Prepared remarks
Ladies and gentlemen, good day and thank you for standing by. Welcome to TAL Education Group’s fiscal 2025 third quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question and answer session. Please be informed today’s conference is being recorded. I would now like to hand the conference over to Ms. Huang Liu, Investor Relations. Thank you, please go ahead.
Thank you all for joining us today for TAL Education Group’s third quarter fiscal year 2025 earnings conference call. The earnings release was distributed earlier today, and you may find a copy on the company’s IR website or through the newswire. During this call, you will hear from Mr. Alex Peng, President and Chief Financial Officer, and Mr. Jackson Ding, Deputy Chief Financial Officer. Following the prepared remarks, Mr. Peng and Mr. Ding will be available to answer your questions. Before we continue, please note that today’s discussion will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC. For more information about these risks and uncertainties, please refer to our filings with the SEC. Also, our earnings release and this call include discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains a reconciliation of the non-GAAP measures to the most directly comparable GAAP measures. I’d like to turn the call over to Mr. Alex Peng. Alex, please go ahead.
Thank you Huang, and I’d also like to thank all of you for joining today’s conference call. I’ll provide an overview of our business progress and financial performance for the third quarter of fiscal year 2025 followed by Jackson’s review of our operational advancements and key business results. Then I will finish up with a brief update on our future strategy and outlook. We remain committed to delivering high-quality learning experiences and services throughout the last fiscal quarter. More students and parents are choosing our products and services to enhance their children’s daily learning. These users provide valuable feedback throughout their journey with TAL, empowering our ongoing innovation as we refine product features and formats based on actual user needs. As always, we aim to improve the learning experience and support students’ holistic development. This quarter, we’ve provided more engaging learning experiences through our learning services programs.
Both our offline and online enrichment learning programs continued to receive positive feedback from users, reflecting the quality of our products and services. Our enrichment learning programs are designed to elevate learners’ abilities, fostering well-rounded development across a range of competencies. As we recognize that true learning extends beyond just acquiring knowledge, at TAL we prioritize the growth of skills such as reading comprehension, critical thinking, problem solving, and quantitative reasoning. These competencies equip learners with the tools to navigate real-world challenges. We believe this product-market positioning aligns with the needs of a new generation of parents who are seeking in-depth cross-disciplinary educational opportunities for their children. Take our Peiyou enrichment small classes as an example - market demand for enrichment learning and our consistent delivery of high-quality services drove continued growth of this business line during the fiscal quarter.
For content solutions, we remain dedicated to creating and curating high-quality content that supports our users’ diverse learning journeys. Our goal is to empower learners and enrich their learning experience with inspiring and impactful resources that enable them to thrive, so this quarter we continue to refine our content solutions product offerings and bolster our go-to-market strategies. In late August 2024, we launched a new learning device, the XBook, a tablet targeting customers with practice-focused learning needs. It features a color e-paper display with three modes: learning, practicing, and reading. We’ve received some initial user feedback on the product this quarter and we're pleased to report that it has proven to be a valuable tool in practice-focused learning scenarios. Our efforts to enhance our product capabilities are yielding positive results for the learning device business.
Key metrics such as weekly active rates and average weekly usage time for the entire user base remain stable and healthy as our product lineup and user base continue to expand. The average weekly active rate for our entire learning device user base was around 80% with an average daily usage time of one hour per device throughout the quarter. What's more, over half of these active users engaged with the device for five or more days per week. In addition to these achievements, our xPad recently received a Twice Picks award at the Consumer Electronics Show 2025. This annual award recognizes the year's influential consumer technologies, underscoring xPad's market recognition and innovative features. Execution across services and products continues to drive our financial growth. Our net revenues for the quarter reached US $606.4 million or RMB 4,323.2 million, reflecting year-over-year growth of 62.4% and 59.2% in U.S. dollars and RMB terms respectively.
Our non-GAAP loss from operations and non-GAAP net income attributable to TAL stood at US $1.9 million and US $38.6 million respectively. With that overview, I'll turn the call over to Jackson to discuss the operational advancements we've made in our core business lines and review our financial performance for the third fiscal quarter. Jackson, over to you.
