GOTU - Earnings call transcript Q1 2024

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the GaoTu Techedu Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to your first speaker today, Ms. Katherine Chen, Head of Investor Relations. Please go ahead, Katherine.

Katherine Chen

operator. you, Thank everyone. Good evening, for Call. joining XXXX you First GaoTu's Conference Earnings Thank Quarter My host I'll today. and name Katherine, is help the call earnings GaoTu's IR quarter available the news services. well earnings earlier PR release is and as was through on at website distributed company's ir.gaotu.cn, as the for

highlights Joining with Financial provide Ms. and Shannon from GaoTu's Chief me the GaoTu's Mr. first management is for Officer; the Chen, Chief GaoTu's then performance business will Executive Larry And call Officer. the will our Larry discuss Founder, in tonight afterwards, senior Chairman quarter. and Shen, detail. more Shannon financial

Following analysts. will we open from to questions their prepared the remarks, floor

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

purpose certain will comparison for today's discuss also only. management non-GAAP During measures call,

earnings non-GAAP non-GAAP published reconciliation For release our financial financial earlier quarter first measures to and a please today. refer definition to results, GAAP of of

this is recorded. As a reminder, being conference

Founder, webcast GaoTu's now Chairman IR pleasure to conference be website. of our addition, and call introduce my Officer, Larry, Executive In this Larry. will is It live please? archived and a Chief available on

Larry Chen

on opportunity GaoTu XXXX call. support gratitude to evening, everyone. Good interest this good your and quarter year of morning, I for and first conference to GaoTu. the for joining of would take in like express my of us all to fiscal Thank you earnings

I like that are and financial results discussed stated quoted to would the start, the our Before financial report otherwise. for I figures everyone RMB pleased all of remind opening in to today year. quarter I'm unless operational

laser our channels. focused During and remained our expanding acquisition on educational the customer first quarter, products we refining

offerings closely On the product our more front, needs. with align user we to worked diligently

significant products, the of [indiscernible] [indiscernible] portfolio and improve progress needs enhancing our also our learning we to While efficiency. address made in better diversifying user

to product front, tapping efficiency acquisition acquisition expanded have combination content our solid ]. to teaching XXX.X and gross by customer year-over-year RMB This channels year-over-year foundation a processes and first and sustainable XXX.X growth the quarter, net tailored XX.X% the channels customer we acquisition the to million, of our to customer laid streamlining grew educational characteristics diverse [ boost billings high In rapid business. of outreach robust caliber increased optimizing RMB and our and our while On by revenue million. for XX.X% the offerings

of margin different [indiscernible] retained million comparable was annual net schedules, impact an and reached saw XX%. clients X.X as one-off the non-GAAP our X.X%. RMB increase Non-GAAP income Excluding such growth than income more net

point same cash, total cash billion higher RMB remains investments, RMB equivalents, of Our last long-term in short the cash and time X.X XXX.X than a year. with cash strong position million restricted and

business. are services, [indiscernible] of customer expansion teaching learning products, the services, we With our to outcomes. to their to premium quality of learning organizational that control to classes, talent learning to education excellence the the enriched investments improve competitions and professional and and teachers we rigorous by teaching quality educational personalized [indiscernible] providing learning localized optimal At support Our and design, quarter performance products deployed strong performance teaching including respect ensure in channels. in enhance and capabilities and needs diverse solutions enhancement the incentive High-quality has our product and the introducing growth. online ensure strengthened mechanisms, GaoTu, different in acquisition educational diverse evaluations learning services offerings of the our our cater strategic content service first and confidence continuing cornerstones development of and

internal business, that of national strength established was our the than XXXX the the exam adults, we we X average. for within academic and competitive users on camps with boot also students shorter new entrance National achieve twice Alongside pushing forward of bolstering our reveals Within data class success have more long-term School Our services time initiatives. the their college goals help rate Grade learning are online a of to frame. established our

the also education and services overall wellbeing. students' have holistic offline round improve development cultivate We launched their to better all

business our in have development. rapid has experienced our investment increasingly we wrapping content As been up core growth,

