GOTU - Earnings call transcript Q1 2021

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Operator

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

First Quarter 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. Instructions]. [Operator event on this XXXX. May being is note, Wednesday, recorded XX, Please would the Ms. speaker hand like over I to first conference now to your today, Qin, GOTU. Director Sandy IR of Thank you. Please ahead. go

Sandy Qin

Hello, distributed earlier is joining operator. Thank at you IR the and and ir.gaotu.cn. earnings was GOTU's available for you, release us everyone, company's today. website on thank

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

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

forward we contains statements management's upon expectations to forward-looking or Before Private events are remind and call defined current and uncertainties operating known involve current as to this unknown These in other relate U.S. conference risks, Act like conditions and looking I'd statements that Reform and Securities based you begin, Litigation market that XXXX. factors. of

and to are differ materially. are regarding company the performance to difficult achievements All and other company's or these company's not actual company's filings of The cause in uncertainties undertake beyond many or to Further the required and the statement, SEC. any law. factors included with except forward-looking risks, of is may control update the obligation results, which predict as applicable which information any does under

conference this reminder, is being recorded. a As

Larry. use go will officially The within GOTU's in be please is In addition, launched on call ir.gaotu.cn. no website a Today, live to new my at pleasure It will week. old longer available conference webcast and Investor introduce now this our Relations Larry, archived one new ahead. website of be website. we

Larry Chen

sequentially. conference Good we to us our In Thank tutors quality, course million. and improve Costs service by call. promotional just revenue, promotional evening to XX% for earnings of the further our first our expenses, That, for you Thank with XXX quarterly student-per related lowered joining for all. quarter quarter, first totaled our rose further morning miscellaneous to XXXX over percentage Sandy. to you, to our combined today ratio up points on courses. account tutor X you good our RMBXXX

million Additionally, on activities. spent RMBXXX we this branding quarter

factors, costs our billion. Excluding were RMBX.XX traffic these acquisition

reactivation While to majority billion that our the operations in trends we of implemented segments, away which our basis, conversion, measures, basis, and semester enhanced year and on education Last time, of class first-time primary, a we we high burning all users student rates. gross Recently, satisfaction. end, some profitability we winter our including war contributed cash our and lifetime services, a billings, RMBX.XX lifetime to still and rebounding quality in stayed the senior adjusted our value At period. on service the for improve have junior the our same a returned profitable. recruitment control customer retention witnessed and implies continuously schools, long-term upgraded student and cost products, and from are actively value have quality school

online. than the no We every online this while traffic Extensive education longer operations. compete refining industry, to rather always has is believed that for of education, works by have core growth player

so in the efficiency, As quality-driven growth to months. profitable could the a core prioritizes possible return that have a education a to decided to and we company that return growth, upcoming of we

efficiency highest high investments philosophy, parent adhere our in we adhere long-term development adhere investments million. and our a continually priority in to student A We expansive to research will reached quality. adhere improving for serve, to quality, education satisfying and our each of focus quarter, on and to historical our and of technology on been investments technology In major the first priority has and quality. and RMBXXX our education our

director level services. term. to leverage the We will the have we us terms year, learning enhance teaching experts and technology in across our recruited investments dozen or bolstering Over over bring these scenarios, of education long quality past above the believe education a tremendous at content technology our

of an also one been of are education compensation tutors education year, RMBXXX over important most instructors we premium the month. each investments per teachers resources raised have quality. the by so for beginning the company, strategic expanding our have in addition, we of for Since this our In and XX,XXX our base

development travel also balance. can that a they for our have annual each RMBX,XXX a course instructors, tutors have fund better established of professionals work-life We and so

develop training level. efforts knowledge has strength routine spending a end, below quarter, our through it contributed instructors is and the lecturing core we XX% our of we train improve third local well-being, recruit to and one contests. at that and serving to been and enrollments. of talented cities the them subject academic and life. social always our one tutors, continued the biggest and Education have first responsibility, to tier with Moreover, our life In person’s factors instructors, ramped their the capabilities is up another K-XX a Our is helped this it and in quarter, affect enlightening increase about

donated winter semester During courses the million Wuhan. worth pandemic regular-priced to last of RMBXX year, we

in We City Hezhang by donating also courses. support founded a in poor left-behind charity to County of of and project children numerous Guizhou Shenyang the families Liaoning

RMBXX to scholarship provided more of impact to local than X profound, we approximately education online significant, courses Shanxi addition, essential and million The Pillars of students of Province, the regular-priced State social the outstanding in is and worth high XXX society. established from schools. have In

uphold original education, more equal education more resources aspiration families. advancing quality to ourselves education, dedicate We in belief bringing and to responsibility and to promoting and will progress and our shoulder about our access social