Thank you Alex. Before I get started with my review, please note that all financial data for the quarter are unaudited. Let me begin with our learning services and others business, which encompasses a wide range of learning programs. This business line maintained its growth momentum for the third quarter of fiscal year 2025, achieving year-over-year revenue growth thanks to the development of multiple product lines. Notably, our Peiyou small class enrichment programs remain the largest revenue contributor within learning services and others business. Under the tailwind of increasing customer acceptance of enrichment learning, Peiyou enrichment small class continues its development momentum. For this business, our priority is to provide quality in-person learning experiences for our users. We take a dynamic and methodical approach in managing our learning center network. Each decision is based on careful evaluation of factors such as market demand, user acceptance, operational capability, and efficiency.
Our online enrichment learning business continues to progress in line with our strategic objectives. We have differentiated our online programs from offline offerings by integrating smart interactive features that cater to online learning habits, boosting user motivation, and deepening engagement. By consistently innovating and refining our online products, we strive to meet the growing demand for dynamic and impactful digital learning experiences. For learning devices, our goal is to support users' self-learning journeys with a diverse product selection and richer smart features and learning resources. This fiscal quarter, we expanded our offerings to reach a broader user base, helping more users find learning solutions that suit their unique needs. It has been two years since the launch of our first-generation learning device. Last year, we offered only one product; now, we are featuring a lineup of four.
Bolstered by the e-commerce event season in the third fiscal quarter of 2025, our learning device revenue increased both year-over-year and quarter-over-quarter. We remain committed to enhancing product capabilities as we expand our product portfolio. During this fiscal quarter, we upgraded our existing xPad learning devices, optimizing the precision learning pro feature to better align with the needs of at-home learning and support personalized learning journeys for all users. Additionally, we introduced a split-screen functionality that allows learners to use two apps simultaneously on the same interface, further enhancing the learning devices' usability. We also rolled out a customization feature for virtual avatars to deepen user engagement. Designing and personalizing avatars makes the learning process more interactive, boosting children's motivation and enthusiasm for learning. In terms of product expansion, as Alex mentioned, in late August we further enriched our product lineup with the launch of XBook.
XBook allows learners to seamlessly switch between learning, practicing, and reading modes using a built-in toggle, enhancing the overall learning experience. It also features an eye-protective screen and a smooth writing stylus. We have closely observed XBook's user habits over the past quarter, and we are pleased to see XBook's practice-related features being utilized frequently. Powered by our large language model, the XBook’s AI-driven features include intelligent grading, arrow tracking, and personalized recommendations to comprehensively support users in their guided practice sessions. The ongoing development of AI technology is also advancing XBook's intelligent grading capabilities. XBook can generate detailed profiles of students' performance, capturing metrics such as response time, accuracy rates, and arrow patterns, enabling students to more effectively evaluate their learning progress and focus on targeted study.
This not only allows us to better support user growth but also provides insight for content development and optimization. We will continue to monitor XBook's performance and refine its features to ensure alignment with user needs. Now let's move on to our key financial results for the third fiscal quarter of 2025. Our net revenues were $606.4 million or RMB 4,323.2 million, an increase of 62.4% and 59.2% year-over-year in U.S. dollar and RMB terms respectively. Cost of revenue increased by 65.5% to US $286.7 million from US $173.2 million for the same period of last year. Non-GAAP cost of revenues, which excludes share-based compensation expenses, increased by 67.2% to US $285.4 million from US $170.7 million for the same period last year. Gross profit increased for the third quarter of fiscal year 2025, rising by 59.6% year-over-year to US $319.8 million from US $200.3 million for the same period last year.
