GOTU - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Gaotu Techedu Second Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Katherine Chen, Head of Investor Relations.

Katherine Chen

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

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

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

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

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

earnings non-GAAP non-GAAP published reconciliation For release our financial financial earlier quarter second 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, Executive In this Larry. will is It live archived and a Chief available on

Larry Chen

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

like strong quarter start, I the that increasing quoted with today everyone revenue would RMB, to I otherwise. achieved results figures accelerating to unless all momentum. net remind in Before RMB are growth financial stated second the encouraging XX.X% billion, in We reflecting X.X year-over-year discussed

also exceeded substantial while billings industry-leading grew expectations, market serving year-over-year proprietary investment maintained to but growth diversified to and potential robust XX.X% acquisition customer in education our the the which RMB Our underscored in by long-term channels, the not we demand. gross a our Thanks only X.X market billion, efficiency sector.

XXX.X During reached the operating inflow cash quarter, RMB million. net our

health and restricted totaling strong, RMB billion remained is This reserves cash higher equivalents, consistent a cash focus commitment on Our and in RMB million same XXX.X of efficiency is the the long-term in our our year. result cash, time aspirations. cash, short-term point and business operational last our in improvement ongoing at educational X.X which to investment than

services form quality the on that quarter. learning deferred progress We've and year, year. last in revenue teaching the competencies. in the the point our second continued ensuring billion, core consistently robust of June for the from XX, growth reached our increase As update recognized same we X.X achieved half of the XX.X% a time XXXX, will of our bedrock support have representing provide an RMB now the I in

continuous the past of students expertise qualifications. and the few our the course a significantly for of have months, the alongside strengthening refinement tutor's optimization content and enhanced Over we instructors experience and outcomes strategic learning and through

tutors students, the and approach core has development introduced teaching non-academic insights. tutoring and capability fostering we our degree, course To learning structures we our student to significantly engagement feedback student and classroom turn universities within the services team innovation, their In greater holding boosted the have contributed design of diligently instance, student thereby quality. on not industry the top-ranked team address elevating has comprehensive individual services, of is college of have percentage but overall children flexible that in based reading and models satisfaction. acumen also needs, overall and our innovative for This from and the boosted teaching learnings. business. our increased engagement activities into and content professional proportion we For problem-solving, our educational This have only health the have by master's our refined the fostered self-directed

increase retention laid the edge a in These services steady effective our the for and we with quarter, have enrollments. business. observed growth solid for learning traditional reinforced among a our particularly new competitive rates within industry of notable a efforts uptick the foundation our During

expanding At mechanism. our and training framework, leading and enhanced and our on stability quality, and teaching the experience. refining behind and offerings, talent tutors educational force focused and growth industry we Company long-term our the have at a instructors remain driving of will strengthening our improving priorities of education strategic by incentive Top-tier refining valuation large. our Gaotu, our the forward, optimizing feedback expertise core is the the learning organizational Looking our culture, our professional and

perspective. to expertise are onboarding a role. industry Their rules. we strategic with ] initiatives integration orientation in These lecture transition have and team programs and industry made newcomer comprehensive our [ teachers. China like and recruitment such our series. To their on-campus partnership management camp with across we business as leading also initiatives smooth support with and extensive methodologies robust and have substantial seamless XX seasoned we collaborative new infusing succeed their in needed hires, first mentor Moreover, effective joint programs facilitate universities engaging and insights culmination teaching XXXX, system and and actively implemented of skills expanding proven into to them capacities. cultivating experience professionals equip are over the with the to rapidly and culture, In a knowledge investment in invaluable formed established a strategic half new We

dedicated remain to we growth. pool sustained talent and solid a to ensure foundation for forward, our effective Going cultivating

While rapidly operational maintained we expanding customer on of an unwavering acquisition. focus in efficiency have business, our terms

but talent posts a collaboration developed risks increased We in range a channels investment effectively and of strategy by position diverse and with This on have competitive fostering proprietary for resources, focus traffic closer building proactively acquisition only and operations. mitigated particular not private channels [ a streamlining market cross-team us, also established ].

