Mei Li - Investor Relations Manager Rong Luo - Chief Financial Officer.

Vivian Hao - Deutsche Bank Fan Liu - Goldman Sachs Jialong Shi - Credit Suisse Ella Ji - Oppenheimer Leon Chik - JPMorgan Anne Shih - Brean Capital Tian Hou - TH Capital Clara Fan - Jefferies Alvin Jiang - Morgan Stanley.

Good morning. My name is Deirdre and I will be your conference operator today. At this time, I would like to welcome everyone for the TAL Education Group Fourth Fiscal Quarter and Fiscal Year 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks there will be a question-and-answer session. [Operator Instructions] Please note today’s call is being recorded. Thank you. I would now turn the call over to Mei Li. You may begin your conference..

Thank you all for joining us today for TAL Education Group’s fourth fiscal quarter and fiscal year 2015 earnings conference call. The fourth fiscal quarter and fiscal year 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 Chief Financial Officer, Mr. Rong Luo. Following his prepared remarks, Mr. Luo will be available to answer your questions. Before we continue, please note that the discussions today 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 the public filings with SEC.

For more information about these risks and uncertainties, please refer to our filings with the SEC. Also our earnings release in this call includes discussions of certain non-GAAP financial measures. Please refer to our earnings release, which contains reconciliation of the non-GAAP measures to the most directly comparable GAAP measures.

I would now like to turn the call over to Mr. Rong Luo..

Thank you, Mei and thank you all for joining us on our earnings conference call for the fourth fiscal quarter and fiscal year of 2015. We are well pleased to report on the another year was revenues exceeding our expectations. We have maintained our strong growth momentum during the fourth fiscal quarter.

Net revenues increased 41.6% year-over-year to US$123.2 million. Revenue growth was primarily driven by a robust 44.4% increase in enrollments. Full year revenues have increased 38.3% year-over-year and placed us securely top line 5% growth target for the year.

We are also achieved solid non-GAAP operating income gross for both the first quarter and fiscal year especially given these was a year offset by investments in our future growth. Today I will review our operational progress and highlights of the first quarter in the fiscal year and discuss our plans for fiscal 2016.

After that, I will provide some further analysis of the financials and business outlook. In the fourth quarter small class revenue growth was strong across the board, with all cities outside Beijing and Shanghai growing by high double-digit percentages and a good number of cities achieving triple-digit revenue growth.

Combined small class revenue from Beijing and Shanghai enjoying double-digit year-over-year growth. As expected Q4 has shown year-over-year to the negative impact from the late start of spring term offset by one class of revenue shifted from Q3 to Q4 due to APEC Forum in Beijing last November.

We outperform on our forecast for the quarter because of stronger enrollment across board especially in 1-on-1 as well as last winter class for all offline business. Our retention rate also improved from the last year’s winter terms possibly this was due to relatively late timing of Chinese New Year holidays these kind of year.

Let me now provide more detail on each of the segments. Our core small class offering continue to be the main driver of our growth up by 46% in the quarter. Enrollment growth for small class in the fourth quarter was 42%. ASP for small class was up by 3% year-over-year in the quarter.

Beijing - quarter due to the winter class response and we achieved low double digit growth in the fourth with improved retention rate. With class rescheduling due to the APEC Forum, small class revenue from Beijing was still bigger supported by ASP increases of over 15% year-over-year.

Our positive signs that the decline of English enrollment in Beijing slowed down in the quarter because more than half our Beijing primary enrollments for English for our conversation of Hello English classes, Chinese sector in Beijing continue to grow very healthily and representing 8% of enrollments in the winter term.

At the moment we are taking some construction initiatives to give us a - basis for growth in Beijing and secure our - place in the top rankings of industry players and potential consolidators in this marketing.

We are merging and combining some learning centers to increase the classroom, to increase the classroom due to addition and improve efficiencies which will eventually led to marketing improvement for Beijing business. At the same time we are adding new capacity in less-penetrated districts like Dongcheng and Chaoyang.

And we are launching very targeted and limited promotions to grow the new subject enrollments and increased retention among new students specifically for the first grade students and for summer class only.

We are confident that this will improve the student and retention rate for out coming summer term as well as lead to higher enrollments in four and winter terms in Beijing. We believe these initiatives are harder to give us a bigger dominance in Beijing in terms of the district coverage which we believe will drive the industry consolidation.

