Image source: The Motley Fool.
17 Education & Technology Group Inc. (YQ 4.89%)
Q4Â 2020 Earnings Call
Mar 08, 2021, 8:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen thank you for standing by and welcome to the 17 Education and Technology Group Inc. fourth quarter and fiscal year 2020 earnings conference call. [Operator instructions]. I must advise you that this conference is being recorded today, Tuesday, March 9, 2021.
I will now hand the conference to your first speaker today, Mr. Raymond Huang, investor relations, director of the company. Please, go ahead.
Raymond Huang -- Investor Relations and Director
Thank you, operator. Hello everyone and thank you for joining us today.17EdTech's earnings release was distributed earlier today and it's available on the company's IR website. On the call with me, today are; Mr. Andy Chang Liu, founder, chairman, and chief executive officer of 17EdTech; and Michael Chao Du, director, and chief financial officer of 17EdTech.
Andy will walk you through our latest business performance and the strategies, followed by Michael, who will discuss our financial performance and the guidance. They will be available to answer your questions during the Q&A session after their prepared remarks. Before we begin, I'd like to remind you that this conference call can make forward-looking statements that you find in Section 20-E of the Security and Exchange Act of 1934, and the U.S. Private Security Litigation Reform Act of 1995.
These forward-looking statements are based upon management's current view, current back pages, and current market and operating conditions and relate to events that involve no -- unknown risks and uncertainties and other factors. All of which are difficult to predict and many of which are beyond the company's control. These risk may cost the company's actual result performance are assumed to differ materially. Further information regarding this and other risk uncertainties or factors is included in the company's filing with U.S.
SEC. The company does not undertake any obligation to update at any forward-looking statement as a result of new information security or otherwise, except as required under applicable law. It is now my pleasure to introduce our chairman and the chief executive officer, Andy please go ahead.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
Thank you, Raymond. Hello, everyone. Thank you all for joining us for our earnings call. This is our first call as a public company since we successfully listed on Nasdaq, in early December 2020.
We are grateful for the support from the investor community, and we believe our IPO helped further strengthen our brand image among parents, students, and public school teachers, as well as help us attract more great talent to join our team. Please, allow me to start with a very quick background for those who might be new to our story. We have successfully developed our differentiated "in-school + after-school" integrated model that coherently brings together our smart in-school classroom solutions and online after-school tutoring operations. Our smart in-school classroom solution operation started in 2011 and provides school teachers was industry-leading tools and content libraries in a wide range of in-school teaching and learning scenarios, including class preparation, class delivery, homework assignment, and grading and academic assessments.
To allow a smoother and more efficient data-driven keep teaching, learning, and tracking experience for teachers, and students at over 70,000 K-12 schools across China. We are now the largest marketing school classroom solution provider in China in terms of MAUs. Under our "in-school + after-school" integrated model, we also offer online K-12 large class after-school tutoring services that complement students in-school learning, leveraging our insights into students' localized education needs and personal learning profile gained from our in-school operations. Powered by our integrated model and technology are unlikely to a large class after-school tutoring courses stand out in terms of a unique approach to personalization based on what data-driven outstanding of individual students' in-school performance, as well as our district level localized insights.
Our business continues to grow rapidly in 2020. In 2020, our net revenues grew by 217% to RMB1.29 million from 2011 -- 2019. Our gross billings from our online K-12 tutoring services were approximately RMB1.65 million, up 203%, and our paid course enrollments reached 2.02 million, up 178%. We are committed to our depreciated "in-school + after-school" integrated model in this highly competitive market.
After multiple years of investment, our in-school products now connecting more teachers, students, and parents and are used at schools across over 300 and 60 cities across China. In addition through more than the 72 -- 722 million homework assignments, students completed all our platform. We're gaining insights into students learning progress, which help us pinpoint the threats and the weakness of the individual students, teachers, students, and parents interact actively around the APS across whereas learning and teaching scenarios, such as commerce and academic assessments. All of this makes it possible for us to live up deliver teaching and services with a higher level of personalization in the after-school tutoring market.
