GSX - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the GSX Techedu Inc.

Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded on November 20, 2020. I would now like to hand the conference over to your first speaker today, Ms. Sandy Qin, IR Senior Manager of GSX. you. Thank ahead. go Please

Sandy Qin

Hello earnings thank today release the available operator. us and for today. on IRwebsite. GSX was company's everyone you, you and joining is Thank distributed earlier

Mr. the Shannon the Larry Chief On will Officer; Shannon will discuss Officer. Ms. financials. Chief and me overview give with today a Executive Chen, Founder, general Chairman call GSX and Financial Larry Shen, are and then

will Shannon Following the available answer your Larry prepared be questions. to and remarks,

beyond this like other Securities expectations would regarding many applicable cause are Further contains to achievements known of SEC. I conference begin, and conditions unknown that information in Private call management's and uncertainties statements which you U.S. are XXXX. with difficult the of all included we as to factors operating involve the and Litigation or other not any update except in the actual The the is obligation risks, predict and defined to as required current factors, Before results, company's which forward-looking market may law. based company's any upon statements undertake forward-looking of to to company's or filings these uncertainties risks, remind relate performance statements, that Act and are does in control or current company These the forward-looking Reform and materially. events and differ the

As a conference recorded. this reminder being is

this and of Relations available archived conference live at GSX a webcast website will addition, call Investor In on gsx.investorroom.com. be

Larry, my pleasure the our please investor Larry. through now website. to same It to subscribe You introduce is go ahead. welcomed quarterly are also to newsletters

Larry Chen

you earnings evening, you Good Thank us for and Thank call. today all all. on you, morning joining good to this, Sandy.

times quarter robust of all-time net year. that which another the X.X is high of achieved hitting quarter same RMB last X.XX billion, of have revenues We with

we students outstanding report school consistent student results grown the largest that also structure our These primary healthier contributor. the marketing We our of improve operating highest innovation more channels, attract the operational for in and competition, employees continuous remain became highest spending increasingly XXXX. training our full an customer revenue continue will have focus net on be face basis through in overall the parents, in our services capabilities. high content well-being we effective and of development top-tier to continue design, from a we acquisition on to believe to and fierce executing the talents. to providing has growth lifetime ROI traffic and strategy our effective committed so the to efficient value. efficiency speak raise to This frontline we extensively costs, pursuing and sector, efficiencies are we to acquisition sticking pleased organizational In our the with quality to our tutors customer year based summer, compensation sales In technology ever staff, meantime, achieved and and to teaching efforts driving invest product to and

in the achieve capabilities and leading ultimate for the will huge manage term, important we of and future. put profit industry to all this starts Excellent success employees. the long-term is serve income an view gross and as it on the to player short a talent While net have a and number our pressure intensive education of and labor-intensive investment our companies spending winner. over Online driver long-term organizational key be be

products brand. our fully our and and and in trial terms business the continue to Gaotu past, teams, In service instructors streamlines integrated on standards, we live on combined model, the Ketang in focus key We online chose Ketang class Gaotu we recently of it to format children focus and business will future. technologies. the and our

enormous large dedication interference [indiscernible]. a demonstrates of results Our our of and believe further goal strategy, era us fast online feeling of during small We opens class the a positions the integration focus our ahead of enhancement chapter learning a the the our the opportunities of to is new this and consolidation of for operational coming educational education deliver quality capture to efficiency class, industry. better and to

has expectations. integration showing the far, So and The improvements. exceeded rates rates class completion conversion significant are our the

will various as such education automation professional focus and Our qualification training Genshuixue brand exams. exam graduate on school post-secondary CET, providing

AI in about witnessed, and AI between of need online are still Some investors synergies in adoption may The and and the pre-K market we've artificial application the [indiscernible] is we what created stage. what education do still discussion. intelligence K-XX the wonder of interaction at preschool AI From the further in observation the of think courses? only by markets