Shanghai recorded a high double-digit growth for the first quarter, prolonging the very solid growth trend we have had there for sometime now, if you recall I explained to you last quarter that we have a pyramid like enrollment structure with largest enrollment base in the lowest age group.

We will ensure that other capacity to meet these demand, so is our performance in Shanghai to remain healthy going forward. The same can be say for Qingdao city. First quarter growth was also in high double-digits with very high additional rates.

In Shanghai, the enrollment structure is very favorably shaped like a pyramid and we will continue to add capacity in Qingdao to deliver long-term growth. Let me now turn to the second big segment, our one-on-one business. As always, we managed the growth of one-on-one as a complementary services to our core small class offerings.

In the first quarter however we have stronger enrollments for one-on-one before the Chinese New Year holidays possibly also due to the relatively late timing of Chinese New Year holidays this time of the year as I mentioned earlier. One-on-one revenue grew by 18% year-over-year resulting around US$2 million more revenue than our internal forecast.

Enrollments were up by and usually high of 25% year-over-year. ASP for one-on-one declined by 5% year-over-year. The third big segment Online Courses remains one of our fastest growth segments with 66% year-over-year revenue growth in the first quarter.

Online contributing around 4% of total revenues this quarter, slightly up from 3% in the same year ago period. Online enrollments increased 70% year-over-year in the first quarter, online enrollments were 13% of total enrollments this quarter versus 11% in the same year ago period. Online ASP declined by 2% year-over-year in the first quarter.

In the moment we are upgrading online cost into experience of teaching determination, practice and communication, we will offer to see an improvement in this new model online tutoring and teaching.

We believe these are very important [indiscernible] in directions we have students and parents, better evaluate a learning process and achieve better results which in terms we have drive our total enrollments. For full fiscal year 2015 let me briefly recap our progress for each these segments.

Our core small class offering continue to be main driver of our growth at by 43% in fiscal 2015. Enrollment growth for small class increase 37% all previous fiscal year. ASP for small class was up 5% year-over-year for the full year. In fiscal 2015 small class contributed 80% of total revenues up from 77% last year.

The year-over-year change in revenue contribution was mostly due to the ongoing robust growth in Shanghai under cities. For full fiscal year 2015 the offset in point to highlight we have once again see a significant mix shift for small class due to the ongoing high growth in the cities added in Beijing and Shanghai.

This other cities contributed 48% overall small class revenue compared to 37% in the fiscal 2014. This is also positive for margins considering we are enjoying higher gross margins operating margin and due to additional ratings cities other than Beijing and Shanghai.

For full fiscal 2015 Beijing recorded single-digit growth over fiscal 2014 for small class, Shanghai recorded high double digit growth for full year fiscal 2015. We achieved mid-teen revenue growth and representing 17% of total revenue in the full-year of fiscal 2015 us complied to 20% in fiscal 2014.

Enrollments were up by 60% and ASP for decline by 1% year-over-year. I am pleased to report online business reported full fiscal year revenue growth to RMB100 million increasing by 67% from fiscal 2014. And it was profitable our annually basis.

Our 80% of students are school online contributing around 4% of total revenue in fiscal 2015, slightly up from 3% in fiscal year 2014. Online enrollments increase 64% year-over-year in fiscal 2015 and contributed 15% of total enrollments. Online ASP was up by 2% in fiscal 2015. Let me update you now our learning center network.

Our net basis our learning center network remain unchanged from quarter at 289 learning centers, with net addition of two small class learning centers and a net reduction of two 1-on-1 learning centers, which brings us to a total of 202 small class learning centers, including four learning centers for Mobby and 87 for 1-on-1 business.

We added seven new small class centers and treated with high utilization rates, i.e. Shanghai, Qingdao, Nanjing, Wuhan, Xi`an and Changsha. In the fourth quarter we close three small class learning centers in Beijing where are consolidating capacity to improve class room utilization and eventually margins as mentioned earlier.

However we continue to add small class classroom capacity in Beijing in the underpenetrated districts. We added net of 692 small class classroom for the full year representing a 31% year-over-year increase.

