman Sachs
That's very helpful. Thank you.
Sure. Thanks, Fei.
Thank you. And the next question comes from the line of Tian Hou of T.H. Capital. Please ask your question.
Tian Hou - T.H. Capital
Good morning. Yes, sure. I have several questions. One is, would you please give us the, how to say, refresher about your full-year guidance in terms of the learning center open. So one thing, you know I agree with the previous, the analyst, the question, so we do see the enrollment trending down, which is something worry us, and even though your learning center opened more, and, however, the enrollment didn't really go up accordingly. So what is the plan going forward, how many learning centers do you think you're going to open this year? And also those learning centers, how much enrollment could the new learning center contribute? So that's mainly the number one question.
Number two is related to your small group class. So probably the first time you disclosed that, so we would like to have more color on that, such as what's the revenue -- what's the revenue contribution from small class? In the past quarter and going forward, how fast can this group to continue to grow? And probably toward the end of the year, what percent of revenue this business will contribute? So I stop here.
Okay. Thanks a lot, Tian. Thank you for your time joining the call.
First of all, I'll take the learning center opening, and then also in terms of the small group contributing to our trend. So let me take a shot on that. And then Xin actually would talk more in terms of how we strategize, as he had mentioned in the script, actually we have to look at the whole strategy as a whole that fits in the enrollment and the learning center opening, as well as the small group strategy, actually that -- as a whole plan for our strategy. So let me start with the detail first, then Xin can jump to the higher-level picture.
So in terms of learning center opening, I am proud to announce that, in the year 2013 we had really focused on the profitability and then we expect the utilization rate of each center when it comes to lease expiry, so we have done a fantastic job in terms of monitoring the opening speed. So last year, we had slowed down on the learning center opening, which give us the base for this year's expansion on learning center.
So in short, Q1 we had opened 22 net, which is 24 opened and 2 closed. And then by end of Q2, we shall see approximately 40, and I can say for sure now because we are already on May 14, that would be delivered by end of Q2, roughly 40-plus learning centers. That for sure will be baked in.
So in terms of the enrollment and related to opening, it's not a one-to-one correlation in the timing of Q1 because there's a timing lag. So for these 22 learning centers we opened, plus the 20-plus we opened in 2013, the Q4 of 2013, and Q1, so it has not yet meaningfully contributing the topline or even the cash collection right away in the quarter they opened. But we will see those in fact will come in as we are welcoming our peak season very soon in May and June.
So I am also confident that these new centers will be setting the pace for our initiative for product opening, product expansion. So that's why we are forecasting or foreseeing a strong second half of revenue, which was ramping up on the base of new center openings in Q4 last year, in Q1 this year, and continue in Q2 this year.
And I have to say that this is a very strong signal that Xueda can execute well on the efficiency model where a lot of competitors they are not opening centers at this point, whereas they are closing. So that was a very differentiating point for Xueda.
And in terms of the small group contributing to the total revenue, right now, we are -- exceeded our plan. So as you see, the small group growth season is now Q1, given Q2 is not a high season, but small group peak season is in Q3. You can see in the industry trend, Q3 is the high season. However, we had not planned that Q1 will grow as planned. But initially we had estimate the full year small group will be around 4% or 5% of the total composition of revenue by the full year which is the Q3 strong season. However, when we finished Q1 right now, we are already well exceeding our plan. We are seeing that around 4% of our small group already contributing to our total revenue. And this is a slow season.
So I'm -- we're seeing that by the end of this year, we shall exceed our initial 4% to 5%. Instead, we are seeing more like a 7% to 8% of small group. So at this point, this is what we are seeing the trending.
In terms of overall how the enrollment -- why we are not seeing it peaking up right away now and where we are in for aiming the rest of the year, maybe, Jin Zong (Mr. Jin), are you willing to share a little bit our whole plan in terms of our enrollment plan?
So in short, let me summarize Jin Zong's key points. First of all, in terms of the enrollment plan and the whole learning center opening plan as well as the small group plan has well fit into our two key initiatives mentions that we are right now focused in, and we are seeing results already for these two key initiatives.
The first one is about the eXueda. eXueda, which is the Smart Tutoring System we had announced in our February earnings call, and then in March 20th, we had launched the eXueda Smart Tutoring System by showing case the whole system. So what we are using eXueda is using it as the backbone of our whole strategy change. And that eXueda platform has deeply, already deeply, changed how we delivered our offline project.