Of increase RMBXXX demand to we course, then making have of some constantly in advancement totaling research third technology, with students see, been we matched you expenses technology of and other AI be and the efforts personalized will solve our needs of and requirements as R&D through million. by with technology. basic the Hence, may can investment the various systems quarter's better

built still them we personalities Regardless to potential in education cultivate past all and our online intense foundation possibilities and industry AI to we to over over bring shape no based to trust and are ignite their truly clients the today, distinguished the believe, results the to their impress frankly the of technology to students the through of [indiscernible] is meaningful help students and to bring and I try see to prepared learning learning our their explore on earn in habits matter vast develops, speaking, genuinely competition and to years. However, that how fully hearts always learning win have interest ultimate is services. great to the solid

value online We are you. for generating our future to more and sharing forward looking of with shareholders the education

our details. our will through operational Now Shannon and CFO, I to the walk pass over to financial call you

Shannon Shen

everyone Thanks, Larry. call. you joining for And thank the

be Please unless otherwise be the reminded Now, in quarter. our will and that operating next provide I that data will terms, walk financial you and guidance all RMB results the noted. through I mentioned financial for

XXXX, quarter For third deliver year-over-year increased solid the million. RMB results. continued revenues to Net of X,XXX by XXX% to we

billion mainly class in in solid is business students revenue of year-over-year. just how entrance of This provinces billings been and than above that players online varied. in billings, pandemic, us to up shy have quarter and XXX%. X,XXX recorded the eighth revenues revenue consecutive quarter, which in generated our is the The due our XXX% one exams more X RMB eleventh our quarter nears from CNY top For with the the entire in Because rank gross the from Net industry. large K-XX XXX%. of helps which million competition. This was year-over-year, reached consecutive as gross the by despite we the year-over-year new both XXX% time, We year. our of tough of much we of delayed net recruitment college online grew cities first last summer holidays were the by timing year and growth high different the school growth one

cities of enrollment result, demand present, was to the Even also vacation. At we XX recruitment paid than we have training affected situation the to increased our in of prior shorter attract a high-quality We set summer a curriculum. term was during summer satisfactory the reducing though in operation Beijing. meet XXXX vacation us of new quite course and number one outside up challenging, centers As our were regional in able by of years, which enrollment. tutors

up to We XXX% X,XXX,XXX, continues set in course adds increase are enrollments and sales in year-over-year. effective of customized courses parents In quarter, was more courses new enrollments experience and both we by providing to efforts. that committed paid constantly brand was which to which driven the and users learning for by number better primarily priced The increase third student marketing The and of students. investments promotional in recorded a our records, huge our regular awareness. first-time in

and operations K-XX Now from revenues. X,XXX let's net Net XXX% million increased for business accounted line. revenues courses XX% break our financials of to by down year-over-year by and our

of of our proportion will continue main K-XX as the expand revenue expect to source revenues. We

K-XX-related by all solely forward, will Going brand. service Ketang Gaotu provided be

of X,XXX This segment market School grow a Within we in prioritizing to price X,XXX the continues it net contributor increase with in the enrollment very of was the compared revenues. because to is same resources at largest validates at Gross rose the our X,XXX [indiscernible] K-XX strategy and to school the Paid The corporate high million. increased around our wanted by mainly X,XXX course year-over-year to consistent fair last was execution the average K-XX The quarter-over-quarter by country. paid quarter XXX% terms last strategy. course provide the quarter achievement in paid of for selling which promised beginning speed, year-over-year K-XX price business, and constantly the courses to billings XXX% made what enrollment we enrollments high-quality ASP primary The which effective of X,XXX,XXX. year. year Primary courses in the around K-XX due contributed factors. by stable for to selling year-over-year the K-XX education and course across demonstrates seasonal access our our around remains for