user high We a rate have conversion at level. maintained the consistently

to expands, Gaotu's word of positive as to power XXth continue we enrollments and Looking of the and further leverage grow our the business brand ahead the our tenth effective brand of founding. mouth June strengthen marked anniversary growth. recognition will drive

Over past of to true educational intelligence. decade, by harnessing the artificial aspirations for striving stayed of our the we've excellence power

to students universities operational organizations, and patent in mission for student and the pursuing We China's further make admitted the second deemed in Educational two last Chinese a advancing to testament cultivating Development evolving data, as Society strategy. nurturing-innovative response framework sector. the co-hosted talent. has Chinese of in social the education to our increase practices a essential our of goal learning to top better official the talent including through to underscores working growth innovative talent top exceptional cultivation. According of dedication excellence teachers innovative We internal with XXXX, collaboration demand academic the forum for to diligently in cultivating initiative our the Gaotu our are advancing and fostering realigning meaningful strong seen the from our This number in value year, collaborative outstanding notch

Our success in value. is trust the rooted committed shareholders. and steadfastly enhancing shareholder We support of fundamentally our remain to

repurchased million under in a As the total of for USD of XX program. aggregate August existing around XX, approximately company XXXX, the million repurchase share ADS X.X had

Thank the of Moving our you lasting committed customer prioritizing much. is forward, for we my remain needs value and creating very remarks. end prepared This to shareholders.

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

Nan Shen

this call Larry, financial the performance year of joining walk operating kicked results operations thank scaling off the revenues and expectations both in momentum you, year the robust quarter, quarter successfully for everyone, delivering you billings. you, our second our our carried and XXXX. for I exceeded will further and into gross Thank with through while now that and our We growth today. fiscal second

billion, in solid ongoing and of market net for foundation year-over-year X.X to set operational Specifically, rate a growth year. enhance revenue the second to first quarter further outpacing RMB increased reflect growth billion, the our These half demand points. to the drive the efficiency, first XX.X results grew boost XX approximately of the percentage Gross billings quality. percentage revenues efforts teaching RMBX.X the year in we XX.X% by for half laying

on operations sustainable education core on talent focus our drive product opportunities market maintain attract long-term and refine expand will we capitalize top and offerings, forward, Moving business, our to growth.

a quarter, the team the surge to particularly ahead I like Before effectively first inherent to teacher of education volatility in diving manage into would result the training we allocated address To time, get billings metric using recognition, of our online these channels. we revenue investments accurately for the acquisition acquisition customer and recommend and ratio key months typical business. Since to to there a expenditure gross resources seasonality demand, our planned summer in as business. three online market and strategically for is efficiency six customer between lag and recruitment, this more

channels, dynamically acquisition which our goal ensuring marketing to effective in adjusted we During growth. thereby acquisition led the of better-than-expected gross delivering investments efficiency, while customer activities successfully and on our billings quarter,

align the the quarters, made fiscal in summer near-term do operating quarter since Additionally, profit. our our not the and calendar, the during school extensive substantially the third investments would fiscal both spend impacting second with fully

boost will market in strategic brand confident are solidify investments our position and growth that summer student meaningful enrollments, further drive recognition. in our We

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

revenues than soared same enrollments volumes surged received. this year. billings by our more services compared XXX% than from recognition, strong and Our to the new learning speak have initiatives last market more non-academic gross and the digits period tutoring educational the both quarter. in centered These results about experienced by services gross student Notably, new earnings Net remarkable year-over-year. triple growth around products

have of and user one key revenues, it more better learning success our more services, them For than and curriculums the in result enabled deep This first skills. contributed continually transferable time, us understanding total market while drivers. segment the the and interactive making trends underlying engaging and to revenue knowledge into optimize key our of insights of needs, XX% which making integrating of this

courses our addressing demonstrating the services Further of basis. a the enrolled of driver student Additionally, number in per user effectiveness needs. year-over-year and improved on average also courses