Gross margin decreased to 52.7% from 53.6% for the same period last year. Selling and marketing expenses for the quarter were US $226.4 million, representing an increase of 85.6% from US $122.0 million for the same period last year. Non-GAAP selling and marketing expenses, which exclude share-based compensation expenses, increased by 91% to US $222.4 million from US $116.4 million for the same period last year. Selling and marketing expenses as a percentage of total net revenues increased from 32.7% to 37.3% year-over-year. The uptick in selling and marketing expenses was primarily driven by increased selling and marketing activities from some online channels. General and administrative expenses increased by 0.8% to US $111.5 million from US $110.7 million for the same period last year. Non-GAAP general and administrative expenses, which exclude share-based compensation costs, increased by 4.8% year-over-year to US $101.4 million from US $96.7 million for the same period last year.
Non-GAAP general and administrative expenses as a percentage of total net revenues decreased from 25.9% to 16.7% year-over-year. Total share-based compensation expense allocated to related operating costs and expenses decreased by 29.5% to US $15.5 million for the third quarter of fiscal year 2025 from US $22 million for the same period last year. Loss from operations was US $17.4 million for the third quarter of fiscal year 2025 compared to loss from operations of US $32.2 million for the same period last year. Non-GAAP loss from operations, which excludes share-based compensation expenses, was US $1.9 million compared to a non-GAAP loss from operations of US $10.2 million for the same period last year. Net income attributable to TAL was US $23.1 million for the third quarter of fiscal year 2025, compared to net loss attributable to TAL of US $23.9 million for the same period last year.
Non-GAAP net income attributable to TAL, which excludes share-based compensation expenses, was US $38.6 million compared to a non-GAAP net loss attributable to TAL of US $1.9 million for the same period last year. Moving on to our balance sheet, as of November 30, 2024, we had US $2,240.8 million in cash and cash equivalents, US $1,595 million in short-term investments, and US $347.6 million in current and non-current restricted cash. Our deferred revenue balance was US $825.6 million as of the end of the third fiscal quarter of 2025. Now turning to our cash flow statement, net cash provided by operating activities for the third quarter of fiscal year 2025 was US $378 million. That concludes the financial section. I will now hand the call back to Alex to briefly update you on our business outlook. Alex, please go ahead.
Thanks Jackson. I'd like to share some insights on the outlook for the company's future development. Moving forward, we may experience some fluctuations in our business performance due to seasonal factors; for example, in fiscal year 2025 fourth quarter, we anticipate a year-over-year decline in revenue from learning devices as the third quarter is typically a peak season for e-commerce activities. Nevertheless, we remain committed to achieving healthy and sustainable long-term growth across all our business lines. For learning services, we will maintain our high quality standards for both offline and online learning products and strive to deliver premium enrichment programs to an even broader user base. We plan to prudently manage our learning center network and develop additional programs tailored to meet the specific needs of various user groups while also managing our operational efficiency.
In terms of content solutions, we'll closely monitor user feedback and market demand and use those insights to further enhance our learning devices and their features. We'll also expand our learning content library and explore new product developments. At the same time, we'll keep refining our go-to-market strategies. By aligning innovation with user needs, we aim to deliver impactful learning experiences to all of our customers. For the past few years, we've been innovating at the intersection of learning and technology, advancing our technological capabilities to deliver quality learning solutions. The potential of emerging technologies, particularly artificial intelligence, is transformative and inspiring. Over the last year or two, we have gained a clear understanding of what is achievable with AI in education and what is still needed to fully unleash its possibilities. Our focus now is twofold: first, leveraging industry-specific data to train vertical models; and second, developing applications that harness the power of both foundational models and vertical models.
Today's children and parents face a major challenge: how to grow into individuals who can thrive in the age of artificial intelligence. Their demand for intelligent solutions exceeds the capabilities of current technology. This creates an opportunity for us to bridge the gap between traditional solutions from centuries ago and the advanced needs of today's children and parents. With a love of learning and technology at the heart of everything we do, we remain committed to creating innovative products that empower students, families, and educators. We look forward to shaping and witnessing this exciting future together. That concludes my prepared remarks. Operator, we're ready to open the call for questions.
Questions and answers
Thank you. We will now begin the question and answer session. Our first question comes from Alice Tsai from Citi. Please go ahead.