In the fourth quarter of 2020, the average MAU of in-school application for students was approximately 29, representing a year-over-year increase of 28%, approximately 60 million in the fourth quarter of 2019. 2021 spring semester has also recently started, and we are happy to see continuous growth in the use of our in-school applications among teachers and students in terms of the MAU in the first week of the semester, as compared with the first week of the fall semester of 2020. The long-term trend of informatization within China's public education system presents tremendous growth opportunities. Government policy has also been supportive since technology will allow students in smaller cities to have a better chance than ever to access the same high-quality teaching opportunities steps that do not have otherwise only be enjoyed by kids living in large cities.
In April 2018, the Ministry of Education issued the education informatization 2.0 Action Plan, and in February 2019, the State Council issued China's education modernization 235 emphasizing the position and role of education informatization in the process of promoting education modernization. Just recently, On January 28, 2021, the opinions of the Ministry of Education and the four other departments on strengthening the construction and application of online education and teaching resources for primary and secondary schools were releasing -- were released. We believe education informatization will provide huge room for our in-school operations to grow in the years ahead. We have continued to invest in our smart in-school solutions in terms of products, content, services, and school coverage of outstanding student's learning profile continues to improve as the use of apps in the in-school scenarios.
This at the same time helps us improve the quality of our after-school tutoring business and services to better address their own learning needs. We see great synergies and further potentials between our in-school and after-school business in helping us provide products and services that better address the needs of our users and customers. Under our integrated model, we have achieved rapid growth in our after-school tutoring business leveraging the advantages of our proprietary user raise, localized content, and data insights into students learning from our in-school business. Our paid course enrollments increased by 165% year over year, to 849,000 in the fourth quarter of 2020.
And our annual total paid course enrollments have reached 2.02 million. The integrated model allows us to grow rapidly without relying on massive spending on external traffic acquisition. This allows us to enjoy healthy new customer acquisition costs and more attractive unique economics. We continue to maintain low and relatively stable new customer acquisition costs in this highly competitive market given our differentiated customer acquisition approach and high entry barrier, the in-school industry our new customer acquisition costs are also less susceptible to industry competition and cost increases.
Our new customer CEC has demonstrated strong stability over the past few quarters, including this last winter. We are achieving an increasing high number of new paid course enrollments conversion such demanded in customer acquisition costs has allowed us to achieve better unique economics and healthier growth. We plan to continue to grow our online large class K-12 after-school tutoring business relying on our proprietary user base, and our integrated model. We are confident that this unique integrated model allows us to grow and compete effectively and efficiently in the market.
Another benefit of our integrated model is the insight we gain into student's personal learning needs and our understanding of the local teaching and assessment emphasis. My team and I spend a significant time reaching out to our customers to better understand their educational needs. Together with that feedback and a long-standing of their in-school academic profiles, we have invested in our proprietary teaching assistant system [Inaudible]. Borrowing remains of an ancient Chinese doctor, we can -- who can diagnose diseases from limited symptoms.
This system allows us to better integrate the insights we gain from our in-school operations with our after-school children and business on an individual basis to achieve a higher level of personalization. We are noted that the renewal rates of students who are helped by such a system tend to have renewal rates of up to high single-digit higher rates than those who is in-school learning data are not yet available to us. We see huge potential in our integrated model not only because it allows us to achieve healthier customer acquisition in this market so that more resources can be invested into improving our products and services, but also because we believe it has its unique value in evaluating teaching and learning efficiencies and effectiveness both in school and after-school to new hate that will create more value for our users and customers. Now, I will turn the call over to Michael.
Obviously, he will walk you through our latest financial performance.
Michael Chao Du -- Director and Chief Financial Officer
Thank you. Thanks, Andy and thank you, everyone, for joining our call. I will now walk you through our financial and operating results. Please note that all financial data I talked about will be presented to me on our terms.