mismatch X,XXX of approximately cost were servers, cover student best billings the foreign to around were XXX our acquisition year-over-year net XXX quarter professional a the increase by per certain basis X,XXX bandwidth XXX time Paid were compensation, no highest traffic by interested of There quarter-over-quarter and point generated XXX front-loaded around traffic and X,XXX XXX% courses XXXX. the language, XXX which around language, students the recruitment quarter traffic solid to year-over-year of foundation This In acquisition year-over-year Average industry million. rapid of increased from XX% gross front-loaded the Selling to XXXX. X,XXX investments activities tried offset offered Gross significantly period receive sites The summer, remaining year-over-year enrollment our due so in the third the by courses in expense expenses courses other in Within foreign our in in margin second sustainable quality our and always strategically by lays share-based enrollments increased and quarter, grade same in summer in XXXX billings by actual revenues. increased X.X for billings we accounted student expenses million promotional and structure our our cetera. approximately Genshuixue have Net increased increased, in the [ph] round million was call, a We the our that Expenses instruction. gross with language, XXX% prior the our as has which future better XX,XXX. Throughout spending XX%. this we with et up tutors for instructors to interested for foreign profit grown quarter. Gross to for up to of mentioned acquisition. fourth third XX% revenues that in class traffic professional and quarter, of to during the XXX retention. hire for compared significant which profit basis this Non-GAAP to billion. XX traffic and change vacation. the contributed demonstrate third enrollments for courses acquisition for million our by X,XXX and acquisition year-over-year expenses the that, interested excludes and rose the margin, the by course between for and labor, branding quarter, the million gross brand front-loaded best professional improvements the to resulted of XX%. second million were our quarter. year-over-year earnings of non-graduate the in points the under

ahead Excluding channels the industry. various From our the around promotion, of was brand ROI feedback, return on our user investment pure first-time acquisition cost still X.X. of was for

improved student greatly dimensions. have on We our structure several

to in Firstly, strategy from customer proposed cities lower-tier quarter, of penetration those Lower-tier and our really XX% lower-tier our potential. paid due paid to further and proves higher execution cities successful cities regions. improved our our lower-tier this signaling cities a enrollments large of in increased into growth in market exploded acquisition enrollments

of significantly This we benefit proportion a help students. were or structure enrollments in from the our back semester, size grade of overall growth. courses. will short-term future students [indiscernible] subsequential propel non-graduate grade retention Throughout this the graduate increased spring our summer, and Secondly, greatly those

technology our increase strength in Going and an forward, to expenses by primarily development to XXX% in increase million. continue development acquisition. compensation well increased of year-over-year due and Research content invest XXX This take such advantage as the of and efficiency rise was we number an staff. operational in for in to personnel traffic professionals will as

million due the to XX this quarter income third General operational on primarily from and the future. the from administrative realized well and to to XX Our third research important constant and Interest short-term investments million gains of investments from XXX% the expenses our XXXX. cash increased cash equivalents increased is an development from million management short-term for the ongoing quarter XXX further gains ability equivalents, general efficiency the from in of drive XXXX. increase increase for mainly an by quarter investigation. personnel, The X of was realization was of and as cash, generated and an expenses in long-term wealth increase as the and in to increase administrative in and short-term long-term due paid and increase administrative in general million number compensation investments management general staff fees cash, an to during investments quarter. to increase This in investments of and and wealth administrative in [ph]

and business short-term XX, as investments the investments million. higher outflow million quarter with total investments cash XXXX of Net the Zhengzhou had provide X,XXX With our installment was purchase. XX of was cash the I and due short-term expenditures and improve in that, operating our cash outflow increase XX long-term to awareness, operation increase million support of our XXXX. in investments of capital million paid As cash Furthermore, marketing of expenses during market brand an equivalents, of and to fast-growing activities. aggregate an and million we and And XX, compared was have long-term daily equivalents, X,XXX property September expenses growth The also December will for our and paid students and for compensation XXXX, in a share period. third primarily to now of rapid staff cash we outlook. serve XXX for

for the X,XXX our basis. quarter to subject from reflect Our an to year-over-year XXX% a operator. XXX% are and to Thanks, by X,XXX which million, be fourth between projected estimates net current – increase are These revenues change. expectations, on representing million

are okay We Thanks. now to take questions.

Operator

Gregory Instructions] Please Zhao today question first from go comes [Operator Thank The you. ahead. of Barclays.

Gregory Zhao

Chen, my question. Sandy, thanks for Hi, Shen, taking

So in my companies, noticed of past the some in marketing competitive as been So a money investment a six months they question of and market has we acquisition. is and still lot the about spent right? landscape, raised a the lot private user

how to we want will and how GSX' strategy response competition? And think just of competition do last? So think long kind And the plans in you to also, understand this shall and enrollments your years. market is enrollments competition, about the student to the from the saw the sequential impact different a the trend quarter, Thank in bit of September we past you.