Good evening management. Congratulations on the strong results. I have two questions. For the Peiyou enrichment offline business, could you please share any recent changes in the market dynamics? Have you ever noticed any negative impacts from consumption downgrades or intensified competition? My second question is how was the network expansion in Q3 for TL, and has there been any changes in key operating metrics, such as renewal rates? Thank you so much.
Thank you for your question. This is Alex. I'll address both of your questions, starting with my observations about the market. In terms of enrichment learning, we've seen a consistent growth momentum in both market demand and our business performance in enrichment learning over the past few quarters. The latest generation of parents is developing their own educational philosophies, often prioritizing their children's overall development instead of just academic success. While official data on the enrichment learning market's growth is still sparse, we are noticing increased activity and inquiries, indicating a stronger interest from customers. Our products are tailored to meet this rising demand. Our enrichment programs focus on creating interactive and engaging experiences to enhance critical thinking, logical reasoning, appreciation for the humanities and arts, and practical skills. As the enrichment learning market expands, our learning services business continues to advance as well.
Regarding competition, it's a common question we receive. Market competition is a natural aspect of any industry at different stages of development. In the enrichment learning offline small class market, competition is more fragmented compared to other markets. To remain competitive, it's crucial to develop high-quality products with performance metrics that matter, ensuring our offerings effectively serve local users. While we keep an eye on sector dynamics, our main priority is enhancing our products' capabilities. Meeting the needs of parents and students, delivering real value, and contributing positively to society is what we focus on, which is why we constantly aim to enhance our product adaptability. Let me share details about two specific initiatives: teacher recruitment and training, and product innovation. We leverage years of industry experience and a deep understanding of our learners to create a comprehensive teacher training system centered on high-quality lecturing and a student-focused learning experience.
Training our teachers in-house ensures consistent service quality, forming a solid foundation for our educational approach. Alongside this, we are committed to innovation in our products and services, always seeking new methods to incorporate technology into the classroom to improve learning experiences and operational efficiency. For instance, in our Peiyou classes, we utilize both large and small screens to address challenges in traditional small group settings. In our offline small classes, teachers utilize a tablet, which we refer to as the teacher's co-pilot. This device displays a timeline for the teacher, indicating when to explain concepts or engage with students, helping ensure lessons stay on track and all students receive personal attention. We also provide tablets for students to interact with teachers through handwriting, voice, or gestures, allowing them to submit work in real-time for instant feedback.
Reports are generated after class and shared with parents, contributing to the development of a personalized learning profile for each student. This approach not only offers personalized experiences but also improves efficiency and saves time. The Peiyou enrichment business is growing along with user interest, and the overall market development, coupled with our efforts, has been instrumental in our overall business growth. In the third quarter of fiscal 2025, we carefully managed our learning center network. As demand increases, we're prepared to add more centers in existing cities and optimize our network to be more convenient for our customers. Regarding your question about operating metrics, we aim to maintain healthy operating efficiency by balancing capacity and demand. We monitor efficiency indicators such as utilization rate, refund rate, and retention rate. The retention rate has remained stable, and our operating metrics indicate a sustainable business model. We strive to uphold this efficiency moving forward, continuing to manage our network expansion judiciously while balancing growth and efficiency. I hope that addresses your questions.
Thank you for the question. The next question comes from the line of Yiwen Zhang from China Renaissance. Please go ahead.
Yes, thanks management for taking my question. My question is regarding R1 investment. Are there any updates management can provide regarding the long-term investment, and specifically, where have the investments been made and have we seen any notable change in returns so far? Thank you.
Yes, thanks Yiwen. That's a great question. We've been focusing on the K-12 educational sector and we've developed a number of business lines across the entire learning journey and in different types of learning scenarios. I would say these are really at different stages of growth and they each face their unique challenges or opportunities, and we remain committed to elevating our presence in the space with continuous innovation. We're deepening our investment in areas that are still in their early stages to enhance user experience, expand our customer base, and generate greater societal value. You may have observed our product advancements in these areas, right? I think they're really propelled by sustained investments in product development, research, marketing, and operational enhancements; for instance, if you look at our learning services, we've been steadily broadening the scope of our online offerings.