XX% Specifically, by first the professionals year-over-year development full-time roughly content number quarter. the of in core increased our

nationwide strengthening proactive with education tier one our rapid goals As based critical are advance regulatory compliance recruitment finance able most GaoTu, committed the a Exceptional ensuring retain strategic at individuals with [indiscernible] promising product educational policies continues levels, and with talent important bodies cultivate expansion and for we hiring recruit, most related our industry. to expand, our our is to the we our one and talent secure of pool. of various business in engage seeking candidates, by on to are to ability steady proactively to and is drive investing our channels of outstanding At guidance the strategic industry Time services and we steps in are top growth. taking universities assets on to and engage leveraging guidelines.

quarter, of into strategic universities. a entered As with the first of we partnership have dozens

organizational coherence professional and and expertise. improving include culture our These addition, In in [indiscernible] development talent courses their our initiatives the we various sharing opportunities. experience mechanism, to taken teams support and strengthening offering and have internal several refining our retention

for Lastly, customer competitive we is implementing efficiency the operational while have team organizational acquisition to promotion Investing content track ensuring the diverse exceptional mechanism members. vitality our fast and in channels critical company's success. of improved our by development long-term our

this Along channels, a high-quality is the This to competitive and range our actively aspirations in off have development far, up acquisition long including with mark videos, project of expanded to establishing year, journey, promote these boost embrace engagement [indiscernible] acquisition offline with XXth acquire have new have ]. and in recognition penetration edge. Throughout anniversary we stayed for also amplified operational maintain customer [indiscernible] ramping So edge students. market about exploring ensuring live and [ and new social our competitive diverse like actively educational and into sales we rural with brand reduced to [indiscernible]. we're and responsibilities efficiency, collaborating will operating initiatives traffic costs. user line by by avenues organization quality we additional channels, centers investment advance we up streaming, regional built By off-line GaoTu since true its [ our ] short-form consistently our channels to learning book our equity. content,

very development and our Thank prepared the as in shareholders confidence -- have much. China's society continue [indiscernible] you This users, at my to end for We of privatize we to to education ability and of value large industry. remarks. our is sustainable full contribute provide to

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

Nan Shen

In We our core and recognition remain our today. of through will operating parallel, and channel optimization product growth in Larry, our portfolio and our value for we joining now extension our XXXX walk achieved commenced organizational committed performance business. the fortifying create notable and in thank momentum modes you year and core was quarter cash a thereby competitive quarter. call Backed strengthening position reinforcing we enhancing actively explored ample and for you, our competitive and XXXX. Thank brand lasting our shareholders. This search I the cultivate innovation, to you, capabilities, first leading the with by advantages. first everyone, by fiscal for financial reserves, in of

Our growth. the trajectory gradually business model The throughout the which million. year, net of a maintaining year-over-year this anticipate first RMB gross our gross more In increased We year, than comparable surged XX% of XXX.X [indiscernible] growth. On billings the exhibit online remainder basis, growth RMB revenue by revenues demonstrated into will robust to the education million. billings quarter to for certain accelerated by patterns. translate XX.X% seasonal year-over-year XXX.X and

revenue certain in realization peak enrollment efficiency the of season, demand Historically, ensures this the the investments reserves and proactive in resources expenses upfront This in necessitating of on is expenditure the costs to and operational second latter scale. half marketing with maximization entails the capitalize strategy year. teaching marketing market The gradually of window. materializing economics quarter typically

with concurrent and and service brand enrollments, of increases recognition scale, penetration costs improved, retention potential. economies can product the associated profitability and course student the be and unlocking As amortized progressively delivery manpower

quarter dynamically profitability we deploy Beginning in enrollments. resources simultaneous economics, drive on additional forward. meaningful single for new healthy recognize marketing window plan the such, seize a student for we customer and acquisition going in growth ensure ratio existing to need online working users, while contingent users the education As of escalation unit is to the in second and manage investments acquisition to in quarter, tutors channels the to the to our