trajectory. growth healthy Our a learning educational services maintained

this increase a year-over-year quarter, period with revenue compared XX% growth saw the high the segment gross During exceeding year. double-digit to billings same in last

especially overall ongoing and notable further student the Moreover, to enrollments. of in bolstered efforts structure student and refine optimize services, segment. a student learning boosted more base health this for Our new diverse the enrollments retention, our significantly

other services educational students component our for is crucial adults. services learning college The of and

contributed include various our backgrounds, we the of revenues, services roughly During diverse career our college under prep as expanded services educational address better growing of exam and and To the CETX offerings total have XX% examination segment students and to rebranded quarter, entrance this from consulting. learning year-over-year. post-graduate prep needs services just such into for XX% CETX users

their resources to Prize and partnered to planning educational for college [ academic job need have ] support, opportunities. quality Prestigious with we provide Additionally, servicing career content students, and high-quality

will billings During high by our college double overseas financials present for related the now from by our high from services our educational revenues study students digits rose increased gross in I services while more year-over-year, detail. double-digits. quarter,

the RMBXXX.X was from revenue margin of to down, cost in and RMB RMB and margin negative increased change seasoned it the and non-GAAP Our smooth year-over-year Non-GAAP XX.X%. for expenses XXX.X was increased quarter net to XX.X% Breaking expenses predominantly result product development decrease reflected business RMB of million. revenues. to was economics. market our this year-over-year XX.X% was offline and scale growth and for revenues. and while Research of loss net largely of was billion. development at management ensuring of quarter XXX.X increased gross our net in was quarter our was operations General was of operations operations, million, operating steps year-over-year XXX.X margin XXX.X% a the from XXX.X with business. million, operational during XXX.X% operating RMB RMB during to expenses XXX.X negative by expansion to The Loss XXX.X year-over-year net professionals million partially accounting marketing margin negative peak XXX.X rise million to over proactive loss operating XX.X%. of and was accounting of income the a recruitment a X.X The The negative increased expenses and support season. online driven XX.X% beginning million, margin loss RMB recruitment was income the Net XXX.X summer million, response tutors RMB XX.X% Non-GAAP demand net million our administrative our unit margin heightened revenue. of to to profit accounting XX.X% RMB about to and of was our net XX.X%. XX.X%. year-over-year XX.X%. increased ensure operational year-over-year of of the non-GAAP was expenses million, short-term attributable also maintaining RMB the selling solid Gross This for increase Total mix. in gross period XXX.X% efficiency to the increase

million. inflow net operating Our cash was RMBXXX.X

Now turning sheet. our balance to

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

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

share million program. August As the repurchased the for existing of aggregate around XX have USD we million market XX, X.X ADS repurchase under on of approximately XXXX, open an

and shareholders. to stock the our buyback of continue a of with value accordance will for Directors guidance the We execute create Board long-term in

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

Operator

will Cai We session. the with comes Instructions] first from Alice [Operator begin Citibank. The now question-and-answer question today

Alice Cai

Good evening, Larry Shannon. and

guess. because noticed offline the to expansion in on off-line share of terms expansion. losses Could some of related please you the about offline progress insight question Another we've probably expansion, I

in entered? For color many how far? student instance, how And many cities have appreciated. so will enrollment you How learning city? Any centers have the be opened this is

Nan Shen

Alice. Thanks,

and asking tasks. business rapidly business synergistically. right? steadily journey a numbers in therefore, influence highly of the across on the team lot centers, Larry, a XXXX, we brand of in at recognition for and city of with progressing industry of half key professional And and our progress centers, we our the the operations. the providing our rapidly exceeded At of offline the terms progress Relying and learning both of are were efficient the the parts has was assembled learning several founder offline the and business coverage number And offline expansion time, You offline our work strong first online learning the our expectations beginning and achievements a expansion business, year. significantly foundation to about centers on of very business. made share the on where is of notable our in offline we glad can same exploring And found the have

