GOTU - Earnings call transcript Q2 2022

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Operator

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

Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Ms. of Manager IR Liu, Gaotu. Sherry Please go ahead.

Sherry Liu

very you all you much, operator. thank and everyone, evening, for Good Thank joining tonight. us

release Second website IR Gaotu second and Quarter Earnings available was earnings is Conference today published the at ir.gaotu.ca. For on earlier Call. XXXX quarter company's Gaotu's

Shen Chairman Sato's general On the Larry. Nan Chief for prepared -- quarter, Larry give will the Founder, I Financial overview financials tonight Executive for Officer; and translate Larry Chen, Q&A are the Nan Officer. discuss call Chief Mr. and business on the Larry with for session. remarks, available Gauto's Shen me the and will Ms. Shanahan, will be will the and

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

being conference recorded. this reminder, a is As

please be Gaotu's ahead. webcast a Larry, call conference website. is pleasure Larry. to available live and It of this In my now addition, go on introduce IR archived will

Larry Chen

Sherry. Conference joining Second Thank Earnings you us Call. XXXX you, for Gaotu's Quarter on Thank

unless on later start, to information I otherwise remind like mention that based all I I is noted. that RMB financial Before would everyone

During stable sustained this our year, sales the of STEAM healthy a second and quarter growth.

that with loss last restructuring. cash successfully narrowed non-GAAP flow. positive Our quarter generated growth our third net business year-over-year, net and and after the we profitability of we realized quarter, our substantially that doubled billing compared operating this is consecutive nearly Moreover,

Going educational uphold continue adult, optimizing profitable educational non-academic students to of focus continue cost continue will forward, for our products, contents growth college strategy efficiency to we to services services digitalized on through and tutoring learning structure. growth operational and improving for and effective strive and and

of and gross During of quarter-over-quarter revenues this business of quarter, million, our slightly increased our continuing Further, period XX.X%, businesses, XX.X% of margin To last a consecutive billings XX% billing year. comparable our provide to gross we quarter-over-quarter. XXX.X business RMB for have increased sales that XXX.X And the comparison, our net over comparable net RMB growth quarters. quarter-over-quarter million. the basis than higher X revenue reached gross if achieved compare was quarter this of also the consistent same

second million, RMB net quarter, in that solid growth. made a have businesses. we we also effective generated operating the cash we our a and achieved XX.X In main of Additionally, products upgraded user flow our demonstrating progress

areas efficiency. -- made in Additionally, metrics, we selling of progress of during now decent operational including some the quarter. in I we about ROI and key in the talk improvement our expenses saw for briefly employee each terms these will

reducing newly of needs registered better life-long that platform. the and students students, APP the upgrades, of and all we additional as APP from thereby exam test reaching of multilevel content learning business new gradual delivered and a center and By learner-centric, as into examinations more we to tools, have as expanding have retention customer serve broader equipped customer and banks, generated interactions and transformed After to tool APP our exam live marketing our our service for our a as go customer level streaming well in coming our service highly rate APP of engagement including as cross platform. a guide a delay number To and terms delay fulfills comprehensive improvement lines, learning channels our among better showed in and and out and has solidify and lines, acquisition teacher-student corporate users our larger user users, active students, a base, our demonstrates reminders. performance business key increase. a product synergies mission for in while such programs features a with repositioned the many announcement mock First, learning costs. -- The APP delivery diversified a independent retention upgrade,

Going innovation. enhance and technology forward, a our products dedication learning make more we with convenient will to to a and better experience through continue

college the our present class then their and our rate XXXX stable which paper, new Second, passing surveys entrance was graduate saw best released for survey and than national rate. summarized students to results intended With we numerous go-to [indiscernible] the the and twice white is for development the quarter. key exam. detailed for school that we student teachers, reports examination for the during typically average In continuous studies, medical the our and services, -- consultants, the best a national analysis that best their have according post-graduate May, on entrance more we our based guidance the prepare pursuit of exams stand of to success