contributed we learning progress over during from other the of walk tutoring an net it will or and revenues. services Learning you I year-over-year. XX% have non-academic down, XX% total of services, Next, representing XX% increase quarter. Services roughly the Breaking made revenues came of through traditional

aimed new ] content. [ Our services holistic in at its activities and on academic students engaging and through development are tutoring unleashing initiatives centered potential footing

basis. continuous generated time in improve more the offerings. on gross During gross we a digits the billings. This this coupled our percentage Furthermore, tutors, as instructors of billings for of triple of standard is it segment the and to increasing testament growth total first made a surpassed to to educational with the than our year-over-year comparable teaching quarter, efforts progress have refinements ongoing our a XX%

align are all regulatory and academic promote diversified initiatives basketball courses, around education including education [ to Additionally, government venturing students. and development offline we and for holistic into ] coating [indiscernible] that with

driver we Our for outreach diversified a will enhanced ward user sustainability scalability long-term continued generate our growth This to product a robust traditional and as services learning expanded serve momentum. growth. tailored sustainable portfolio needs, user With of pipeline. and to

high quarter, this basis and double-digit a revenue a in increase of comparable billings gross year-over-year growth recorded the segment on During XX%.

The acquisition customer platforms. efforts by expanded rapid this learning across which of overseas of and billings, increased adults, component our both services crucial the during for by more is students college service XX% Revenue other educational accounted quarter. gross related around revenues study primarily our radio better-than-expected for and year-over-year. was live The driven total XX% in segment performance short-form attributable streaming growth to of than and services,

providing the like our gross triple During more exam our post-graduate harness the users services learning increase development than plan, a their professionals, personalized exams, with industry-leading by third experience, tools. of and content [indiscernible] pace educational digits related a artificial quarter, offerings year-over-year for evaluation cutting-edge and Notably, positive services preparation fusing that progress developed cash revenue to quarter. adopt technologies overseas tailored flow in saw our one-stop cross content teachers Jointly intelligence, paths entrance and generated billings. consecutive prep

service our While second achieved in now the quarter. prep will profitability silver financials I consecutive business more present exam detail. our for

sales to recruitment XX.X% was XXX.X of down, revenues XX.X% profit mix margin expenses margin profit million RMB selling to expenses XX.X% million, year-over-year The quarter a a of season. expert XXX.X response Gross operating the effect also awareness, economics XX.X%. track The teaching of was increased the the over a to future the quarter, last monitor RMB of brand have period meet meet efficiency enhance gross year-over-year during teaching demand. performance diversified XXX.X to low in heightened increased result for RMB the and our was partially same satisfactory. quality our specific in increased of foundries creating Breaking reflected with predominantly profitable million. meticulous refinement in provided such marketing weekly marketing that and the channels on basis yielded product the during decrease more and XX.X% to this and scalable to base staff criteria. We investments expenses drive to net cost a million. long-term winter Based gross This rise revenues. increase unit quarter and our it within on changes accounting growth RMB of XXX.X a in Our Total to year-over-year our first year. proactive in demand market year-over-year attributable

foundation in us Our investment long-term for thereby laying return our high sales expenses, appropriately remain a investment increase efficiency, solid on growth. metrics promoting to

Moving XX.X on, Non-GAAP X.X%, General income XX.X% negative was X.X%. research million, from accounting million, operating net million, and margin net administrative X.X%. Non-GAAP loss revenues. expenses year-over-year of RMB loss XX.X million, year-over-year to margin RMB XX.X% was negative and was was income operating for and of Net and XX.X% accounting development and and XX.X million, non-GAAP expenses to RMB RMB was increased income XXX.X increased X.X Loss net net XX.X% operations operations margin revenue. net margin was from RMB negative non-GAAP was XX.X RMB X.X%. million was for

Our RMB net operating XXX.X cash outflow was million.