Let me give you a quick update on our O2O strategy as we have said before we aim to drive our competitiveness through integration of our online and offline efforts and get that to operational leverage from online to offline. We finished the fiscal year as planned raising the US dollar $15 million spending.

We have allocated for new business initiatives in O2O, in the fourth quarter we saw continued progress for data and our online and mobile community of parents whose children are taking or will take classes in our nearly 300 centers that combine very cost effective way for us to growing enrollments by the end of February [indiscernible] are useless with local websites in 26 cities.

We added more online capabilities to classroom based learning in a classroom - such as our [indiscernible] ICS 3.0 program as well as the Xueersi Peiyou app, e-class card and online payment. Finally we are continuing online live class platforms in the first quarter.

Looking ahead into fiscal 2016 we will continually invest in O2O and new initiatives and we have budgeting a similar level of investment in fiscal 2015, we will continue to pursue a - growth strategy mostly driven by enrollments through our offline learning center network and deeper online engagement, where you expect that highest growth of our core small class business to continue to come from the cities added in Beijing.

Our priorities for this year are the following. First, we will further penetrate existing markets by expanding class room capacity, most of the expansion of the tutoring capacity will take place in the fastest growing cities where there is pent-up demand for our smart class business.

Second, we are planning to enter new markets adding between two to four new cities in the second half of fiscal year many cities across China are still under pressure. And we used our proven formula of opening one of the center first and build our brand based on the strong student outcomes which in turn of marketing.

Third, the enhanced content offering of across classes in great levels, we are also investing more content development especially for the charges of Chinese and English which we are trying to offer a more cities in the coming quarters.

Fourth, we will maintain premier pricing in well diversifying province, we have time for price increase for small class in five cities before summer time while we have planned for initial price promotions for new charges in Beijing while we are assuming to maintain our admission benchmark to student and events to protect our premier brand quality and premier pricing power.

Fifth and finally and we are planning to expand online and mobile offerings to drive offline enrollments and online engagement, we will continue to focus much of our result is on our ultra offers seeking integration of online and offline blending lending instead of purely online tutoring.

To summarize, we finished fiscal 2015 with strong top line performance in the first quarter and exceeded our full-year gross target of 45% to achieve over 38% growth and solid operating income.

The mix shift in small class in favor of the series other than Beijing and Shanghai has continued in fiscal 2015 online business achieved around RMB100 million and became a profitable business for the full fiscal year with our investment also in new business significantly and believe this was right strategy to solidify our more advantages towards the class rooms where the technology meet education.

For fiscal 2015 we are planning to pursue further growth base on expansion and a technology base in Malaysia with the right balance between present and future growth, we would dedicate our time after and the result is to both our O2O initiatives. Continued center capacity expansion to meet a strong demand for our cost based tutoring.

We will bring together a technology community education result is become a leading technology focus education services provider in China. Let me now go through some financial highlights for the fourth quarter and fiscal year adding more detail and inside on a numbers and finally discuss our guidance.

We believe our US$123.2 in revenue in the quarter representing revenue growth of 41.6% versus the same period in the previous year. Driving the causes revenue growth was strong enrollment growth of 44.4% supported by ongoing solid momentum in cost small class better than huge well enrollments and rapid growth in online causes.

Gross margin was 52.0% as compared to 53.1% in the same year ago period. Total operating expenses increased by 54.3% year-over-year to US$49.4 million due to an increase in both the selling marketing staff compensation and the R&D expenses related for our all education complied to the same year ago period.

Other expenses for the first quarter of the fiscal year 2015 was mainly driven by exchange losses for our cash balance holding RMB well a company reposing US dollar. As a result, all expenses coming US$2.9 million for the first quarter of fiscal year 2015 compared to US$400 for the same year ago period.

As we all a significant portion of cash balance in RMB a repo in US dollar we are benefit from exchange gains in times of relative exchange in RMB. In exchange losses in the times of relatively strengths of the US dollar.

On ASP side the year-over-year plenty as it was almost send for the fourth fiscal quarter for the same period of the previous year, which continue to reflect a very positive in our business in favor our small class and online has been managed to close of our well one business.

Earlier in my prepared remarks, I already gave you separate ASPs for this segment, because blending ASP no longer properly reflects the underlying trend due to the shift in business. GAAP and non-GAAP income from increased by 30.2% and 18.8% respectively year-over-year. Basic and diluted net income per ADS were US$0.17 for the fourth quarter.