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

Shannon Shen

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

and of coming Gaotu our Last under and foreign walk we all up under including services. Gaotu other note businesses the services and the last will past the professional, conclude in financial This half second about of brand. we brand, for I under believe September, company for recognition of further Gaotu have of our able Now, language, financial admission our business, operating in KXX continued thoughts on services brand, that brand. Please we results, April, integrated KXX you Gaotu, for Professional is focus We through one just terms. and the RMB market. KXX Since strengthen all to year, by our building will this the with data our our quarter, outlook quarter. Gaotu our all all some the our bringing integrated our of we be to

focus expanding developing we strength. traffic The development money investments upgrading engaging teaching Over products. our of our work. logic teaching to the for students, education continued strategy of burning localized the scale on our improving Instead, portfolio, for improving caring quality, and and and our secure products personalized our our strengthen teaching, we in long-term does few will continually to quality not research months, teaching past developing and services, and more competitive

Going product forward, we cash will pay healthy overall healthiness, flow maintain and attention our profitability. metrics a focus including growth, and more on on

the quality by X.X In brand and KXX in the XXXX, performance our XX% growth revenues to period net our from by our student courses was For recognition. increased numbers, our first year-over-year expectations. retention K-XX XX% revenues spring increased our thanks that and continued year-over-year. This the net driven billion, to finished, enhanced exceeded education of quarter just our

year-over-year was billings decrease Our to due few billion. X.XX a The were gross factors.

quite our year base the a to the students when for signed hand, one pandemic last lot the due period On was high of COVIDXX up classes.

XX the On school net partially For a competitive KXX, above shown advantage enrollments line: we with by billion, X.X quarter. of mostly decreased grew strong yuan, in last segment, net thanks good highlight XX% instructors, hand, by to adjusted our as I’d enrollments, this to a that year-over-year, to to priced to as increased for were junior year-over-year net quarter at revenues Gaotu our which which business revenues first first-time revenues. had or actually the this quality refer high have year, XXX,XXX. Consistent Revenue seasonality XXX% winter accounted like enrollments quarter down our other Breaking we and our Paid particularly our of operations. by X.X% still year-over-year users. Group established. XX% high the

finance-related XXX to to revenues and bigger classes course first gradually Gaotu a growing number the a smaller XXXX, Meanwhile, KXX that the reached with contributed in and from Professional the Gaotu Paid in interesting per Group and spring X,XXX Gaotu hit billings billion. giving instructors of of quarter enrollments levels Quarter-over-quarter, student XXX,XXX. year-over-year. its performed for courses, contributed enrollments billings to course growing new have and by fourth Gross Among Paid products, needs. interactive our the localized from paid class Net X% [XX%] class by design were later. so Gross class million. accounted over winter in X,XXX course size Professional of net Gaotu because Average their courses them, effective. well, Gaotu are XX% grew enrollments we X XXX and wider size was classes for both covers to range year. compared last cater this slipped quarter slightly with KXX revenues. are Professional curriculum, our various For enrollments were million, XXX,XXX. scenario for

Beijing, and services, and service increased XX localize which increase instructors for Henan, materials, profit on an as the localized compensation Shandong personalized to XX% and local excludes et cetera, of to The mainly our development was as we from GAAP high by of to gross to school number XXXX. recruited junior XXX% compensation, was in Zhejiang, and XXX levels. XX%, down our instructors learning same due instructors content will et and primarily the margin, share-based due launch experiences. staff. professionals expenses and Our of increase revenues students the experience, and provincial recruit over better compensation rental XX% to we such To decreased decrease in for decreased in students cost growth well tutors, with to The Jiangsu, period from year-over-year in the courses summer, down in profit Non-GAAP same tutors experienced year-over-year This enhance gross senior increases for cetera. of XXXX. in trained million. and level Shanxi, XX%, period margin an

are relative especially terms even to quality first-time on Within billion. campus, classes further and services increased whether learning better. classified due labor, to manage the activities to cover students remaining for personnel, boutique about enhance we for optimized each. expenses bandwidth, the branding were as they overall in make to in pre-class time, XXX% of investments expenses et course by X.XX Therefore, as XXX increase be student experience groups expenses students traffic tutoring, approximately of our our were talent servers, Selling primarily year-over-year recruit the an expanded look cetera. XX learning to education teaching increase can we our for approximately of and increase sure million. level. the according We The services, expenses that, their and and whether well our development we and live R&D education to XXX professionals billion, and the better quality, in they users, tutoring technology expenses across an for was In our compensation services. X.X such million, is as staff. acquisition same can scenarios, At content of R&D number fine-tuned increased