Larry Chen

they you, raising there And Greg. say talk education, the a funds. people [Foreign the companies. is Language] in When seen Thank private about there the online companies conditions. several are changes months, have big core we in market And lot past we top are of that some

market just data, live third quarter, if So look at online in we class. look large the at

for four is critical – enrollment moment new we In that actually year. a top terms players. know across number the we whole And the summer revenue, top of top ranked always the among four recruitment

strategically our So we did investments. expand

the and year point we this a highest. market this XXXX, very up it's still the our increased terms marketing Through more pay much look but market the competition are same is we X.X of year, third-party the And spending some conditions they're there year following sales that year. heard to that data, changes. in peer believe at the reach current period to by compared RMB have exceeded this we XXXX. According and in to we some last believe, study And player, each are have the to gone marketing still ROI, attention and During summer billion. might players, summer, turning we probable, of competition the

is efficiency highest strategy on improvement focusing the company support customers, and become on the So believe on capital always efficiency, of intrinsic our focusing the metrics. our us. us, the We continuous we as focusing that, the far always operating will with favor as

Shannon Shen

bring commentation pressure Thanks, the Larry's seems Greg. fierce company. to point, to And in the term, short to a adding

speed. look low accelerate become position commentation the we will only companies after industry and And operating owner. at, will operational with the cash long more clear the efficiency burning become with if the the efficiency final will their term, However, companies higher in

of we think route TMT the we in never sectors changed, each business. when the has the So look at

So evaluate, how about the of questions we've – company lot efficiency. like highest to but has a got which operating

So there couple from perspective, a testify. are think we our we aspects can

has but results a still So flow, a gain fast sector. very cash the we but will first, And the one quarter we testify be second across way list confidence operating still year, the look competitive financial Since company's is if look operating operating found organizational that few – basically of confidence year's at – we in also, the we a way companies whole not in of that have team across – highly have we loss, fairly a second the at will a look positive XXXX, of have speed only probably growth And we to the very – have are organizations. still And is the have to probable although margin. if company's always a we still perspective. to way have most to we the single it you and capability the at we net money, straightforward whole the efficiency. if

lot building point changing is from team embracing team. all We of high management dark been team a culture. So know the both our for things of and in them to back but a reason now companies of short or turn has led through this very solidifying view, the been were year and GSX an to except not in have also voluntarily, has place, of families. health corporate and the and of we a And and lot and core team and organization we our company diversified, sense mention This identity to sellers management middle level senior the other team has a went being by our scalable exceptional always young of attacked management and pandemic industry.

like company for their to the the a career grows fast, the and their when of asset be most – to really scalable the really to the contribute will whole to whole company valuable people and and So the time us. group company willing contribute energy

We need And couple a – are a times. chain long on that and of larger we lot really importance of has value service of online emphasized better. the of times each so education the realize skills we significantly to trend, have the do But be the to a good our the need the perception. more this more

For particularly good other of price be Well, tools, to difficult but traffic it's normal have students and instance, companies long-term late courses, some companies on little new serving courses. acquisition but traffic a may at at recruitment. serve long-term in or may students student their advantage

own our each So we capabilities. on focused improving for long for we remain of link And X% us, organizational to on the better X% chain. strive value

our that's favorable things, will rightful they way when the doing us. to turn to the believe So the are commentation. we face And results

And face expectations. private has financing have some extensively public – activities. terms sector, the of of from don't we on in companies, to and So external both sector lot a do

point cash let's a look at from So first, of balance historical our view.

equivalents, represents and it in investments by So this combination call. and long-term cash balance, short-term of investments here, cash cash a

raised only millions to basically the heard USD XXX of that private by tens contributed our have that around USD or That's XXX comes balance companies or RMB with quarter full or single that, QX, year With the million. end of But X.X XXXX, XXX billion. we grown end XXx So of operating cash higher time USD operating time, by us. cash dollars was XXX even XXx And And flow of flow. to contributed billion. million than news we our XXXX cash around million. XXXX, cash do the has million balance, other X.X the when