Non-GAAP basic and diluted net income per ADS which excludes share-based compensation expenses were US$0.24 and US$0.23 respectively.

Moving to the year as a whole we deliver US$434 million net revenue a year-over-year increase of 38.3% supported by enrollment growth of 39.2% and slightly lower ASP [indiscernible] in favor of small class and online as we manage the growth of our 1-on-1 business.

Total student enrollments increased to nearly 1.5 million up from nearly 1.1 million one year ago. The increase in total student enrollments were driven primarily by increase of enrollments in the small class offering.

For the fourth fiscal year 2015 small class contributed 80% of revenue and 1-on-1 tutoring contributing around 17% of revenues and online contributing around 4% of revenue.

Gross margins for fiscal 2015 were 53.2% a increase of 150 basis points from 51.7% in fiscal 2014, GAAP and non-GAAP income operation increased by 17.2% and 30.3% respectively year-over-year, income tax expense was US$9.4 million in the fiscal year 2015 as compared to USS6.7 million in fiscal year 2014 because the company’s effective tax rate increase.

The effective tax rate increased mainly because TAL Beijing is entitled to be a preferential tax rate of 15% from calendar year 2014 through 2016 as a "high and new technology enterprise strongly supported by the state", but having entitled to be a even lower tax rate of 12.5% from calendar year 2011 through 2013 as a software enterprise.

As a remainder 10 out of 12 months of the fiscal 2014 - in calendar year 2013. Basic and diluted net income per ADS were US$0.85 and US$0.82, for fiscal year 2015. Non-GAAP basic and Non-GAAP diluted net income per ADS, which excluded share-based compensation expenses, were US$1.08 and US$1.03, respectively.

From the balance sheet as of February 28, 2015 we have US$417.2 million of cash and cash equivalents and US$21.2 million of term deposits. Net cash provided by operating activities for fiscal year 2015 was approximately US$147.6 million, representing a year-over-year increase of approximately 45.3%. Let me finally turn to our guidance.

In the first quarter we expect total net revenue to be between US$122 million and US$124.6 million, representing an increase of 37% to 40% on a year-over-year basis. This estimate reflects the company’s current expectation which is subject to change. That concludes our prepared remarks. Operator; we are now ready to take questions..

[Operator Instructions] And your first question comes from the line of Vivian Hao..

Hi. Thank you for taking my question. I've got two questions. First of all, we've observed some quite aggressive pricing strategy in Beijing for the high school program. For example, there's an $1$1 for these courses.

Just wondering how long will this strategy last and will we - are we going to apply this to other regions as well? Also in terms of the reason for this pricing strategy, is this due to the competition, because we know that EDU has also applied some loyalty program and other promotional methods to their K-12 programs. This is my first question.

I will wait for the second question..

Okay, thank you for your question. I think our revenue contribution for other six outer cities other than Beijing actually is doing quite real they need to pass this headquarters as I had mentioned they have achieved high double-digit and eventually growth, so we are quite confidence about that.

Especially in Beijing we are running some of the targeting and limited promotions. Simple answer is for summer class only, for the new students only and for the new subjects. I think as I have mentioned in my prepared remarks I think it’s good time is now only from competition progress, it’s more likely for review of industry consolidation.

And we are taking into account all of this promotions we are running in Beijing actually is quite immaterial to my TAL coming third quarters.

I think us there are high end payers in this market that certain kind of the proper promotions in this market we are asked to grant more market share longer-time and we are Peiyou improving the retention of small class so we are quite confident. This kind of the promotions we will be worry helpful fast to increase the enrollments for summer time.

And in the future you but also be worry beneficial class to two business in fall term and winter team..

Right. We also closed several learning centers in Beijing.

Is this part of the rationalization for Beijing market?.

Let clarify my as we added seven new sensors in cities automotive embossing we close rig in Beijing. I have mentioned that in my last quarter.

Because emphasing our strategies we try to candidate our capacity to improved for class room utilization which is the cost that will be very how fast that improve the both the gross margins and operation margins. So I think low OpEx and there is not because by more from the way we want to increase our Beijing performance..

Understood. I have a follow-up question, a very quick question.