Originally, our online classes were based on dual teacher live streaming models, and now we've introduced new product formats such as recorded classes. We also launched two new smart learning devices in 2024 and we're really consistently and continuously upgrading their AI-powered software and content. In the smart learning devices business, we're continuing to invest in hardware, software research and development in content, and also strengthening our go-to-market capabilities across both online and offline channels, and really—additionally, as I mentioned in the Consumer Electronics Show, we're exploring opportunities to expand our products' reach internationally. Overall, based on our experience serving users, we believe that this full-stack capability, right, this full-stack capability across hardware, software, content, AI technology, offline operational and online services operational capabilities, that's the cornerstone of our user service, of our future growth and long-term strategy, so it's really essential for us to continue to invest across these full-stack capabilities.
Let me maybe walk you through a few of our current top priorities in this area. I'll start with technology and content, maybe. The integration of technology with learning, it really enhances our products, so investing in R&D, in research and development is vital for creating a forward-thinking and forward-looking learning experience and strengthening our long-term competitive advantage. We also firmly believe, and this is really widely recognized, that the transformative power of this latest generation of artificial intelligence, as exemplified by these large language models, that will really redefine and re-imagine the future of education. In terms of content, we always believe that high-quality programs are a core competitive advantage. When students and parents trust a company's quality and standards, they're more likely to choose its products and services. This in turn then enhances the company's reputation and strengthens its brand recognition, right?
Next, we are committed to establishing and strengthening both online and offline customer conversation mechanisms, so let me talk a little bit about this, exactly what I mean by that, right? For our online products such as learning devices, online marketing efforts are obviously key in fostering that conversation with customers, and this conversation really spans across the entire decision-making journey and then reaches to the learning journey itself. We're trying to deepen this customer conversation and really broaden the users that we reach and broadening their acceptance of our products. For offline channels, there is an ever more present need for integrated online and offline dialogue going in conjunction while the offline touch points themselves also remain crucial for user engagement, so in areas like learning services, we've been steadily building offline communication for years, right - we converse with our parents at the learning center, at the reception desk, inside the classroom and so on, but in other areas such as for learning devices, we're still at a nascent stage.
We have a number of exploratory efforts underway. In learning devices, there's a lot that we can learn from existing players, their experience in having this offline customer conversation, and we also look for ways to innovate on our own. Finally in terms of investment, I'd like to also say a word about organization, right? We really aspire to become an organization that drives continuous innovation, and we consistently invest in building and refining our team and their capabilities to achieve this goal, so developing initiatives aligned with major industry trends and the broader ecosystem is a big part of our innovation journey. There's a saying in hockey that you skate to where the puck is going, so that's our approach. Some of the capabilities we need to excel in these areas are already in place while others are still being built, are still in development, so we're constantly driving to enhance our organizational strength by nurturing our current employees and helping them grow while also recruiting outstanding external talents. Yiwen, I hope that answered your question.
Thank you for the questions. Our next question comes from the line of Timothy Zhao. Please go ahead.
Thank you management for taking my question, and congrats on the very solid results. My question is regarding your online enrichment programs. I was just wondering if management can provide more insights into the online learning platform. Is the primary growth driver for this business driven by SKU expansion innovation or access to marketing channels? Thank you.
Timothy, thanks for the question - this is Jackson. I'll take this one, and I'm happy to share some thoughts on our online learning platform. Based on our observations of market demand and our confidence in our product quality, the online learning platform remains one of our strategic priorities. We have consistently invested in this business to strengthen our online enrichment product capabilities and enhance operational and marketing strategies. Our current goal is to serve more users by creating and offering quality products. Just like in many other businesses, our strategic focus for the online learning platform is product quality, so we're focused on developing high-quality products and competing through product excellence. Additionally, we also believe it's important to engage our users across multiple channels, especially during exploratory phases of some products - that's why we're constantly exploring ways to reach our users more efficiently.