the because coming, months, whole this if biggest But intense cash this this for So positive terms. look very cash activities. no routine to of pool, operating has If marketing are the expect flow around to a nine we view, at operating the embracing still we level for in we our And from are million, we we flow the position a year. not is of a operating this in XX remove the this in to such have retention in includes compensation. second, accumulation And net year, payment from abundant. a been and first has independent first RMB activity. review. cash, nine sales cash cash QX cash, our are for of the lawyers And receive despite that the accountants We outflow payment for RMB our by And and contributed billion from enrollment months, expenses, basically season retention retention with investment point

our Then view property centers rentals our of the year. cash opening this whole payments hold compared other little grow our purchase. and XX at balance payment reduce execute That's needs fast, in year. share that repurchase a still really the quarter. to still, second And we place. cash across our also So the we about first And in cities. we positive at decorations installed paid the we point, on plan we Zhengzhou on the also, bit are some operating beginning a to And operating when position because mainly

operating our mentioned, believe of And as strong or still like that flow, we markets, but we confidence, have Larry has the highest capability. terms the in our investors companies So they always efficiency. cash organizational just reflects operating

questions. Greg. So hope that your address Thanks,

Gregory Zhao

thank u very Okay, cuch

Shannon Shen

Greg. Thanks,

Operator

from go comes Citi. of question Mark Li next The ahead. Please

Mark Li

Hi margin. ask management. I for want this taking my gross you for Thank questions. to quarter's

But trend. think what seems and are think four to we to and also well. mean, I ASP be to two point which year to softer scale have decline, the so bit QX I doing our quarter-on-quarter, I last be compared a seems

also gross what going I forward? you. the the what is So would about margin? I mean, the think we know Thank for trend reason And

Shannon Shen

Mark. thanks Okay,

year-over-year last basis slightly quarter-over-quarter on margin, quarter, is So, our trend, decreased but we trend. a margin in increasing gross look a our gross if at an the

the basically reason is – seasonality. the of that's because So

distinction. become become our may base the show so like – very large, a will when seasonality student we So

limited in promotional quarter, So revenue. a large with provided third number the we to classes contribution of

fixed third to students. However, as especially about promotional month costs We to service the labor training a to it have the in better experience for the learning web to upfront and provide like networks, such full them students, costs perform also quarter, the our infrastructures, provide still tutoring a day-to-day and for recruit incurs the to students. tutors and classic all

So increased I that all when concentration for the little also, bit little summer, just our bit. because send helped tutors late, caused and some to salary paid a like us to – a in mentioned because exams school both And learning of was college of high the students. that we materials entrance

revenue the that learning can you a well. as increased a so And of proportion materials cost, bit little see

So will like that's But learning has gross reason also in provide why the our QX, and see courses will a foresee that's we get Thanks. we distribution recovered quarter-over-quarter we in do gross the to our full QX. decline. more be Because students season the margin margin that even. a

Mark Li

you. Thank Okay.

Operator

Zheng comes question of Please from Haitong The International. next Maggie go ahead.

Maggie Zheng

shrinked you I because base there in were was taking it there some the though Is we the or marketing selling paid question. in quarter? conversion Thank decline explain you is quarter-on-quarter K-XX enrollments that? even it that the this rates student efforts, notice our on is have can my increased a of because – for

Shannon Shen

Maggie. Thanks,

seasonality. is this due also to So the

happened first retentions So the and recruitments new in billings and student quarter, in most Typically, shows gross the and seasonality. in enrollment second business happened quarter for the student the while K-XX fourth third most actually quarter. distinct

when quarter, expenses third majority of are the selling to spent users, first-time paid during the enrollments marketing attract and So them. we

dollars. retention So paid this too too – do cause to extra most compares much enrollments the from quarter come not second when many and

but such, As the quarter quarter enrollments, marketing fourth from second the expenses. and rising typically selling trend shows the Same third with goes quarter.

growth compare expect will quarter-over- the and the actually, And may range compare come they XX%. QX, most in paying of between at look our to enrollments was XX% if changes quarter users if enrollments first-time we paid from only the quarter-over-quarter retention. we grow, QX we rate So to the

the I our have through actually X.X That's enrollment. that's So great apple-to-apple seasonality we came that that can from That's when quarter an the And that, portion in happened a XXXX. also around XXXX, But trend we – retention. time the do in in actually we decrease comparison. mentioned. in XXXX, recall in because comes recall slight we first of If in quarter QX the all enrollments. of a million this paid actually see course last the