What is the total number of new hires in fourth quarter? And also what is our planned hiring in FY 2016?.

In general I think of our hiring in happen in the fiscal 2015 as with they happen in Q2. So in Q4 we don’t have been any significant number of new hirings. Looking forward to 2016 because we had already hire of federal hub IT productive of the costs. So we don’t have for the [indiscernible] playing to held big number again next year.

But of course because we are normal companies. So we will have kind there maybe 10% to 15% of those normal attrition in the company year..

That’s very helpful. Thank you..

And your next question comes from Fan Liu..

Hi Rong and Mei. Thank you for taking my question. Would you mind sharing with us your learning center expansion plan in the next quarter, in the whole year of 2016 if possible? It seems like in this quarter you have tried to expand the capacity more through the addition of classrooms.

It seems like in this quarter you have tried to expand the capacity more through the addition of classrooms in the existing learning centers.

Will this be a strategy in the coming quarters as well? And in which cities did you see the triple digit revenue growth this quarter? Also, I apologize if I missed, what's the small class revenue contribution from the cities outside of Beijing and Shanghai in the fourth quarter of fiscal year 2015 please? Thank you..

Okay, thank you, so I think for the learning center network development in a whole fiscal 2015 we added around 692 classrooms which is around 51% of the capacity. In the coming year 2016, I think we will continue our strategy to adding maybe around 20% to 25% of classroom capacities.

And we adding the capacity use different way purely based on that city’s situation. For some cities like Guangzhou and Shanghai we prefer to add more class in the current learning centers and we will be more ready to adding more learning centers when all of the classrooms [indiscernible].

But ourselves the new cities for example the four cities which just added last year we may prefer still we will add surplus learning centers we try to add more not more learning center numbers and to measure - we can capture that kind of opportunities.

So all of this strategy will be different think it by - and specific up on the contribution from learned cities other than Beijing and Shanghai.

For first quarter it’s close to 50% is a little behind 50% because the revenue in Beijing actually it’s because they have one class, they shift from closer in Q4, they may Beijing Q4 number is a little bigger but it general for the full year, for the cities other than Beijing and Shanghai the mix after actually increase around 11% compared to the previous year.

So I think we are still - and personally I believe this trend a lot more contribution were coming from other cities will continue in the coming quarters..

And your next question comes from Jialong Shi. Your line is open..

Thank you. Thank you. My question is just about your growth, top line growth next year. And I was just wonder if Rong Luo may remind us then what's the revenue growth you now expect for next year especially when you deliver such strong 1Q revenue guidance? And also your margin dropped in 4Q.

I was just wondering if you may share any colors on the margin trend for 2016?.

Thanks Jialong, we don’t provide a full year guidance on top line revenue and margins, but what I’m trying to share some colors. I think in - we continue to deliver healthy and sustainable top line revenue growth, we also invest manageable risk to enhance our confidence in O2O initiatives.

In the top line revenue perspective I want to share with you is that our internal budget actually is approximately 35% top line growth in RMB tons in fiscal 2016. Since the depreciation showing off RMB and we are likely continual, so let us assume only 2% to 3% impact the revenue is expected to grow 32% to 33% in U.S. terms.

That is our internal budget for the information and specifying to your question about my margin I think the ultra initiatives are still our priority and we remain a similar level of the investment of ultra and new business.

So while the total O2O investment by the end of the day estimate to cost around US$20 million to US$22 million for the full fiscal year 2015.

In the past I think we have [indiscernible] invest in new business, which still continue to manage cost intelligently and ensure our improved efficiency in terms of our headcount and center for performance and so on.

And for the fiscal 2015, we will continue to look for the right balance between top line revenue growth momentum and investment for future growth, so we are managing the past. Therefore, I am confident to say that we will maintain sustainable to top line growth, while the operating margin will be moderating down in fiscal 2016..

Thank you for the detailed answer.

May I ask a quick follow-up? I just wonder what the OP margin for ex-Beijing and Shanghai cities and how does it compare to Beijing and Shanghai?.

I think actually only Beijing is a little special is Beijing actually we have a lower your addition in Beijing so margin both operation margin and gross margin paying its actually in Beijing lowest cities. All alter cities rather in Beijing and Shanghai all places actually they are little higher in Beijing..

And all these ex-Beijing cities are quite close to the operating margin..