non-academic our to contributed see to profit, a higher a and continuous we also optimize our not With effort operating performance net are pleased satisfaction. services It a user flow. quarterly cash quarter. refine also operating products, delivered tutoring achieved positive Additionally, in solid this but only

approximately retention instance, rate indicator high quarter, retention user We X% of is satisfaction. almost the believe business was the and For programming quarter-over-quarter. our rate of increased this tutoring its cross-billings during that best

customer satisfaction. retention optimize and Going to rates continue to forward, further we will products services and our increase

the the last efficiency efficiency of that employee compared selling and nearly for expenses quarter-over-quarter. doubled and quarter expenses quarter. during doubled ROI for also Third, with both selling increased employee ROI

expenses control by continue ROI forward, guided to and strategy, further the our efficiency. marketing to we expenses will Going effective operational improve selling continue growth and on for implement

like would as June Xth we of properly to that and to of year. we well leverage XX this environment. adjust I anniversary ever-changing challenges this as organizational to celebrated well area prepared on capability Lastly, are In opportunities, strong say Gaotu's our to respond the

aspiration Although organization, businesses restructured we to remain we our our original have educate. precious our true to and

point education in long-term social industry, emphasis practitioners education responsibilities in role as value, advocates, hopes as corporate our of will the confidence starting we have China. education the play has core education nor practice changed, and an Our actively With leaders on in continue the for never dive the our industry. deep company future and in a to

Over and will to. empower better build more students we even very content, XX and offer XX the to exceptional services, go Thank continue superior next provide create a products, much. years, you better

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

Nan Shen

industry RMB Larry, know workforce. and second on walk call employees' financial terms, relies you Please I I our education mentioned based later noted. on thank you, the the financial joining is XXXX. operating among quarter everyone, for you, the through and that highly unless otherwise operational and our The Thank for data, today. that our efficiency performance will now synergies

continued economic quarter, the X optimizing under operational efficiency, costs quarters. showed challenging quarters. growth Net quarter-over-quarter businesses effective this to comparable for revenues consecutive we for and enhancing environment. [indiscernible] showed generated quarter-over-quarter X achieve through a second growth consecutive During by And growth

next quarter. in the expect momentum this continue to We

And Additionally, we loss XX.X% on net to was million narrowed the profitable GAAP remained this quarter XXX,XXX. XX.X hugely with non-GAAP amount RMB basis the by basis. the year-over-year on of

that, position million, strong. remains seeing We RMB positive capital also flow a of our operating are cash net XX.X with

our resources As and of cash, business continued balance equivalents, approximately of total we terms had XXXX, XX, X.X investments in billion short-term sheet, providing ample development. RMB cash June for cash restricted a of on

we will and services strategy for and by adults, content to forward, on core students of and products, well non-academic sustainable college educational educational learning Going our focus digital tutoring growth. businesses, services our X continue guided

for second financial through key quarter. go our Now I data will the

also quarter-over-quarter. As To of displayed XXX.X with billings seasonality a to achieved which We up our Gross Among quarter-over-quarter gross for onwards, on healthy the after and non-academic in businesses. billings and comparable Gross businesses decreased RMB XX.X% XX% still basis same increase. to therefore, happened fourth business to businesses. RMB year-over-year second if come quarter-over-quarter the year, development increased of restructuring will of comparisons appear phases, businesses their development our performance and to comparable the comparable higher provide billings during will over we quarter-over-quarter increase quarter our quarter showed better collected, showed million. services The million. following increase. new cost that, alongside the be our present increase for the as comparison, compare the year-over-year our gross the treating the [indiscernible] from fourth net services increase of consistent We a second year. our retention like In the point to are that compare XXXX, from revenues our early performance quarters. consecutive quarter XXX.X during would for XX.X% financial trend and second year-over-year than from a of we normally increasing will decreased XXX% tutoring basis, we year-over-year growth revenues initiated net substantial in this continuing quarter quarter-over-quarter of revenues our businesses, net accept out XX.X% non-academic and gross billings billings X with

decreased quarter million. this revenues XX.X% RMB of cost year-over-year XXX to Our by