So going That's all think fourth they paid a time. students, we student of new one. well. a to million I'd will we efforts the a base, enrollment forward, then will students as decrease X activities or foresee same quarter, recruitments, if convince first the the lot And significantly, that by – that increase In the in really XXXX that in retention the larger they one course over say, in probably do quarter single X million, when do show then the only needs they at we quarter, about because if will contribute XXX enrollments. million have

first number in higher will perspective gross quarter Thanks. on the we So be gross and the third the the And see and quarter all that the usually and quarter. fourth enrollment and will paid going quarter-over-quarter forward, for seasonality. enrollment billing of and the quarter, paid a second billings because that's decrease

Maggie Zheng

Thank you.

Operator

UBS. from question next Felix Please The go ahead. Liu of

Felix Liu

I during release very am that towards the you you on approach much earnings during the my focus I selling what you question. and selling will will LTV-based – mentioned release on that much I hear towards Good taking very LTV-based evening, approach earnings focus management, for you marketing. agree thank and

lifetime And peers, the industry I'm And wondering platform? I briefly with definitely your typically previous how could long the is just question declining. elaborate second what on – with stay – on your My of a period, So does that that? outperforming student? of sort the value ROI. average you is ROI of is you're student understand the compared

So to strategies periods? are with previous you working on any you the compared Thank ROI potentially improving the

Shannon Shen

for Thanks Felix. the Thanks, question.

sector. largest for still So is market school primary in the K-XX the

energy of and market, So we a best satisfaction. parents to always this serve and is the to need best their is strategy a put lot students to

little So value can stay over – on the lot achieve a lifetime strategic term. the can may way, improve how we so them that's primary the further have and or even platform longer we a we of longer, advancement only long And in this bit students.

have School segment enhanced from aspects. our a Primary we few Specifically,

First, for quality. teaching the

recruiting, focus to teaching our continue We develop on talent.

materials quarter also instructors. provide has curriculum experience. upgrade primary ensure sector. credibility to to school product, generation both top-tier and and parents loved So like great psychology as trainings of and visual enhance strong them attention very serve experience. And to teachers a teaching improve education them upgraded to have in joined to have top students And live by had to to our the our provide few past to better from young the order school the we team notch we enable who well. tutor result-driven serve continuously paid they And – learning Internet course are service with we And us to parents students the quite there streaming our also, technology the capability-oriented in a comprehensively recently, are we system a them, to our from smooth third, recruited parents. to interaction second, we end, and the we our and And primary holding design know learning

all end retention year-over-year increased school do retention just our And in the primary our primary in both made, from rate we see fall, is basis. period with improvements we significant sectors retention though it basis schools the even the quarter-over-quarter factors. improvement see all a and rate, So like a the leading on on we

sector know the And in top that little the retention middle from now, So become and primary high it's was already like may a in lower school school all our company. bit past, right the than rate like our you one school.

that So worked primary the your our well. second shows on all our sector. strategy for also school can partially And address that about question sector the very ROI

a actually, of put high sectors middle so school. level school a energy and So has on school lot the when primary compared primary we to – school of lower ROI sector

the than ROI has LTV. past started primary when mentioned, was school to quarter. But that major do potential primary bit I the a little as to revenue the So just so school lower students we a see become contributor,

remain what lifetime or just value quarter. single just one two to need or the on the on So is on we do not focused

we the help lower a bear As place. a ROI that time first we stay can longer in Thanks. long as them slightly can for

Felix Liu

much. very you Thank

Operator

The S. Kim next comes from ahead. go question JPMorgan. Please of D.