Yes, they are almost in the range Shanghai a little better, Shanghai little lower..

Thank you. Thank you very much. I'll get back to the queue..

Again next question comes from Ella Ji with Oppenheimer..

Yes, congratulations on a strong quarter. I also have a question relating to your total OpEx spending of online initiatives. Rong-zhong, you mentioned that the total spending level is about $20m to $22m in 2015.

Could you break it down by the major initiatives such is ICS 3.0, Hyperion and Jiazhangbang? And also could you give us dollar spending level target for each of them for 2016? Thanks..

Yes, thank you for question.

In general we don’t give detail breakdown of all spending by projects, but in generally I can face the project we have mentioned in the past for [indiscernible] I think they are spending maybe we talk about next year compared to the year 2015 at almost flat and maybe slightly lower, but for our investment ICS 3.0 at the end life learning platform and should we still need to invest more, because they will cover more levels and more projects.

In general we also I thinking about the new projects mid happen coming quarters. So in general I think as a company we were still manage our investment are in the controllable range - total 20 million to 22 million actually is fair range faster investing the coming year..

Hello can you still hear me..

Yes..

Okay. So sorry, I just want to clarify. So if it's still about the same dollar level spending, then I think you mentioned that the non-GAAP operating margin will moderate down next year. So I'm just a little bit confused.

If there is still the same level of dollar spending, then normally we should expect to see some margin improvements because of the operational leverage. Could you clarify for us? Thanks..

Let me clarify. I think what I am talking about is we were in the similar level of the investment on O2O last year I think total investments are on US$15 million and this year it’s around $20 to $22 million. So actually maybe more similar in the percentage of revenue perspective now in absolute dollar perspective..

Okay, got it. Thank you..

Thank you, Ella..

And your next question comes from Leon Chik with J. P. Morgan..

Yes, hi, guys. I think you answered most of it with the O2O. But I was wondering did your - your G&A expenses is more than just O2O.

So for the other G&A expenses, do you think, because your sales is growing so fast at 30%, 35%, would the other non-O2O G&A costs also increase the same amount in proportion to sales?.

Frankly speaking, if we streamline business to online and mainstream business including small class, small 1-on-1, I have mentioned I invest $15 million in O2O which is around 3.5% of my net revenue, if you are looking into non-GAAP operating margin of this year compared to last year only dropped by one point.

So actually you can see despite the O2O my mainstream business as we can around 2 to 2.5 points margin expansion every year.

So I think we will balance our investment in O2O in our current business in our offline capabilities but in the future term I think we are still - we still believe we can get operation margin expansion opportunities from my mentioned business where we balance our investments in O2O automation. Our margin will be in that range..

Just quickly, in the O2O what haven't you done? Like what's not available now that will be available at the end of - FY 2016 with this $20m to $22m? I mean I would have thought a lot of the things would have already been completed..

I think so far O2O online initiatives are still in the early stage I can now comment the other income in this industry. I think it’s common sense for all the people in education sector. I think we still need to invest in O2O online to enroll the model into more mature stage.

I can now say the investment is pretty much down, so I can say some of the project like - and something like that actually that I mentioned that will be flat like it’s been, but we still have more we need to do. For example, we need to deploy more power plays for 30.0 in fiscal 2015 [indiscernible].

But in the future I need to try to expand more series. And for life platform we are still in the pilot stage, we only have 2000 students today which it could be a much bigger number in the future, so we still need to invest there.

As a company again we try to control my investment there in manageable rent, this one will not change is where we will invest there to leverage the technology advantages to improve our efficiencies and to establish some of the new kind of education models in the future..

Okay, it makes sense. Thanks..

Thank you, Leon..

And your next question comes from the line of Anne Shih with Brean Capital..

Hi, Rong. Hi Mei. Thanks for taking my question. I just wanted to follow up on the O2O online business. And you mentioned that online achieved profitability for the year.

I'm just wondering whether or not you can provide some more detail on where you see this margin trending for the next year? And could you also specifically talk about whether or not we can continue to anticipate enrollment re-acceleration and where the ASP may move?.

Okay, first of all I welcome our new analyst, Anne coming to our call because I know [indiscernible] reporting April.