So for example, data point wise, is that right now 70% of teachers had already used the Smart Tutoring System to do their teaching, and then 40% of students had used the eXueda platform to complete their assignments. So the eXueda platform has a very deep change in how we are doing our teaching model. And then that was how we are seeing Xueda can be a differentiator -- the eXueda can be a differentiator for the market in our industry.
The reason why we have seen it's a very unique platform is that right now we had not yet put the platform onto our enrollment or our new sign-up strategy. Right now, we are still using the platform on improving our service platform and our service quality. However, starting in Q3, we will start to put the focus in using the Smart Tutoring System in our enrollment, new sign-ups.
Right now for the registered user, for the ones outside of Xueda students, right now we are seeing that it's about 15% the potential students using our system. We have now very high visibility in terms of what they do on our online platform. So our consultant actually had not yet started the process. But once we have start -- once we have the data points, we were able to use their assignments completed on our platform, we can pinpoint and then identify where the area needs to be improved, then we have a very high efficiency turnover rate -- I mean conversion rate when we outreach to this potential customer.
So this we believe will be -- has yet to see its strong potential point for our improvement or our progress in our enrollment. So that's, in short, we had done quite well in deliver the eXueda platform, in serving our existing student and rollout in our education quality and yes, there are more to come in terms of Q3.
In terms of the student retention, in our industry, there is strong seasonality quarter by quarter, especially for one-on-one tutoring services. Q2 is the peak season, because there's a strong demand for “Gao Kao” and “Zhong Kao” in Q2. However, once we complete Q2, the “Zhong Kao” and “Gao Kao” students might leave the one-on-one platform. They do have the demand for tutoring services, yet they might not need the one-on-one, which is a premium service. So they are seeking for alternative method or alternative platform for their tutoring needs.
So what we are working for these past few months is focus to retain -- to retain the June students, to stay behind eXueda by providing our Smart Tutoring System by our product line expansion such as small groups. And then we are expanding our student base by end of June by retaining the students we already have in our house. And then by keeping them within our system, increasing by 20% to 30%, once we have the space, now Q3 and Q4 will have a competitive profile than last year, than our previous year.
So I think in short, the transformation we have talked about in our group, which is embracing our platform of eXueda, the strategy will be worked out step by step. This is our plan. And I hope that, your question, this will give you some color, Tian.
Tian Hou - T.H. Capital
That's very helpful. Thanks so much.
Thank you. And the next question comes from the line of Tzewee Chen of Manresa Capital. Please ask your question.
Tzewee Chen – Manresa Capital
Hey. Thanks for taking my question, for the opportunity to ask a question. I have two questions. The first question is that, just a little bit of understanding. When you say new student sign-up increased 9.3%, just a clarification, those are new paying students, right? So they do not include like people who signed up for free or something?
No. You're correct. New signed up are paid students, that they had signed contracts with Xueda.
Tzewee Chen – Manresa Capital
Okay, great, great. So that was -- yes, just -- it's more of a clarification.
The other question is 9.3% increase in number of student sign-ups and the ASP went up by 8.3%. So -- but your revenues only went up by 1.6%. Can you give a little bit more color around why ASP went up, number of students went up, but revenues did not go up as much as maybe 18% or something, like 16%? So that's my first question.
Thank you. Yes, that's great. I actually think this is a very good question, it makes sense from the service that if your ASP is rising and then if your new signed-up are rising, how come your revenue are not rising. So in short, I think the one-on-one model in the past, our revenue drivers are in the following. One is the course hour delivery, one is on the ASP. And now we actually had -- I think in our script, we had -- basically was saying that in the new strategy or the transformation, we had now shift in terms of focusing on the course hour delivery or focused on the dollar per student bring in. Now we are looking in terms of the extending our student base to a wider base. For example, we are talking about retaining our students from leaving to the small group provider after “Gao Kao” and “Zhong Kao”. That is the base we are looking at.
So how we are modeling our new revenue model now is using the student headcount or the effective student count and then multiple by the ASP. Basically it's the people and also how many -- it's the people and the ASP.
So in the formula, we are right now seeing the 1.6% growth only. ASP has gone up. However, our people count actually had not -- let me see. Our people -- the people we had retained, it's only 4%, it's only 3.9%, student retained. And then the new signed up pipeline, basically they had not delivered -- they will not deliver the revenue right away. So the 4%, the 3.9% student retained right now we have would be the base for our student count. So, hope that gives you some color.