I'm pleased to report our strong results for the fourth quarter and for the full year of 2020, we achieved strong top-line growth. Net revenues increased by 153% year over year, to RMB487 million in the fourth quarter of 2020, an increase by 218.6% to RMB1,294.4 million in 2020. The net revenues from online K-12 tutoring services increased by 164% to RMB468 million in the fourth quarter of2020, an increase by 239%, to RMB1,219 million in 2020. Gross billings of online K-12 tutoring services, which is a non-GAAP measure increased by 166% year over year to RMB579 million in the fourth quarter of 2020 that increased by 203% year over year to 1,655 million for the full year.
Paid course enrollments increased by 165% year over year to 849,000 in the fourth quarter of 2020, an increase by 178% year over year to 2.02 million. In addition to robust revenue growth, our operational efficiency continues to improve in the fourth quarter and the year 2020. Our gross margin was 64.3% in the fourth quarter of 2020, improving from 62.9% in the fourth quarter of 2019. It was also --61.7% for the full year 2020, compared with 57.3% in 2019.
Our adjusted now loss also a non-GAAP measure, which excludes share-based compensation expenses was RMB134.6 million loss in the fourth quarter of 2020. A decrease from RMB163 million in the fourth quarter of 2019. For the full year 2020, our adjusted net loss was RMB984 million, compared was RMB871 million of 2019. In terms of adjusted net loss as a percentage of net revenue, it was negative 27.7% in the fourth quarter of 2020, significantly narrowed from negative 84.8% in the fourth quarter of 2019.
For the full-year 2020, our adjusted net loss as a percentage of net revenues was negative 76%, a significant decrease from the negative 214% in 2019. We're happy to share that our operating cash flow has also turned positive in the first quarter -- in the fourth quarter of 2020. Our business model has strong operational leverage. Our differentiated integrated model allows us to grow as a relatively attractive and stable customer acquisition costs.
As our net revenue grows from online K-12 tutoring businesses will be much faster than the increase in costs and expenses associated with our in-school operations. Our operational leverage continues to increase as we grow. Our larger revenue base allows us to better observe the sales and marketing, R&D, and SG&A expenses associated with our in-school operations, and thus allow continuous improvements in our operational efficiency. Next, I would like to go through our fourth-quarter financials in greater detail.
Our net revenues for the fourth quarters of 2020 will RMB487 million, representing a year-over-year increase of 153% from RMB192 million in the fourth quarter of 2019. The increase was primarily driven by the increasing net revenues from our online K-12 tutoring businesses. Our net revenues from online K-12 tutoring businesses were RMB406 million, up 164% year over year from RMB177 million in the fourth quarter of 2019. And accounted for 96% of our total revenues.
The increase was primarily driven by the increasing paid course enrollments, and increase in the median levels of our cost fees. Our paid course enrollments for the fourth quarter of 2020 were 849,000 representing an increase of 165% year over year from approximately 320,000 in the fourth quarter of 2019. Our costs on revenue for the fourth quarter of 2020 was RMB174 million, representing an increase of 144% year over year, primarily due to the increase in compensation costs for instructors and tutors and teaching materials, which were largely in line with their revenue gross. Our gross profit for the fourth quarter was RMB313 million representing a year-over-year increase of 159%.
The increase was primarily driven by the increasing net revenues. We also see grossing our gross margin improving to 64.3% from 62.9% in the first quarter last year. That increase would primarily attribute to -- attributable to the gross of the business operations scale as well as improvements in our operational efficiency. Our average MAUs of in-school applications for students for the fourth quarter in 2020 was RMB20.4 million representing a year-over-year increase of 28% from around RMB60 million in the fourth quarter of 2019.