Customer acquisition is also a key growth driver for this business, but let me again talk about product first. Our product development efforts are primarily focused on refining and expanding product offerings. As you may have noticed, we are consistently upgrading existing products while developing new SKUs and diversifying our online formats. When we first launched our online enrichment business, our main product format was the dual teacher live streaming model. Since then, we've adapted our products to better meet user demand and we're now offering more topics and formats in addition to what we already have. We're also continually refining our products' interactive features and technology. We have meticulously designed our online programs to differentiate them from offline offerings. Their smart interactive features engage users and enhance teaching effectiveness; as a result, our programs align well with online learning habits and meet the growing demand for digital learning experiences.
For example, online classes today offer interactions that mimic real life experiences, right? In some of our online classes, students will be divided into small groups, for example, for in-class discussions and then regroup again for the lectures. We have observed an impact on user engagement driven by such interactive features. Now coming back to user acquisition, effectively reaching new users is always crucial in building our online learning platform. As we continue to deepen our understanding of user needs and enhance our product offerings, we're also improving our marketing efforts to better match our products with user demand. Additionally, we're leveraging multiple marketing channels to connect with a broader audience of target customers. This increases users' awareness of our offerings and attracts more users to engage with our private domain operations and driving increased user conversion. Looking ahead, we aim to further strengthen these efforts and build connections with our audience. Timothy, I hope that answers your question.
Thank you for the questions. One moment for the next question. Our next question comes from Jenny from UBS. Please go ahead.
Hi, good evening everyone. This is Jenny on behalf of Felix Liu from UBS. Thanks management for taking my question, and congrats on strong quarter results. My question is regarding our learning device. Some third-party data that shows the device performed well during the recent period, so could you please elaborate more on the reasons behind the strong sales performance, and could management provide some updates from both the channel and product side? Management mentioned earlier that you expect a revenue decline in learning devices in the fourth quarter. Just want to confirm here the decline is year-over-year or quarter-over-quarter. Thanks a lot.
Hi, this is Alex. Regarding your last point, we anticipate a decline in learning devices revenue quarter-over-quarter because the previous quarter was the peak e-commerce season. However, our devices business has shown year-over-year and quarter-over-quarter growth, particularly during the e-commerce season. This growth is largely due to the overall industry expansion and the entry of more players with advanced capabilities pushing product improvements. Today, parents increasingly view these products as valuable tools for at-home learning, which is essential for the learning journey. The products have evolved significantly over recent years, but there is still room for enhancement in user experience in at-home learning. We believe there is considerable market potential for intelligent hardware solutions that combine software, hardware, and content for self-directed learning at home. Furthermore, our product expansion and enhanced capabilities are key growth drivers.
We’ve launched three types of xPad learning devices and one XBook this year, catering to various consumer segments and learning scenarios with diverse functionalities, performance, and price points. Our xPads are priced at RMB 4000, RMB 6000, and RMB 8000, while the XBook is just under RMB 4000, compared to only offering one product last year. By broadening our product range, we are able to meet the varied needs of our users. We place significant emphasis on product design and hardware innovation to ensure students can use these tools safely and efficiently. For instance, the XBook features an electromagnetic stylus pen with child-proof attributes, and it offers a smooth pen-and-paper writing experience with its dual nib design. We’ve integrated a three-way toggle button to swiftly switch between study, practice, and reading modes, helping children remain focused. Additionally, we are implementing artificial intelligence across all our smart devices, allowing seamless connections between content, AI, and user data to maximize their effectiveness.
Let me mention a few updates on our smart devices. We continuously enhance our intelligent assistant, Xiaoxi, which supports various learning devices. It can now conduct ongoing topic-based dialogues, answer student questions, assist with English speaking practice, and provide companionship in their learning journey. Over the past 12 months, Xiaoxi has been activated 230 million times. Our homework correction tools have identified 75 million mistakes and corrections in that same period, and they have performed over 25 million word look-ups and provided around 6 million essay corrections. These features not only aid students in learning efficiently at home but also alleviate some pressure from parents. Our understanding of users enables us to develop personalized learning profiles for children on our devices, allowing us to deliver tailored and effective learning plans. On the topic of content, we recognize its importance for our devices and are committed to developing this aspect long-term.