XXX.X break sales of XX.X% was million, last profit gross XXX-basis-point margin XX.X%. RMB Non-GAAP decreased and XX.X% RMB up was year-over-year in proportion selling same shown took Operating million, margin non-GAAP tutors we for operational identify decrease our private potential year. for are diversified we to and traffic efficiency. customers XX.X% upgraded to down increased have new increase businesses of gross restructuring, channels more period customer constantly X.X% customer higher strategies acquisition by acquisition profit to different our in have business and a gross Our year-over-year period of year. margin first and to increased XXX.X Selling because quarter-over-quarter of that and consecutive has selling due RMB compensation for expenses expenses first quarter of cost X for To was compared million. than expenses over The by XXX last solid revenues. of which quarter operating year. marketing us decrease also the since quarter. improvement a expenses, instructors XXX.X last the same expenses profit net prefer lower for efficiency with acquire is Since RMB better expenses rates. to and XX.X%, the The profit model high decreased smaller vertically, margin give to year-over-year for Selling XX%, profit and ROI after the lines, different customers to the quarter-over-quarter gross gross operations million. decreased of is last new the quarters suited a expenses conversion

to the General and are by stage, R&D reliant also to net the will through million. results, quality expenses XXX.X referrals, relatively and businesses initial R&D acquisition R&D employee enriched not development value and retention is for Since also way exceptional XX.X contents have only the we sustainable are pursue superior realized structure revenues. in business for and expenses, expenses superior XX% fixed of customer adjust to up more our on selling to provide in branding our will lower year-over-year development efficiency and expenses users' and and in expenses content. become establish Further, constantly in and taking education ROI products continue an early high million. tool, improvement. service, each gradually and application able RMB cost by that acquisition this Research margin expectations, We quality to RMB and our industry to enhance [indiscernible] and we to our still development continuously administrative specific new costs, exceed APP, but through to upgraded will according the XX.X% a year-over-year a offer including the through R&D growth. the customer line. decreased Meanwhile, learning decreased acquisition which customer be of To learning we shareholder education, R&D invest still proportion better

the scale We new size to some start and economies showing expenses of of larger. grow as R&D expect businesses G&A

our to value our optimize Going forward, to our efficiency continue stakeholders. cost achieve improve will structure and greater we operational for

the million. for operations reduced by from XX.X was XX.X% loss Our second RMB quarter to

income net XX.X% XXX,XXX. Non-GAAP XX.X was Our reduced loss to by RMB million. was net RMB

in of high was Our net were line. X.X%, expenses to recognized a the revenue loss and proportion of , net the compensation net Due bottom units non-GAAP expenses thus, still non-GAAP and employees cost gap effect and offered to margin took between towards wide income a years, causing being past was restricted GAAP share-based and margin relatively stock X.X%. the

and of quarters. revenues With gradually the in compensation we account end of a lesser the expect our for lesser this proportion acceleration share-based expenses revenue, in increase and the following to

net operating of gross and compared flow representing period large with our positive XX.X primarily Additionally, was flow to quarter, this in cash RMB The and year increase efficiency an improvement in cash increase last last reaching turned the same quarter. in million billings. due

to continue this this achieve quarter, will to We momentum. growth are pleased strive and to to effective be able we continue

balance our to sheet. Turning

business X.X RMB restricted continued RMB XXX.X providing primarily XXXX, collected and XX, deferred was we XXX.X consists Further, RMB of cash, short-term June of X.X resources XX, As June ample XXXX, million, RMB our which equivalents tuition of which cash for development. cash, revenue advance. approximately and billion investments, in as had billion, totaled balance million

of concludes third the ready Before you, a between quarter business and materially my risks section. RMB to I could actual which Instructions]. beyond differ a predictions. XXX to allow we cause are Operator, [Operator representing and the to on are our revenues our RMB XX.X% current next prepared for remind million year-over-year uncertainties, of Thank now the decrease from for provide are expected XXXX Based quarter, This estimates, for our million, please that outlook everyone. basis. the on control which statements, and involves contains me forward-looking XX.X% net Q&A our remarks. results this to be everyone XXX

with from first The Citi. Mark question Li comes

Mark Li

maybe the My Thanks major QX about revenue this you you Could could outlook. breaking question comment Or profit. on for Q-o-Q a major growth share your even the quarter non-GAAP on the presentation segments? of and see is congrats breakdown the in for revenue bit first net in We on improvement. the the segments? Q-on-Q drivers