centers. recruitment, recruitment education superior also the have universities. team Beijing, top-tier that critical we most is with Fuzhou all overlapping very early of of be resources meticulously factory ] materials, and the the universities significantly This the across offline is support been new and could which software conservative an our products to the to important our secondly, particularly also minds to learning in teacher education This as Compared the value can but for This of in provides And a educational operations, strong we abilities offering teaching only other is resources the our and because offline factors our enhance combined our domestic high-quality learning with ensure offline those [ successful will excellent terms offline brand center. that efficiency boost other offline from And these know offline in parents and most teaching students our education, institutions, headquarters And offline importantly, recruiting have operations offline content, top-notch strong shared. resources offline share increase is online such teacher education process. quality brand in our able students, our of product of talent to refined stage, holds brand also, by Firstly, educational offline business. brands, providing like awareness. in for capability supported a prestigious greatly to content. is significant teaching

identified notable year. there have localization personalization. half greater Offline offline our a on in the However, emphasis the place between operations differences and been products online and past are of that education

our students support the simultaneous at development. business, the online That offline also, to quite product current we And localized system means requiring develop business from in efforts multiple need operation online specific and investment different distinct paid as well learning of to if expenses. research need partially We into operational in R&D and and the content our to the in meet business. this our are increase is invest expansion to Given multiple different we compare an research is cities regions. stage, education in the needs explained centers, the

do multiple for online renovation make in offline class of significant and rescheduling, campus difference business a These be a details to support time, and For campus crucial between offline is principal and operational Building recognize long, our do and deep. are entry challenge the parents locations and significantly systems our the example, students nor and team same high that long offline systems moat for operational At entrant, enhance and recognition as very of the cultivation, barriers in the requires support accessibility, we a selection system as reputation systems and products support teacher integration etc. we business And and cycle. for operational fully to among check-in [ not as cost new expansion. multiple system and a overlook and development. we operational site the will educational comprehensive ] operation that for of and will recruitment efficiency successful. training, students our Such time business underestimate well ensure

cities we our offline our patience of However, for and revenue offline level when right our numbers entered level begin But the of a a high comprehensive will metrics, we to of relevant of progress us the also we significance, centers long-term the a offline investment future. and our are committed when current including of strategy time and our that determination. business the can The more growth. is business of importance contribution certain and is deeply operation with great learning reach finally, disclosing help gain in the understanding to

Operator

The next Timothy Sachs. Goldman with question Zhao comes from

Timothy Zhao

management, taking for you, Thank my question.

about in prepared you remarks, think your the I AI. mentioned

question in my regarding education. the empowerment is So AI

and think view to AI field do you in Just the for is wondering what your business your management strategy will how business? bring this efficiency much segments? gains operating And potential different is what

Nan Shen

a a of This lot artificial in whole question. recent is update team management attention And good the very on Yes. Thanks, the most pay intelligence. Timothy. the

industries artificial artificial understanding development meet a we in of in with in the recently, visited and And and evolution the profound of and more entrepreneurs most clear personally of Silicon continuous States of technology personally couple Larry rapid intelligence. the recent to a and get United the about application the AI have various of Valley the development firms So intelligence. AI knowledge

of mainly reduction So, has the cost our used currently, improvement. a aspects are been efficiency internal current and AI widely and in focused applications few quite on business

promoting homework majority the intelligence help app used can oral AI our and of practice. existing more can assist more our personalized of the like oral learning and efficiency want products it product were or we WeChat to system all research field practice the our sure we are create teachers make research the applied research interactive incremental talk to new other to to on tools, polished, and in well, value to designers the and instant provided very and do teaching And daily students students. to the them the also, their [ corrections of all -- to and of development, of students Firstly, to secondly, significantly product efficiencies improved technology student's the and in our improve also they of the the AI students tutors artificial all language teaching provide our that them our our development, automatic design our to AI product programs design of including and can AI our in But office And the has we of and link currently, Internet front-end improve instead to ] internal we existing message students them promote efficiency development, want because efficiency. internal be before to market.