We offer a high-quality first-party content library and are actively collaborating with third-party providers to create a synergistic content offering for our customers. Lastly, during this peak e-commerce season, we are concentrating on managing our sales channels and refining our marketing strategies. While monitoring the effectiveness of our online channels, we are also exploring offline opportunities to expand our customer reach and create more touchpoints for engaging with customers. Felix, I hope this addresses your question.
Thank you for the questions. One moment for the next question. Our next question comes from Candace Chen from Daiwa. Please go ahead.
Hi Alex and Jackson. Thank you for taking my question. Regarding this quarter, the 50% top line growth, can you shed more light on the revenue growth from various business lines, and also some comments for the following quarters would be great. Thank you.
Candace, thank you for your question. This is Jackson. I'll address it. We have two primary business lines: learning services and content solutions. Both lines saw year-over-year revenue growth this quarter. Over the first nine months of fiscal 2025, the proportion between these two lines remained stable compared to the same period last year. Our Peiyou enrichment small class programs and smart learning devices are the key revenue contributors for learning services and content solutions, respectively. We're committed to providing high-quality enrichment services, advanced hardware, and engaging content to a wider audience. The revenue from smart learning devices increased this quarter due to the e-commerce peak season. Alex covered the factors contributing to this, so I won’t go into detail again. Regarding Peiyou enrichment small class learning, we've seen year-over-year growth in recent quarters.
We've discussed the specifics of this business, but our growth drivers—such as market demand, service quality, and our ability to recruit and train lecturers—are still strong. Therefore, we anticipate continued growth in this area. However, to address your question about long-term trends, we do expect the long-term growth rate of Peiyou enrichment to gradually slow down as we compare to higher base numbers from previous years. Overall, we believe the company’s growth is fundamentally linked to the value we provide to users and society. This principle influences every part of our business. At both the company and industry levels, we see revenue growth as a direct result of enhanced innovation, product capabilities, organizational efficiency, and operational effectiveness. I hope this answers your question, Candace.
Thank you for the questions. Our last question comes from the line of Liping Chao from CICC. Please go ahead.
Good evening Alex and Jackson. Thanks for taking my question. I noticed the company is currently at a breakeven level in terms of profits. Could you provide some insights into the bottom line, please? Any plans to improve margins moving forward? Thank you.
This is Jackson, and thanks for the question, Liping. It's a good question, and a complicated one. We have developed multiple business lines around enrichment learning, around technology-powered smart learning solutions. Each business is at a different stage with its own sets of priorities and parameters; for instance, in the learning device business, we are still exploring and validating user value. Our priority there is to closely track user feedback, net promoter score, and engagement. Although our learning device business is still operating at a loss, it remains a key long-term strategic initiative. We will continue investing in this area, launching new products, building content, crafting AI-driven experiences and iterating on a regular basis. On the other hand, our Peiyou small class enrichment learning business is more mature with a relatively stable profit margin. The company's overall margin is influenced by the mix of its different business lines, so it's a little hard to generalize.
Going forward, we will continue to prioritize innovation and investment in business lines with high long-term strategic value. By combining technology and learning, we aim to develop and enhance the experience for our users. This requires us to commit to continuous innovation. The challenge and opportunity for us is realizing this mission while balancing growth and efficiency, so some of our early-stage businesses will continue to operate at a loss for a while as we focus on user experience. We believe this allows us to expand our current operations while building a solid foundation for long-term competitiveness. This will also enable us to be well-positioned to capture the market opportunities and deliver long-term value. However, from a group perspective, we will continue to proactively address this challenge and opportunity by closely monitoring the efficiency metrics in all business factors and make timely adjustments to optimize various factors in our operations, including content generation, product R&D, sales and marketing, and more. Liping, I hope that answers your question.
Got it, thank you.
Thank you for the questions. That concludes the Q&A session. I would like to hand the call back to the management for closing.
Again, thanks to everybody for joining us today, and we bid everybody an early Happy Chinese New Year and we'll see you next quarter. Bye bye.
That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.