Moving to the expense side. Our total expense -- operating expenses for the fourth was RMB676 million. This includes 230 million share-based compensation expenses. Our total operating expenses as a percentage of net revenues decreased to 139% from 137% in the fourth quarter of 2019.
Our Sales and marketing expenses for the fourth quarter of 2020 were RMB247 million. This includes 23.4 million share-based compensation expenses. This represents an increase of 74.5% from RMB142 million in the fourth quarter of 2019. The increase was significantly slower than our revenue growth.
This was primarily due to increasing our operational efficiency as well as our payments into the salary and the welfare for sales and marketing personnel, branding-related expenses as well as the promotion of course expenses as we have enhanced our sales and marketing efforts to prepare our gross. We have seen similar trends align the expenses, which were RMB192 million representing year-over-year growth of 49%. The increase was primarily due to continuous investments in R&Ds including salaries and welfare for R&D personnel. G&A expenses will RMB237 million, which also includes share-based compensation expenses of RMB176 million.
The share-based compensation was probably due to an increase of share-based compensation related to IPO. Our net loss on a GAAP basis was RMB365 million, compared was RMB178 million last quarter, but on an adjusted basis which excludes share-based compensation, we see our adjusted now loss narrowing to RMB135 million, which was negative 27.7% of our net revenues in the first -- in the fourth quarter 2020, compared to a negative 84.8% in the fourth quarter in 2019. As of December 31, 2020, other than restricted cash of around -- RMB0.2 million, our cash and cash equivalents RMB2.8 billion, compared to RMB654 million as of December 31, 2019. And finally, our deferred revenue was RMB588 million, up145% year over year.
This was primarily attributable to our rapid gross in our off-school tutoring businesses. We generally collect cost fees using the bonds, which we initially recorded as different revenues. We believe our deferred revenue gives us greater visibility of our upcoming quarter's performance. with that, I will now provide our views on our business outlook.
Based on our current estimates, total revenues for the first quarter of 2021 are expected to be between 458 million and 470 million, representing a year-over-year increase of around 100% to 105.2%. These estimates represent our current and preliminary review, which are subject to potential change. Although due to inactive accretion of convertible redeem preferred shares, our pure accounting treatment, we have actually achieved net income available to ordinary shareholders of RMB552.6 million in the fourth quarter of 2020, we do not expect this to continue and this is a one-off event. We will continue to balance the growth rate and profitability.
We believe at this stage, continuous investment the entire business grows as more important with the company. To conclude, I would like to remind everyone about the seasonality within our businesses. The fourth quarter tends to be a quarter was relatively higher margins. We typically have higher revenue and lower selling and marketing expenses in the second and fourth quarters of the year, and thus, higher profitability.
And also, relatively lower quarter-to-quarter revenue growth, we'll be seeing in the first and third quarters. But together with higher sales and marketing expenses as a majority of the conversion and promotion expenses activities take place in winter and summer vacations. Therefore, for the first and second quarters, they tend to have to experience more losses. This is a primary result of first; we primarily rely on our proprietary user base for our paid course enrollments, therefore the biggest chunk of our selling and marketing expenses are actually related to providing the services for potential students instead of paying to external parties for them to attend our trial courses.
That's why a substantial portion of our tri postal service fee takes place in the first and second quarters. Our similar reasons, we typically see more material increases in paid course enrollments after the winter and summer vacation, and which have more revenue uplift in the second and fourth quarters on a quarter-over-quarter basis. Similarly, our sales and marketing expenses in second and fourth quarters tend to be lower than the first and third quarter. This fluctuation is further amplified by the fact that we don't incur a large amounts of online external traffic expense -- acquisition expenses, which is common in the industry.
That's why relative to our peers, we might be seeing a slightly stronger seasonality fluctuation between different quarters. We do expect us to reach break-even our profitabilities in the second or the fourth quarters easier and earlier when compared with the first or third quarters on a full-year basis. However, if reaching profitability in certain quarters especially in the second and the fourth quarter doesn't automatically guarantee the next quarter to be profitable due to the seasonality reasons I mentioned above. That's why, we internal review our performance and operational efficiency, our semi-annual basis to gain more company.