can exams, the based their them feedback we sessions, instructors and collect massive quizzes, help our upgrade to courses, periodic we Q&A of instant amount that pace, correction content of the and courses. homework difficulty through from data on Firstly, to in-class our provide

can networks business. XXX million, and increase many latency and brand, which related was to company, due technology, with believe income XXX% years an a all million classroom we our investments the interactive We headcount our to instructors, will quarter compensation. net the expenses in real-time mainly X,XXX essential G&A net and in students of first due benefit mainly Secondly, with these GAAP G&A increased loss of our learning XG to provide technology, long-term leverage investments be XXXX. technology experience. in will immersive of continued an create research our AI/VR to XXX to aim we the for in to low come. with was to something competitiveness million, steady loss and are The in compared by increases

of to summed investments. cash X.X equivalents, As investments of March X.X long-term up billion cash XX, billion of XXX of had XXXX, X.X and and billion. be Those million short-term we

Net bonus operating was As revenue increase long-term consists that collected for The an of XXX awareness, balance activity XXX share assets primarily including XXXX million an to the was of branding revenue X.X for our deferred to Zhengzhou to which higher for purchase March annual related is billion. includes outflow X.X XXXX, and expenses XXXX. property. The advance. flow billion. XX, was market in of outflow quarter tuition around primarily and Deferred in due million, our totaled cash first improving compensation, brand cash

prepared to to into remarks. sales to our later net second ready advertisements a also compliance X.XX to outlook, channels. provide revenues on questions. consideration representing with XX% our healthy sustainable lead, business billion, completely operation XX% I basis. gradually the of year-over-year ensure performance Thanks. quarter, billion on Before possible the and for current Operator, our short-term and and impact is unit Taking please and ensure quarter terminated own X.XX all growth on our on update. That these allow feeds and the now are we an contracts. are in our take me of be branding regulations, estimate my Meanwhile, acquisition of in we reduced we’ve XXXX full adjustments increase second traffic ongoing level, To concludes between terminated we

Operator

[Operator Instructions].

Our from Li ahead. of first Citi. Please question Mark go comes

Mark Li

from for Hi bit government, the you year? And more our question the the you. a I more Larry, a our you our is next ROI. second what color Hi little update is think Thank forward? Li for And for the color? share for ask also the the bit regulation my is what in we quarter the advertising the on ROI do recent see just rest Could May Could QX? Citi. share Mark operations do or going impact on management, given thanks we from potential of presentation. This for

Shannon Shen

Thanks, Mark.

the question impact. For regulation the about first

tuition after-school So we issued on Beijing has the XXXX prepaid several coverage including the XX, after-school issued opinion collected regulating institutions have institutions tutoring fee And government in in aspects on listing education, a on released management. following been further specific the including, online in On first, years. fee regulatory online fee X XXXX guidance requirement in jointly the past after-school advance, and opinions May of an in out guideline, -- tuition regulating departments on recently, tuition law provided competition. advance period, follow and tuition provided guidelines. a provided timing monitoring. and student All law department about et list format, guidelines company commercials. qualifications, tuition a advertising It's teaching And very do also fee content, course the what Also, should fee on of scheduling, a of in the companies course very They second, -- advertisement. not unfair time, about collection cetera. list. teacher homework The detailed and regulators should rest detailed against

class to teacher check paper, from checked homework those of team implement down the we the cross from schedule requirement consists our these compliance have for a regulators. the with non-compliant the we the online the So and the qualifications team other rounds to initiated regulations, and senior better adjusted the procedures We've proactively teachers' several rounds channels. established taken regard study to have new meetings, organized qualifications, all And of This cross-department teams, adjusted qualifications, of on advertisement we all except of certificate company. and meet within and also of management regulations. instructor

management the students. its Commission So called and May burden the XX, of same day on education [Zhōngyāng]. meeting. prepaid fee the compulsory Deepening Eventually XXth also for the of launched rule, homework That approved Reform Central opinion Comprehensively tutoring after-school from reducing is on tuition

the will levels. Once is all take opinion specific to immediately comply measures in yet. haven't we received the So content published, we

and education So provided for after-school the education clearly the focus industry. education, regulations and tutoring impact especially values. K-XX is The social industry on core directions for part should of the and timely

following the monitor policy the government only companies lasting, can a execution. and level, take will highest healthy achieve at sustainable actions industry when believe the whole We with We and policy proactively comply closely development. the the and all solid the embrace

Larry Chen

I want to add several more points.

is the for for customized parents always premium from firstly, demand education, education So and exist. students eternal,

brought provide benefits access online secure affordable will the the price very equal Secondly, at by education a education. for to

all aspects to able data collect the online education students. is the with Thirdly, from

easier student. for for solutions online each customized provide So to more it's education

as true education of a do So personally, long-term will optimistic we very And development. our am believe sustainable I sector about our short, for me believe very with have as the consciousness, that online far in this I I with heart, education. future and