Turning sheet. to balance our

higher X.X point a March equivalents year. than time in short-term of and RMB total in billion investments, As comes X.X cash approximately RMB investments. that RMB restricted XXX.X X.X million RMB billion, XXXX, billion million same the XX, we cash, last RMB held This to at long-term XXX.X cash, in

revenue our advance. received RMB X.X balance As of XX, primarily of March in was billion, XXXX, which tuition deferred consists

March million repurchased have an approximately XX.X aggregate on X.X ] open [ approximately market million. USD XX, of for XXXX, ADS the of we As

Furthermore, will has to company in to of with our We value continue accordance create ADS original Directors aspiration shareholders. the reinforced for personally Larry by commitment long-term X.XX in an to Board the buybacks the his purchasing [indiscernible] execute and additional guidance confidence XXXX. the and million education stock of in

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

Operator

now session. Instructions]. [Operator will We begin the question-and-answer

Our comes first Citibank. from Kou Alice with question

Unknown Analyst

the evening, is Good in of in provide appears more the the influenced revenue the whether the XQ that information you situation relatively enrollment conservative. enrollment existing management. students students know Could regarding on impact shift them April. Last reenrollment of Thank down of you. year from outperformed us in March, year, sharing have by I detail you we question a it period? in it new how while put and took guidance on this online, enrollment the because guidance Could enrollment please separately? the occurred shift the place please and

Nan Shen

Thanks, Alex.

Let's expectation then start with of second quarter, into the guidance whole they can the dive for the our year.

So the of increase XXX XXXX, to million basis. RMB year-over-year RMB be XXX second XX% of revenue perspective, quarter we between on the in and from a revenue the to an expected representing XX% million

learning traditional came services the XX% So our is contributor total revenue within revenues and primary our services around academic learning which of teaching services. from

foresee year-over-year to grow segment, second this the or on XX% momentum we and a over So still basis quarter, of the quarter. in this near part we we strong see in second for revenue

with college impact growth education we of rates growth are overall provide and adults. services the the students So slower segment company the for than primarily

and Although even show the the billings recognized half but in the the strong third quarters year. to X seasonality, gross According it's overseas-related and a of contributed schedule in the business. and by revenue the the past college quarter increased class learning mainly usually services second momentum,

revenue saw growth whole billings, remains growth the the strong the kind and in the So drag second therefore, down flat although revenue of rate. it we therefore, in gross quarter, momentum company's

momentum I tutoring traditional the see of academic from double-digit anticipate rate services, grow over growth in to XXXX, billings I gross basis. the momentum we still still quarter quarter students, been our expect learning in triple And second for at services collected gross we also grow And we digits. year-over-year it second especially and it in on November, a continue last the high -- billings, our to this and expect -- from second terms in a to the new mean, quarter. So of to has it the for continued

see the last to of whole, high scheduling double digit middle year-over-year expected the if with in as still differences So compared gross first basis. a end the regardless, on half a year, all billings we XXXX at we the grow

we that basically is revenue which for because so growth, all leading a can indicator know So revenue a billings the gross foundation solid year whole for place the growth.

expansion. traditional compliance substantial essential. then new governance of growth So initiatives through into With the with business looking the if is we're retention and [indiscernible] and in for the clear generated cost enrollments and our place, non-academic half, and guidance incremental still second revenue demand business

operational So for revenues we in rate [indiscernible] Therefore, gross our accelerate in have we and we half have still second the parents. students growth reputation as year. the the and the second billings the among that in and and to quarter confidence capabilities especially anticipate both the of

the end changes, whole ASP because but have assessment of should terms clarity saw our the situation, we to stayed because higher we we but like So revenue of of the enrollment stable. current a details our towards for time high year. move growth has level of in And the segment., our haven't of call, on the the next based earnings of by rate enrollment by disclosed the expectations

the So enrollment gross actually, increase increase. billings basically the of the at pace the shows same with

updates your the questions, with I strong release. of will still that Alice? whole And you put have guidance, So fourth we let's quarterly quarter guidance revenue But address we year collected advertises specific goal. so second the the in revenue billings hope this on confidence quarter weak. like the share -- half all for for information put of the during a bit earnings we little seems gross the of the each year's and XXXX, remotely together, first last although if we growth