With that, that concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A sessions.
Questions & Answers:
Operator
Thank you. Ladies and gentlemen, we now begin the Q&A session. Thank you. Our first telephone question comes from Sheng Zhong from Morgan Stanley.
Please ask your question, Sheng.
Sheng Zhong -- Morgan Stanley -- Analyst
Thank you very much for taking my question. My first question is on your next quarter revenue guidance. How much impact do you see from them based on late Chinese New Year, and also provided with the revenue guidance for the full year next year? And the second question is about the regulation. We see governments disallow electronic homework and especially for primary school students.
The government now required the homework to beat down in-school. Do you think this will impact the in-school business of the MAUs' growth? And do you have the plan to do more external student acquisition if there is an impact from the regulation? Thank you very much.
Michael Chao Du -- Director and Chief Financial Officer
Thanks, Sheng. I'll answer the first question and then, I'll pass it to Andy for the second question. So, first questions on that quarter's revenue guidance. How much of that was affected by late Chinese New Year's is actually indeed affected by that.
We actually have --already completed our winter conversion cycle and we do see strong growth during that period. However, as the Chinese New Year is actually relatively late, so actually you know for the spring revenues actually it has one whole week less of revenue that is being recognized in the first quarter. On our initial estimation, It probably -- will actually decrease their overall revenue by around 10% assuming on whole all cycles was similar as the previous year. In terms of annual revenue guidance, we actually do not provide revenue guidance for the full year.
With that, I will pass to Andy for the second question.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
I will speak in Chinese and Michael will translate in English. [Foreign language].
Michael Chao Du -- Director and Chief Financial Officer
Even considering the regulation we have seen, we are still very confident in our overall annual growth. In terms of revenues especially, we are confident we are able to achieve that without relying on external traffic resistance.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
[Foreign language]
Michael Chao Du -- Director and Chief Financial Officer
Then I'll further elaborate on the reasons behind that. So, first in terms of our in-school ecosystem, essentially, it is not only homework. Actually, it includes cost preparation, clock delivery, homework -- homework assignment as well as time assessments, which is comprehensive multiple scenarios interacting with the teachers, students, and parents. Secondly, even in terms of homework, it can be completed by students on multiple types of devices, including PCs, pads, and including mobile phones in the home.
Also, in terms of completing homework at home on different, different multiple devices it was actually activities controlled by the parents and students themselves, so we don't see much impact on that. And also, the philosophy I think starting from last year, we actually have been exploring private domains where we are able to back up and duplicate the reach to parents and to various students of our various social networks, which further allow us to be less impact in terms of the apps yourself.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
[Foreign language]
Michael Chao Du -- Director and Chief Financial Officer
So, therefore, those in terms of near term and a longer term of our integrated model, we are fairly confident because we believe if you look at the things three or five years or even longer cycle or longer horizons of informatization and the modernization of China's education system are irreversible. This is actually the only way to achieve or to improve education and quality in China. So, we are very confident as long as we can provide high values to the teachers, students, and parents in class preparations, deliveries, homework assessments, various learning, and teaching scenarios, we are confident this is a model that has a long prosper -- prosperity. If some of you may be interested, you are encouraged to actually see the 14 five-year plans of protection and discussion about the informatization of China's education over the next few years.
We see very strong needs and a willingness to prepare this from China's government.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
That's all.
Sheng Zhong -- Morgan Stanley -- Analyst
Thank you, very much Andy and Michael. May I ask for last that if you'll make your outlook for next year?
Michael Chao Du -- Director and Chief Financial Officer
Thanks so much, Sheng Zhong. So, we don't actually provide say I'll look for a particular one year or so, but I think despite the policy environment, we are still confident that the MAU of apps is likely to double over the next two to three years on the horizon.