Shannon Shen

about ROI question your QX. And is second in the

So we can innovation if ROI last And the QX platforms that platforms, budget normal. MCN, live during acquisition lower spend on we et would traffic channels on streaming than as like earnings of we actually such more channels. less our even and and is in mentioned cetera, recall invest call, social to acquisition customer offline our from

platforms -- the like social So one down the it's dragged the actually traffic reasons and ROI on actually observation is of acquisition our level.

gradually quarter, completely have stopped we social And this now, spending. platform. traffic we So acquisition reduced on the

other we future. students expect So channels in to come the from

through brand -- courses, activities, For student a has to over accumulated our the and pool. large awareness expect Gaotu up our organic we have so the fairly reputation we which traffic flow KXX website. APP free it courses instance, past brand branding can quarters past promotional draw the that the and improved and

Second, and as adding questions the actually we In up resolve ramping such in focus for campaign providing or on we visibility content encourage students our or one education of order referral to as our parents of will are their our to most referrals. explorations and benefits future, more help to to brand. key these increase more trust coupon referrals,

recruitment. also student are We localized starting in

Mark. and attract We join Thanks, content more to will further the differentiated provide students services to personalized us.

Operator

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

D.S. Kim

change that down the quite even and termination this And be more -- by costs went this following second is Thanks sales quarter, twice evening, I to the yet. regulatory pressure summer drastic out why the in half just gauge say, hurt you marketing, a building the because growth up or could to in for that quarter? quarter you the impact lingering a quarter do And for mean billing. we in marketing enrollments period? how lot you can half and in from Mr. wasn't the think change, Well, versus into second check question and first taking saw as it's of Chen traffic I mentioned, deterioration such second the particularly is gross Shannon. materially temporary you good guidance, break in this surprising like the and the Hi, question. promotional my mentioned, say,

Larry Chen

Okay.

I So for several points. will down break the reasons the

QX sales And this large we as you level it QX, revenues relatively year much the Firstly, in slightly. how on cost and is of on some sales if December the in of very that also how is relies marketing down QX see December, we sales implemented low. of we in look XXXX, last of spending. billings the on part net control marketing marketing half QX, goes last billings the actually QX. margin on and of gross especially gross last a second And first this the relying of quarter And and of the spent. much the also spend actively last all XXXX, why is And we our can year, aspects,

somehow same competition, several the reason this to change the That The cost the And year. market high period times last of our our quarter all is this of gross a performance proportion. also second sales caused billings. fierce customer within the the and from acquisition channels, channel still account traffic compared of quarter, performance because for up acquisitions is, first in marketing pretty channels the of by

this the immediate the activities spending We investments this impact, branding some not it started branding might activity quarter produce be first scaled in we will for long-term, in this assets. QX, however a believe for for significant spending. our Thirdly, time,

believe create also reached the first expenses R&D Secondly, also We high. quarter, have its long-term for a that historical average. will our

Lastly, we instructors for first long-term. for Those also recruitment quarter, also tutors. our our expanded will value training the for and and create

acquisitions Lastly, channels. significantly have in traffic completely And performance this channel. traffic we at our reduced performance from moment, in acquisition very March, spending we this spending have stopped in the our on

On with to one want regulations. full we in compliance hand, the be

comprehensive to a the several in internally, first really next see we quality-driven in essence hand, growth. our the the believe efficiency are some operating return have will to On with other satisfied and We of a quarter. done to return Also, Internally, not review we the very reflection. we months want benefits. education, we

current be believe whatever efficiency gathering the better way observed with our of our talents, of able and recognition we bring As about I have so the we today, will operations use size of following will and have brand have and many and whatever days, current thought whatever in to our into and make us learned effect. we we and

improved sales marketing that summer also QX sales QX. the and As in on data also for size conversion operating revenues so for semesters it the for in and have quarter. positive spring And movement. the will second rate. to of and for budget we some QX we second especially recruitment retention student the significantly far, the quarter, collected the and see relates in efficiencies significantly, have seen Based marketing and the We've affect second the quarter rate

confident we’re and beliefs we want to to our we time, profitable I believe few about return return to period, operation, original hope a some this we definitely quite about in future will in growth. our and So

Operator

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

Sandy Qin

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

contact subscribe have email or company to any to the hesitate very Please website. our The quarterly questions, us feel contact be alert ir@gaotu.cn on investor the continue to old you newsletters you will Thank don’t available. address further company via email much. free directly. or news If please IR to

Operator

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

now may You disconnect.

Gaotu Techedu (GOTU) 26 May 212021 Q1 Earnings call transcript