Tzewee Chen – Manresa Capital
Yes, that's great color. Just one to quickly understand a comment you made, so you said that the student retention is 4%. That means that -- I just want to -- make sure I'm understanding it correct. You know, if you sign up 100 new students, you keep the four students at the end of the year? By the time this time of the year next year -- by this same time next year, you expect on average four students to be left from the 100 that you signed up this year? Is that what you mean?
No. Let me reframe that. In terms of when we say the student retained number year-on-year growth by 4%, it's like this year's 46,000 students we retained in Q1, compared to last year 44,000 students we had retained last year. So that represents the 4% retained.
So, however, in terms of the percent where you're looking at, is how many -- out of 100 students, how many stay behind. The figure would be 77%. So out of 100 students, they had remained end of the year in 2013, 77 people stay.
So the reason why our revenue are slow, because we had only 77 people from the 100 people stay. So that's why, in a way, if we can increase, which is our strategy or our focus right now, if we could increase the people stay, that will already help on the overall picture. That's what we are working on right now.
Tzewee Chen – Manresa Capital
I see. Well, thanks for the color, it's very helpful. Do I have time for one more question or should I go back to the queue? I have time for one more question?
Yes, yes, please.
Tzewee Chen – Manresa Capital
Okay, great. Yes. So just a clarification on your last comment, and I have a new question. So basically you said currently you are keeping 77, you know, for 100 new students you sign up, you keep 77, and that's the current level. And your plan is to increase the student retention rate. So just quick clarification, do you have a goal? I mean obviously 100 would be the ideal situation, but do you have like a near-term or midterm goal that you want to drive your retention rate towards?
Yes, definitely, definitely. Right now, we have a very clear goal on this subject because this is exactly what we are working on right now. So what we had seen is, first of all, we had seasonality in each quarter, as I mentioned earlier, by “Gao Kao” -- or “Zhong Kao” complete by June. The retention rate usually is lower than all other projects. Because when people compete the hard to get line, they are taking a break by going to small group, which we don't have in the past.
So the goal right now is that for every quarter going forward, every quarter we are improving by about 20% on average. However, for June timeframe, we'll have -- want to have a higher retention by 20% to 30% just because Q2 by seasonality that's the most people were leaving the one-on-one platform.
Well, by June, that's why Jin Zong just mentioned, our goal is to retain 20% to 30% of our existing students already in our system compared to last year. Then that way our second half is going to be easy to work off. And then in Q3 and in Q4, we were also looking at improving our retention rate by about 20%, around 15% to 20% for each quarter for the rest of the year. Then that's, in a short form, that's what we are laying out for today.
Tzewee Chen – Manresa Capital
Thanks, Christine. That's very helpful color. I think I will just follow up with you online on exactly how to reconcile the 20% to 30% to the 77% retention rate.
So my second question is just a really quick question, is, what is the distribution of your student base? Like basically the way I'm thinking about it is that I don't think it is evenly distributed across all 12 levels, you know, from Primary 1 to the high school level. So it appears to me as though from your prepared remarks that there is a little bit more in our student base, a little bit more people who are preparing for “Zhong Kao” and “Gao Kao”. So, you know, can you just help me a little bit understand what does the distribution of your student base look like?
Okay. Yes, we had roughly -- we don't have the number top of our head, but just roughly the number of middle school students is roughly 80% to 85% of our composition. And then the number of students of elementary school is about 15% to 20%. And then out of the middle school students, the “Zhong Kao” and “Gao Kao” students composition is roughly around -- is around 40% of total population. So that's why in the past, the “Zhong Kao” -- particular the “Zhong Kao” students, once they complete, they are seeking the small group. This is the potential. We actually have a very, very high population in our profile, yes.
Tzewee Chen – Manresa Capital
Okay, great. Well, that's all the questions I have. Is there some time you can help me by -- I'm not sure if you have other questions on the line. If you have other questions, please take it. But --
Let's take it offline…
Tzewee Chen – Manresa Capital
-- so we can have more time for other participants. Thanks a lot, Tzewee.
Tzewee Chen – Manresa Capital
Thank you very much.
Thank you. That does conclude our question-and-answer session. I would now like to hand the conference back to today's presenters. Please continue.
Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may all now disconnect.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!