Nan Shen

Thanks, Mark.

more products between way, becoming our synergies rate. focused this student are and a We enhance branding target businesses vertical more gradually market the our and increase to create penetration in to and on population and users our to to

we services and products. businesses, focused for services As adults educational X on students during such, quarter, content this digitalized tutoring the learning including college and main academic and are educational and

different of the different by and business the Our development lines revenue are new be stage businesses still contributed of early development. by each will in their stages affected the seasonalities and

roughly and for it our our this revenue breakdown So detail give can we and content revenue in going second currently, not I mean, But revenues disclose our flow. change high-level on, following cash academic our a you tutoring products, a we expect operating as and current contributed Like quarter, the educational constantly revenues net combined I did and operating in quarter, learning contributing of digitalized picture. larger. is together, profit XX% because services not in structure what's very grow to sizable quarters the perfect and indication our

more different preps phase. test civil disclose will exam through accounting more this lines more at preparation different and accumulated our students. -- and our a and the business categories. base the so like constantly businesses whether of the than better recognition disclose educational to will to services college products -- And revenue large when enter entrance leverage also preparation vertical financial by have still the were past not some will as as upgrade qualification and that such includes we for serve information other contributed years mature as we other servants which in students user our adults, stages exam categories we rest and our So exam and preparation are well brand XX% we XX%, Because

next looking QX and foresee stages. to depends of So seasonality you're then on quarter still all these if it but X for categories we outlook, to the revenue that helps. Hope grow, different the like

Mark Li

into the a it. highlight QX, I what you service any have us? costs Like looking could Got are for college on new May to follow-up for quick the courses education driver doubts. the major or the

Nan Shen

Thanks question, Yes. for your Mark.

businesses categorized third to our we of to our the we quarter, and clients that Currently, the target. business. core restructuring is this have according So wanted transforming we're groups

we and So and group year-over-year a to see it think And growth. learning an we XXX% students, have for indicator the this achieved If which momentum gross and growth adults we And working are are quarter, energetic their to progresses historically this decent achieved future new college build speaking, a and gross look continue. about businesses. also billing of is strong will development. over strong. demand is year-over-year we students billing still happy over XX% the foundation for And very also for is achieved into quarter, last these the business always

raising prep in some group business achieved preparation So also school financial around over have and such graduate like operating we our overseas [indiscernible] achieved the Besides about growth of further, qualification achieved revenue. exam tax quarterly a revenue This like as And have also, profit, also businesses. called this courses quarter-over-quarter XX%. XX% quarter-over-quarter preparation. lines a savable entrance businesses growth

this, education grow. certain on to categories, in we continue we do we can like for invest all based way foresee QX, so they services in working the a like and to grow see and adults because students college sustainable So our in that

I will example. an So terms so use school entrance the reoperation for of yes, in then the seasonality, instance, examination as graduate

we grow. seasonality, will QX quarter to when see and students second like the to courses, this business for and tuition to started so the are shows the billing then the fourth gross So see collect the the usually fees, season you we the will usually strong take that's QX a quarter, that revenue Then increase.

so fair to in categories there're we of both So a because way them like in grow. certain are -- the direction -- very

Operator

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

Sherry Liu

Thank you call thank joining you operator and the tonight. everyone for

contact have through or you department our e-mail management any further questions, If [indiscernible]. Investor don't hesitate to Relations please our

You are your also on the for Have new company's you much sellers night. a welcome time. to IR website. subscribe very to again Thank our great

Operator

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

may now You disconnect.

Gaotu Techedu (GOTU) 8 Sep 222022 Q2 Earnings call transcript