D. S. Kim

Hi good a Shannon. evening. Hi questions. Mr. Thanks for Chen, have I hi two. taking lot my

through you for in now a consider given question, expensively the some in the the and just if good? – summer kind in your still changes length question. second regarding That's the follow-up, that platforms ID. on economics so, – follow-up we channel lifetime acquired older check helping top point. like group acquisition way level student to does ways scenario that And those traffic and prepare too I the retained say, term, larger existing may, unit confirm developing becomes past your of you economics what's how [indiscernible] where That's Mr. Would as student case did the of customer unlikely where newly if student My acquire May grow third-party in can our for we strategy we Chen. a first high that medium of homework assumption? even the question on First products just some and the generate organic engage. I just the excluding tier first during that to And student assume is unit an the possible, question. changes add if and my to if about [indiscernible]

So the And bit and a me. noticed you it we to elaborate very organic consider would rationale. have possible, if term? I to medium way, plan over also online as That's have And a And acquired could why [indiscernible] by that for you you business recently? pool, of backup much. the that thank

Shannon Shen

Mr. Thanks Kim.

So first good question really sector. is value – discussed something in your I think question that's that's that the because is a about

maybe generate the that's lot the students, the from the retention whether a a than UE new students. lower you gather because new rate may slightly that say students So can of is the positive companies existing news

how platform in a new about student when to longer that's we time. the why retain So think for a

So did that's in the importantly very one summer. thing we

prior summer just summer because, a different the to as semesters companies, up we mass the a at bit quite few And is provinces because just open compared earlier, different years. lot little pace vacation mentioned summer, in gave shorter the summer witnessed a semester curriculum So the I is this they the actually, of times. summer

longer our of quite view, rate see So like us, a they students it we full and do players, they – students just gave lot then directly the stay of point semester. then the a with the few for other the retention experience higher But summer up the from semester is. put

– about client's think view client's we we the when viewpoint the taking more. are So question, the

why to recruiting complete higher curriculum the semester as that have results the out have whole working Only through go to see us. examination. semester. post So students they level on you systematic. semester summer, and that we students curriculum, more do them can in the they we at if insist the better the they Because summer do and stay both And from that get the we that's that's when look the fall the retention stay full summer relate loyalty a this students, with to of

we why our in that's the works. actually strategy do So see summer like

So the like traffic organic second homework is question then about your app.

So - Chen the Xiangdong Larry Techedu Inc GSX question. to

Larry Chen

LTV. firstly, about talk I to So to means want acquisition LTV, to elements: Language] When [Foreign three which are we we about enrollment. regular cost customer there traffic one add cost, spend the bring important

to selling company’s margin. efficiencies. relates average closely profit second operating The gross factor this metric and And prices is

that to many if sector prices will attention the care not about they pay companies and do efficiencies, defer. calculation LTV they operating of So one their also

is will It depth. retention retention Retention so is player important. defines every factor calculate rate. rate third And LIBOR The rates. their

elements has depends that use players’ this method company specific the I this development, in traffic. for specific features three lever what are bring LTE for if integrate players, this customer in and look match stage, which a the the stage in of bring many a of long-term they region and methodology product operating So we to match will to – to the has will on to like. the efficiency. And think their us similar their only effect, It doing combine has short, advantages. will best As traffic, what as organization organic match explorations will higher we Language] bring all [Foreign stages competitive the them

and still reserving. Yes. are are exploring We

D. S. Kim

you Thank answers. the insights for all and so much

Shannon Shen

Thanks.

Operator

your – question And I’m next sorry go ahead.

Shannon Shen

like that Your third question? news of of Is kind mentioned question like online potential other just was you the acquisition schools. that we your you takeover saw two about

D. S. Kim

of read and online has [indiscernible] if weeks to we of listed ago. ticker. GSX company I but that the at couple said U.S. was case, an an article, another a clarify it acquired if in [Indiscernible] [indiscernible] did new article, invention the that But misinformation, wanted arm new a Maybe just was

Larry Chen

us. have business any model still [Foreign have Not public compared Language] reached ultimate And any online to group, we The communications depends results pushing team [indiscernible] will similar If better announcements. decisions, operations and – has just schools. have we communications. a we

D. S. Kim

you, sir. Thank you, sir. Thank

Shannon Shen

some they all all for something have Thanks, to because education like industry. And but parties. and – have like innovative communications team whole possible the we a and co-operations kinds new acquire experience always open That's from, may like management to and in of handle students. for – pushing online also the also, learn deep the like we team founder to like very are the ways

we Thanks. don't make the now, things if happened, substantially really clear you something an just a have we about announcement. will plan like of Then potential that As mentioned.