Sheng Zhong -- Morgan Stanley -- Analyst
Thank you.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
[Foreign language]
Michael Chao Du -- Director and Chief Financial Officer
Yeah. I just have to supplement her remarks and added. So, probably it might be -- to be more accurate it will be unique R&Ds both in terms of apps as well as potential PC-ordered outperformance.
Operator
Our next telephone question in the queue is from Lucy Yu from BOFA Securities. Please, ask your question.
Lucy Yu -- Bank of America Merrill Lynch -- Analyst
Thank you, Operator. Thank you, Michael. So I have two questions here. One is on the policy side, but more on the after-school tutoring.
So, we have seen governments requiring or instructors to have teaching qualifications. So, may I know that how many of your current instructors that teaching online now is without the qualification at the moment. So, if they do not have the qualifications, does it mean that they can not teach their classes for the upcoming semester? And also, how should we think about the competition after-school practice going forward. So that's question No.1.
No.2 is, we elaborate a bit more about our winter promotion strategy. So, I have seen that the conversion rates from in-school to after-school went up quite nicely in the fourth quarter of last year within a year being largely flattish quote on quote, but that is getting warmer actually a lot. So, how should we think about the conversion rates from in-school to after-school in 2021? Thank you.
Michael Chao Du -- Director and Chief Financial Officer
Thanks, Lucy. Let me quickly translate the questions. So basically in terms of the instructor qualifications, as I recall, we have more than around two-thirds of our instructors actually are properly qualified or have already and only around 10% of them have passed all the tests but not yet got the qualifications yet. We don't see this have a major impact on us as the vast majority of their revenues generated from instructors are with those with qualifications.
And we actually are among the leading players with a higher percentage of teachers or instructors having such qualifications. On your second question, in terms of after-school tutoring computation and how we can -- how we see our fourth quarter paid course enrollments. I think the fourth quarter paid course enrollments were a combination of our improvements in terms of the students. We can convert from our school traffic as well as you know the student -- existing students renew their calls in signing up of their courses.
That's why you can see the number is keeping increasing in the fourth quarter. In terms of our winter strategy, actually, our expectation of 2020, as you know the winter conversion season actually has already completed. We have some preliminary statistics from that and we see them are very promising. And we're happy to see the trend.
In summary, we've seen first in terms of the number of the foot -- full-price students that get converted from our winter actually has increased significantly, which is actually more than double the same number of last winter. Secondly, in terms of unique customer acquisition expenses, it also remains highly stable. I think it only increased by around 10%, compared to the last conversion cycle, which is significantly slower than the industry increase. We believe this is a significant benefit and edge of our integrity models.
That's why with as you mentioned earlier the paid course enrollment that took place in the fourth quarter, and also what we have seen in their winter cycle, we actually see it as approaching what we believe as major milestones for our business where the number of concurrent students getting very close to 21 million enrollments after the winter cycle. S for 2021, I think we are -- as Andy had mentioned earlier, we are very confident to continue to grow in these sectors despite the competition, and we are confident delivering very strong overall.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
[Foreign language]
Michael Chao Du -- Director and Chief Financial Officer
So the numbers that we have seen in the fourth quarter and also the initial statistic we've seen on the winter where you know rallied various stable [Inaudible] from only increasing over only 10% and also the number of students getting converted was actually doubling what we've seen here last winter 2019 as well. Also, our overall off-school teaching business approach in the SKU very close to 1 million concurrent number -- concurrent full-price students enrollments did it actually all be high. As a result, the long-term advantage of our inherent advantage of our integrity models. So over the last few years, our accumulations of presence in in-school scenarios of more than 70,000 schools have actually is a long-term strength and the benefit that we actually gradually play out in the next few quarters in MAUs.
We're confident that we actually -- will be growing on very healthy, unique customer acquisition expenses in relatively solid growth rates without relying on external traffics.