I think to your questions, let me answer for ASP perspective first, because we have some kind of promotions in Beijing a lot of people may ask maybe your ASP in the filter we will drop down a little bit, but why can say to you always also with two price increase in Beijing, Shanghai, Shenzhen, Wuhan, Zhengzhou, Suzhou, Chongqing and Taiyuan last year.

And in fiscal 2016 - cities in Shanghai, Shenzhen, Wuhan, Zhengzhou, Suzhou, Chongqing and Taiyuan et cetera.

And so I think we still maintain our pricing strategy our geographical distribution most to the cities added in Beijing and Shanghai you may this slide to the lower ASP growth for small class in the fiscal 2016 but still should be around 3% to 5% range.

And for the O2O you have mentioned just now I think all of these investments when we are talk about the profitable business base especially follow online school [indiscernible]. So before we have being profitable for five quarters.

And looking ahead to the next year I think we were still maintain the changing and base all the information in the past two months which is beginning of the year actually we are seeing this kind of growth at least accelerating.

So we are still quite confident our online school, online class we are still be our faster growth segment in the future and percentage - revenue percentage for online will increasing year-by-year..

Very helpful thank you..

And your next question comes from the line of Tian Houwith with TH Capital..

Hi Mei and Rong. Two questions. One is related to your expansion in margin.

So now you're at - your learning presence, center presence are in about 20 cities, so from the previous expansion experience from other companies, what we can learn is once you go beyond those top 20 cities and this expansion is inevitable will also cause margin pressure or compression.

So I wonder how do you balance your growth expansion and margins. That's the number one. I will have a second and after you answered the first question..

Thank you, okay. I think we are quite different from all payers English market because our company the past more than 10 years we are relatively more approach. When we try to expand to more cities.

So our typical approach is that we only what learning center with limited students in the beginning after when you establish our reputations [in all counts] we will try and expand more. Again all of that is under a kind of conservative approach to do that.

So, when we go into the other cities other than Beijing, you can see we only start with maths first. You know maths actually is our very strong subject. So in maths we can have very high retention. We can have low rebound rate. We can have very high class performance and etc. Actually in most cities outside Beijing their margins are higher than Beijing.

So we will continue to take this kind of relatively conservative approach to expand to more cities. So we have confidence where we will continue - we are already in a process to leverage - expansion to increase our margin. And this has also been proved by our performance in the year 2014 and 2015.

So again I appreciate your questions because we have one common and try to expand to more cities. Actually we will face more questions in the future.

So I will take your advice and recommendations in my mind and to remind all of my team Beijing and all the other places to be 100% alert and try to maintain our churn to increase our margins by try to expand to more other cities..

Thank you so much. And the second question is related to your recent course promotions and particularly in Beijing, like one of the previous analysts mentioned $1 courses. And I do believe there are so many education like after school tutoring institutions in China and a $1 course promotion does have this kind of market consolidation effect.

And so - but I do wonder and how those promotions will impact your enrolment and market.

Yes, I think that’s a very good question. In the enrollment perspective because the promotion is actually for summer class only, so it has no impact on my Q1, but will have some impact on the Q2.

Enrolment perspective, frankly speaking because we just started to do the promotion maybe several days, based on the data we have seen today actually, it's quite promising.

In revenue impact perspective because we are only to this kind of targeted and limited promotions for the new students like the first grade students in the junior high, so based on our current estimation is immaterial to Q2. We are still very confident to deliver our long-term revenue growth more than 25% for the year.

I think all office promotions actually is a worry for Beijing market because it is time for the market to do kind of consolidations now..

Okay. That's all my questions. Thank you..

Thank you, Tian..

And your next question comes from the line of Clara Fan with Jefferies..

Hi, hello. Thank you for taking my question. I only have two quick questions. One is I'm just wondering outside Beijing and Shanghai what is the overall revenue growth of those cities including both like small classes and one-on-one and which are the cities that has been going at the fastest pace.

And other question I just want clarify on what you have just mentioned about on your online. Did you mention that going to fiscal year 2016 we are still expecting it to be profitable because I am just trying to see what we are trying to expand our user in expense of our profit or whatever thing you brought back? Thank you..

Yes, well for the online [indiscernible] actually we are seeing they have very good advantage growth rate and they were profitable in the last year. Looking forward to 2015, there is no indication to see they will loss making position again.