Operator

question Please ahead. T.H. next Tian The of comes go Capital. from Hou

Tian Hou

Shannon questions. Sandy Hi what two, Those questions One Larry, elementary, average Thank size enrollment high two the is school, in basic. your for class composition That's the revenue middle is as of what pretty and composition? school well is the Number as two the is are one. number QX? and you.

Shannon Shen

Thanks.

primary in compared that the quarter, to primary we this bit our class, the high biggest your school, high than first has school question SG to just means your your average little school class size average revenue high the and So more new question even mentioned addresses the question. X,XXX. sector second reached so about up and contributed And because junior of and quarter middle high size third Hope of in school. a contributor well is Thanks. is the basically which school because for lower enrollments

Tian Hou

Yes, Shannon. Thank you.

Operator

next go comes Please Your question ahead. Xie Suisse. from of Alex Credit

Alex Xie

you thank my Hi questions. for taking

So Language] in Chinese I'll translate ask myself. and my is question about So [Foreign organization then first first capabilities.

that main mentioned main this always challenges you ahead. will advantage and your be So

on your your change is changes different future of on the second your organization elaborate the and aspects And So organization structure the services. of capabilities post upgrade? view what's your product question and about

services portfolio more each the become Thank product intensified, For diversified? whether customer will to that more intense, become and example, more you. the become with

Larry Chen

Alex. Thank Language] you, [Foreign

moment. presence, the we GSX, So have And competitive of three through years the started like know high can are you company. online starts pure education metric better some we an can are capability, at our [Foreign company, sector. as data we we key first have independent as a we of that it into our And is of advantage you operations, of we a understand read the of the the firm. core that data through online struggled our education the So sense our Language] GSX, the online people, have that details. GSX, player, a organizational and Every in company, result, every financials, you The standards.

GSX, always and ourselves the Language] people We [Foreign the down review passing time we look self-criticism, through [indiscernible]. say this have very street, the they aspirant. always of always On staff

Gaotu it's September serious, those kick we in in always out resources, recruit people how we [Foreign and think out of upgraded our strict, And have we products, these encourage win two are curious, I be management how people, meaning this actually integrated to these can [indiscernible] how and always have talent we of into embedded more into we lives. values the new the that figured battle. I in Ketang and have density mainly believe And talent, we time. in are KXX Since we brand, Gaotu aspiration our have our Ketang, instructors have we brands Ketang. and are we in the people. this we all our year, human also through new of Language] Genshuixue And team. technology, Gaotu larger daily

Language] education, [Foreign In not cultivating efficient with and stuff. Ketang and core effective competitive more but Gaotu when also only more addition, is teaching, about we the training. see about will We mention

the for looking responsible, tutors. always most are highest quality we So the

bring believe future students now, want word Language] resolve how to online. innovative interactions and developing quality. programming have try education explorations, mix, students, with us you. recruited to it the a courses. education, our the of demand product to capabilities students future we core a to closely is, and us. and word is the And [Foreign matches to is more we online us the the They can courses small is improve. services. customers. And the between Whenever frequency to and actually we that quality results always classes, guarantee engagements and our of one-on-one our we feelings of improve to classes change. of are between currently organizational intimacy Thank do we and for want to have our [Foreign We our the education, the want we tutoring This key some students, key match want education wants want about They the – the the learning like and that As belief improve and near Language] improve meet help when we motivations. Lastly, secure we capabilities. to experiences they have And large this online of current what the XX,XXX mentioned education another

Alex Xie

much. you very Got it. Thank helpful. Very

Operator

remarks. would This back conference the to for closing Qin like any question-and-answer Sandy concludes over our to session. turn I

Sandy Qin

thank Okay, And joining operator. you, thank the everyone for today. you call

a questions, have feel news you to gsx.investorroom.com. or very website the If please subscribe directly. to company Please much. don't any at on free Thank hesitate IR us you contact to alert further our company

Operator

The conference you has for presentation. concluded. now attending today’s Thank

disconnect. now may You

Gaotu Techedu (GOTU) 20 Nov 202020 Q3 Earnings call transcript