TAL Education’s Earnings Call Highlights Strong Growth

TAL Education ((TAL)) has held its Q1 earnings call. Read on for the main highlights of the call.

TAL Education Group’s recent earnings call highlighted a robust financial performance, characterized by significant revenue growth and positive operating income. The company has made notable strides in expanding its product lineup and maintaining high retention rates in its core businesses. Despite challenges such as increased sales and marketing expenses and investment phase losses in the learning devices business, the overall sentiment was optimistic, with positive aspects outweighing the challenges.

Significant Revenue Growth

TAL Education Group reported impressive net revenues of USD 575 million, equivalent to RMB 4.2 billion, marking a year-over-year growth of 38.8% in USD and 39.4% in RMB. This substantial increase underscores the company’s strong market presence and strategic growth initiatives.

Positive Operating Income

In a significant turnaround, TAL Education achieved a positive operating income of USD 14.3 million in Q1 FY2026, compared to a loss of USD 17.3 million in the same period last year. This improvement reflects the company’s effective cost management and operational efficiency.

Strong Performance in Learning Devices

The learning devices segment continued to show year-over-year revenue growth, driven by product optimization, enhanced user experience, and strengthened sales channels. This sector remains a key focus for TAL, contributing to its diversified revenue streams.

Retention in Peiyou Small Class

The Peiyou Small Class program maintained a robust retention rate of around 80% this quarter, highlighting the program’s effectiveness and the company’s ability to retain its customer base.

Expansion of Product Lineup

In May, TAL expanded its product lineup by launching three new learning device models. This strategic move aims to cater to diverse user needs and strengthen the company’s market position.

Increased Selling and Marketing Expenses

The quarter saw a 47.7% increase in selling and marketing expenses, totaling USD 180.8 million. Non-GAAP selling and marketing expenses also rose by 50.5% year-over-year, reflecting the company’s aggressive marketing strategies to capture market share.

Quarterly Loss in Learning Devices Business

Despite its growth, the learning devices business recorded a non-GAAP operating loss this quarter, as it continues to be in an investment phase. This indicates the company’s commitment to long-term growth in this segment.

Quarterly Revenue Seasonality

Q1 is typically a low season for the learning device business, resulting in a quarter-over-quarter revenue decline. This seasonal trend is expected and factored into the company’s strategic planning.

Forward-Looking Guidance

TAL Education Group’s guidance for the first quarter of fiscal year 2026 reflects strong financial performance and strategic progress. The company reported net revenues of USD 575 million, a year-over-year increase of 38.8%, and a non-GAAP net income attributable to TAL of USD 42 million. The Peiyou Small Class Enrichment programs maintained a retention rate of around 80%, while the online enrichment learning business continued to innovate. The company remains focused on expanding its learning center network, enhancing product quality, and leveraging AI and technology to innovate in the K-12 learning sector.

In summary, TAL Education Group’s earnings call conveyed a positive outlook, with significant revenue growth and strategic advancements. Despite challenges in the learning devices business and increased marketing expenses, the company’s strong performance and forward-looking strategies position it well for future growth.