Operator

Chan The CLSA. question comes next from Jeffrey with

CH Chan

I OpEx color margin question can margin. could, us of you the give on in the have next give more in more GP GP this And some OpEx ratio regarding perhaps the color the you and the the management XXXX? if us quarter a also rest full in Can and year on XXXX? and profitability year

Nan Shen

Jeffrey, for question. your Thanks,

profit believe So GP our the line change let's of line start by gross and OpEx the with margin.

the margin we in X% So profit decrease margin, for GP gross basis. observed on year-over-year a around first,

the gross reasons. year-over-year the reason was due decrease mix revenue few The in So margin to change. primary profit was a

revenue of In user terms contributor meet to diversified demand.

constructed by large one-on-one online primarily classes. test mix large small smart highest complemented class, have and these live class class a all focused We the models, boosts margin level. business, Among on product online books off-line business GP

which our of revenue and books text As mix center brought accelerating expansion GP learning is smart gross higher classes, proportion subsequentially one-on-one point gradually this and business the lower at margins, is opening time. from cost goods our off-line especially classes sales, impacting increasing, generated revenue of marks margin of us of level the offline expands, our the a profit

Secondly, the curriculum and early impact the to we before courses. stage develop gross new the and to comprehensiveness also The our in their introduce are associated will they achieve enhance capacity. making in resources [indiscernible] system, competitiveness investment efforts of full profit margin

structures. margin the the GP in future our revenue on will long run, So depend highly

the Then for expenses details GP So secondly, that's margin look the our reason of the change. R&D fluctuation. into let's

Education artificial investments year-over-year the in development the for as was as which potential in such a stands in this promising technologies, to half year. So research mainly of corresponding intelligence started implementation. last expenses resources, was due our second in increase practical domain and innovative quarter

like such a section customer than design of efficiency of student tools. online operating the our to curriculum product a operating also includes focused assist new a also service and started exploring our system. center top-notch system researchers so question-and-answer that basically us as This at development. content improving and at internal other learning our development as offline business to products That's also invest We research Also foundation students we for efficient and tool-based areas of help recruit Simultaneously, as content we auto application different off-line very well solid they off-line enhancing external our development and primarily support the currently, to business, on efficiency -- level. research can fast, operations. -- system higher our internal learn So overall the content from AI and aimed expanding development. are research make to call we to is in

a revenue thirdly, of decreased quarter-over-quarter into economics X%, comparison, as which section. So G&A operating nearly leverage. -- the but dive if of the a expenses scale And percentage R&D we actually shows and we the make if

So G&A in the to labor our year-over-year the cost. expenses mainly was due increase growth in

efficiency general beginning tutoring year, so, by a managers. we quality talent top-notch is expenses center we since we our rapid talent also And So off-line our marketing. that off-line most achieve especially of to through we is learning to our success but will factors of know business our non-academic number of management and operational believe services, growth And and of while brought the that a business. couple reasonable K-XX-related most this improving last the numbers doing because sales all on spend

our to highly gross relative billings increase. it's So

So mentioned around Well, the make the comparison, basis. year-over-year we year-over-year collected our students XX% expenses an our is marketing as a prepared on gross increased on from XX% in actual added sales over actually, a basis. newly if increased and nearly billing remarks, I

cost is and and [indiscernible] efficiency. still we still our acquisition we see room customer boundaries, side our our see investment saw still -- the there cushion on over our within investment profitability the we we high returns So that have like maintains

a gives you that our on color and Jeffrey. OpEx there a that Thanks, or level variations hope high So helps.

Operator

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

Katherine Chen

contact to you, @ir@gaotu.cn everyone, [indiscernible] or and Investor you, further team joining operator, for our please any have the you management don't directly. today. questions, department Thank our Relations And call thank hesitate if

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

Operator

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

disconnect. may You now

Gaotu Techedu (GOTU) 21 May 242024 Q1 Earnings call transcript