So we are still have to be profitable next year, but again I think for online school the majority purpose is not being profitable a lot.

The key purpose is to maintain a single level of operation margin, but increase the volume, try to cover more cities, cover more place, cover more students and increase the market share, that’s our key priority for online school.

And your online revenue performance in Shanghai and Beijing by for small cost and I think I need to prepay the Shanghai operations because they are in different situations. For Beijing actually I think in general in Q4 they are low double-digit growth because of the increase of the ASP by 15%.

All of these information and own strategy is almost flat or slightly up. This is also quite similar for the one business, but for Shanghai actually we are seeing they have achieved high double-digit growth rates across the board. Both revenues, both small class and online school.

So I think these trend will continue that our Beijing performance we are continue to be around maybe 5% to 10% revenue growth about our Shanghai performance continue to be high double-digit growth in the coming quarters..

A quick question I mean outside Shanghai and Beijing what’s the revenue growth like?.

I am sorry I don’t catch your questions. Ourside Beijing and Shanghai has been all have been have achieved [indiscernible] average is close to 80% in Q4. And most of the cities achieved high double digit growth rate while number of cities achieved double digit growth rates..

Thank you..

Thank you, Clara..

And your next question comes from the line of Alvin Jiang with Morgan Stanley..

Hello. Can you hear me..

Yes, we can hear you..

Hi Rong and Mei. Thank you for taking my question. I have two questions. The first question is on your investment strategy. Can you give us more color on your investment strategy going forward? Thank you. And I have a follow-up..

Okay for the investment I have my investment key philosophy in last call is as you we know in the past several quarters we have build our portfolio of smaller and larger takes and other companies early stage of projects. So most of them happened actually in the past two to three quarters.

So we are using a very conservative approach to evaluate all of these projects for the companies who we can see have strong synergies we may increase our stake to majority holding in the future. But for the cases, we find is no longer a suitable case for our strategic priority and focus, we probably may decide to reduce our investment exposures.

So in general I think in the future looking into 2015 our investment will fully focus on strategic investment deals. We will have very less focus on financial deals. The only thing we're looking at is whether they have enough strategy, synergy with us.

So as a result you may see the number of deals we invest in 2016 may reduce while the deal size may increase. So in general we are taking relatively maybe very cautious approach to evaluate our - all of the deals we just invest in the past or in the future..

Thank you. This is very helpful.

So would it be more a cooperation with New Oriental Education just like what you did for the [Hehei] Technology?.

Hehei is a very good example. We invested in them first and in the second round New Oriental has coming in. I think we are quite open for any kind of co-operations, opportunities to co-operate with New Oriental and the other players in this market, because the K-12 market today actually it’s quite big.

We have a lot of potential and we have a lot of space, everyone can contribute more. And if there is specific project opportunities will happen to compete together and we are happy to do that..

Okay. Thank you. Thank you. My second question is on the Gao Kao and Zhong Kao. Do you have any updates leading from the new policy, Gao Kao policy and the Zhong Kao policy? Thank you..

Yes, I think for the Gao Kao and Zhong Kao, especially for Gao Kao policy it only recommend all of you can looking at the - just release by MOE maybe in January or in February. So I think the Gao Kao first starts for [indiscernible] in the year 2017 and try to implement to the whole nation by 2020.

So the new event will be moved from three plus one today to three plus three in future. Three composites remains Chinese English and the other three are selective on the rest of six or seven subjects including physics, chemistry, biology, geography, history, politics when they apply for colleges.

By far most of the college majors in China actually are engineering which will probably favor the methods and subjects. This can also be benchmarked or can be also be proved by the Shanghai because in Shanghai the most of the college they have released their such requirements by major.

For English perspective I think they will move quickly into a conversation with English and which is a challenge to all English market including us. We also see the trend at Gao Kao will be nationally standardized starting from this year around 25 provinces of China will use the national test papers in the coming Gao Kao.

So the standardization will give Gao Kao with our quality content and nationwide footprint has advantage over local competitors. So I personally feel good about the new policy trend and we try to do more to capture all of the new opportunities coming from the reform..

Okay. Great. Thank you. Congrats on the strong results. Thank you..

Thank you. End of Q&A.

And there are no further questions. This does end today’s call. You may now disconnect..