Lucy Yu -- Bank of America Merrill Lynch -- Analyst
Thank you, so much. Andy and Michael. Thank you.
Operator
[Operator instructions]. The next question is from Sheng Zhong from Morgan Stanley. Please ask your question. Hello, Sheng, your line is open to ask a question.
Please ask.
Sheng Zhong -- Morgan Stanley -- Analyst
Ok. I ask my questions already. But you find me. I want to ask one question, one more question.
Since you mentioned that your retention regime is a strong improvement. So do you -- can you add some color on this perspective? What the retention rates for the student you have in their academic performance record and compared with the normal ones. Thank you.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
[Foreign language]
Michael Chao Du -- Director and Chief Financial Officer
Well, let me translate. So, as we have shown earlier and also some of it has been communicating with us, we do experience customer acquisition expenses that are significantly lower than the industry average, and also add to similar retention rates among the leading players. Therefore, we have -- we enjoy significantly better comments with much higher LTV versus CSC structures. But we also want to share that we do see stronger potentials of our new offerings team proofreaders.
As we show earlier that we have an entry system were utilized the school students who are learning our localized learning daytime information together with our after-school tutoring services. We believe, the vast majority of our potential students or current students actually want to improve their grades in the in-school learning scenarios. That's why, our in-school learning scenarios where we accumulate a lot of data in terms that make assessments, homework data's where the student mistakes and what's a local exam focus. Such insights allow us to be much more efficient in terms of helping students to improve their learning results and to be more targeted.
So, I know people might be more -- this might be more obvious to do to people where the interim model allows us to enjoy significantly lower customer acquisition expenses. But actually in our mind what's even more valuable and especially more valuable in the longer term is that the localized content and data that it provides allow us to actually providing stronger and more efficient and effective off-school tutoring and learning products to the students.
Operator
our next telephone question is from Christine Cho from Goldman Sachs. Please ask your question.
Christine Cho -- Goldman Sachs -- Analyst
Hey, thank you so much for the comprehensive update. Andy and Michael, I just -- I think we could start to notice a lot more of your competitors actually starting to talk about localization as well as potentially exploring some offline customer acquisition channels. Can you highlight any product more R&D on some developments on that side over the last few months that you can highlight? Thank you.
Michael Chao Du -- Director and Chief Financial Officer
Sure.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
[Foreign language]
Michael Chao Du -- Director and Chief Financial Officer
All right. Let me translate what Andy has been sharing. So the question was about you know more and more players talking about localization as well as trying to acquire students or from offline channels. And what were our investments especially R&D product in this aspect? So, I think these actually have as well a trend where we have pioneered if people -- if everyone remembers that even doing a last year's mass meetings roadshow as we have already mentioned that, we have already become the leading among the leading players has the most number of localized tactical versions in terms after-school tutoring courses as well as multiple levels of difficulties for online large classes.
And this is what we have always been in focus about to so that we can provide more services. However, while we believe in having multiple localized cost versions, multiple difficulties actually only the first steps. It has some value to the parents, but may not be as great. Because from parents perspective they don't really know about look -- they don't really look-see localized versions what they really need is to have courses and services that are more targeted to help them in solving their problems and they have seen from in-school and to help them get better prepared to face exams within the schools.
And this to help us back to the level of data of the highest value, the differences of our school level wants to -- at our district-level once it's exam focuses teaching focuses, and what's more likely to be tested. And secondly, our individual level. So what the person's own learning problem is. What are his strengths and weaknesses? How you can be more targeted to providing or tutoring services.
And this too is actually spent well what we have particularly strong was our integrity model. To share with a number more than 10 million students actually have taken our assessments in 2020. This is consistent with a trend where the Chinese government is trying to use progress data instead of one more final exam to evaluate how students are learning. This is a product and services whereas highly demanding in terms of -- both in terms of technology as well as expertise accumulations over the last few years.
Such a large number of students attending them assessments on our platform, more than 10 million of them actually give us significant knowledge advantage in terms of what the school was likely to test. What's the exam focus all such information we actually be imported into our interest system. This system will be used by our tutors so that they can be providing -- so when they provide services to our students it can be more targeted and organized more you know smaller tutoring sessions to talk about more localized school base and individual-based questions in complementing to the overall relatively general large classes. In terms of the offline customer acquisitions, we do this -- see this trend fairly early.
As we've shared earlier, we believe all the players will be actually having our matrix of course some acquisition trends channels both online and offline as the customer acquisition expenses and social platform are becoming increasing and increasingly more expensive. Hiring in terms of when you look at offline, we can do a further dissect into multiple segments. You can -- first is offline but do outside the schools. This is not difficult and doesn't have many barriers.
And that has worked on the industry all offline as she has been doing over the last few years. But the difficulty is that it's more difficult to scale out. It's not as scalable. You can do that.
You have lower customer acquisition expenses but it will be difficult for players to build to such offline structures within a short time, so they can provide major growth. Secondly, like those that involve in-school scenarios even within the in-school scenarios, you have multiple rules pads. First is, product-driven in-school systems similar to us. This requires a much longer multiple years of investments both in terms of products, accountants, trust and a relationship built up was in the schools and students.
This one will believe -- what we believe will be very difficult for others to replicate and build up in a short time. Others what we have seen is more trying to do more efficient in terms of timing and one-off approach such as holding seminars within schools. This is similar to those that took place in apps outside schools. This is also something where offline institutions have been using for multiple years.
It has some advantages in terms of costs, but more difficult to scale up.
Christine Cho -- Goldman Sachs -- Analyst
Thank you so much.
Operator
And next telephone question is from Manik Mahajan from Freemont Capital. Please ask your question Manik.
Manik Mahajan -- Freemont Capital -- Analyst
Hello. Thanks a lot for the detailed insights on the results. I just have one question and that's around the ASP [Inaudible]. So how should we think about the other selling price of all the after-school tutoring courses going forward? And any color you can shed on how it has been trending as for your expectations.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
[Foreign language]
Michael Chao Du -- Director and Chief Financial Officer
So let me share my view of [Inaudible]. In terms of ASP, I believe it's very likely that the average -- on the average basis is likely to grow at around the 1% annual growth over the next few years. The reason behind that is that, if you look at the average price of the online large classes it's around RMB3,000 for the whole year. This is a price even highly acceptable and comfortable for students in Tier 3 and Tier 4 cities.
This would account for around up to 10% of their annual income even in Tier 3 and Tier 4 cities. We have also conducted several surveys, we believe these are fairly comfortable levels where they can accept. Second, in terms of the emphasis and focus on education as a whole and driven by the continuous product improvements of the industry, indeed the only large closet is actually bringing much better and attractive instructors into a lower-tier city so that will be -- we believe it will actually drive continuous demands from even lower-tier cities. Also as for online large classes of an alternative to other formats, it also has a significant price advantage compared to multiple other forms.
So even with a 13% annual price increase over say next two to three price, we still remain competitive.
Operator
There are no further questions at this time. I'd like to hand the call back of speakers for closing remarks. Please continue.
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
Thank you, Operator. In closing, on behalf of the 17EdTech management team, we'd like to thank you for your participation in today's call. If you require any further information, feel free to reach out to us directly. Thank you for joining us today.
This concludes the call.
Duration: 61 minutes
Call participants:
Raymond Huang -- Investor Relations and Director
Andy Chang Liu -- Founder, Chairman, and Chief Executive Officer
Michael Chao Du -- Director and Chief Financial Officer
Sheng Zhong -- Morgan Stanley -- Analyst
Lucy Yu -- Bank of America Merrill Lynch -- Analyst
Christine Cho -- Goldman Sachs -- Analyst
Manik Mahajan -- Freemont Capital -- Analyst