efficiency customer important cost in operational to improving of like reducing playing in different and AI and as constructions -- links role service links. also is Finally, in responses, an automatic such other

it as But improve now, internal our can we want huge to create in future to the in top company. right conservative. our this the the now, So we stage. artificial this we at believe value efficiency only technology intelligence more use be investment develops, field And right to

Operator

CLSA. Summer next with from [ The comes question ] Chan

CH Chan

Thank taking that growth My strong and a congratulations on guidance question is the question see we that three quarter. quarter you faster will a my be for quarter.

revenue the [ online ] segment? offline, business for growth and fact So, can quarter three, in more say, or breakdown like, share about you color

Nan Shen

diving guess the deeply. were I wouldn't But quarter. for and Yes, clearly. revenue about We the you asking should next the hear be Summer. to guidance guidance Thanks, to do think be I numbers able the

X revenue. than increased mainly in is higher with in billings about the approximately impacts So indicated X of and billion, in year-over-year a points year last are now, X.X XX% That and growth the first higher deferred we negatively revenue a by half of for student RMB the approximately the much for balance as increase class QX. is percentage XXXX, XX.X% the And rate year-over-year. the related the special And the summer class to There right? reasons over provided this. It course, operations And revenue revenue our price compared September, X.XXX that is has schedule of will of weekend QX appears all grade growth third the a some with growth window release in the precious the that recognized limit RMB entrance-level growth rate year-over-year rate secondly, during X revenue rate the the month growth quarter, guidance in billion, rate of we in XX%. first, be the billings is scale. of gross earnings seizing to upper year-over-year which conducted which strategic gross less

question revenue gross guidance QX live online will revenues billings. is the For to indicates the range. and The the billings our typical continuously currently of breakdown QX I causes And QX contribution the of present QX main also the and We growth your these offline predict in business contribution fall indicated and billings our combined revenues QX of in in could the growth our revenue contribution. large reasons rate together of online think effect rate with contribution within your second the class This is these instead gross seasonality by the students, referring -- be gross revenues part of revenue QX. to model.

disclosed So of significant as not year, the enough offline be contribution this to revenue separately. is

online gross addressed that your of So by Summer, our contribution hope Thanks, were revenue and question. of the billings majority contributed business.

Operator

next The with CMS. from question Crystal Li comes

Crystal Li

taking question. management Thanks my for

marketing And So could I of this? see in on enrollment billings you reflected your new forward. the main have this your elaborate you And going how about regarding question by gross the my this growth. regulation driver And second more exceptional the enrollments? -- new strategy summer, behind

Nan Shen

in lot. critical a year Actually, our is quarter. a Thanks business Right. events significant for were the Sure. for QX because quarter happening second X there every

at then training the we teachers' The first recruitment May, keep because the in our or April past end happens and of is the keep part our investing usually in publishing retention few we of and years, the educational in product. early

seize newly really I our mentioned my And in the remarks, we keep retention the business. or part summer students. just have the campaign And important our especially we our that's preparation joined confidence second studied prepared something in that, future rate for increasing, in for see So do is usually May. to strong demand And and we parents better plan summer, fully landscape, has operations during the shown firsthand. felt a the the middle we education vibrant the we've market of and the ensure And needs this can students valuable to learning summer, this meet opportunity. proactively diverse

our professional familiar characterized tutors thorough professionalism. been services summer Most immediately assignments second and training intensified skills, experience. improving systematic scalable and early training them learning communication live from of preparation attention their comprehensive our and secondly, we've greater the excellent customer where question, during by summer, high-quality Therefore, teachers teaching key parents. particularly X greatly your streaming to the a we in students terms enhancing achieved the address to teachers teaching diversified of terms acquisition this and teachers have can on up and and training passion operation. to educational more us. channels, skills, initiated acquisition attracted investment the with in First, followed we Outstandingly, are that already with of the our of tutor our weeks recruitment teacher success advance, in understand the recruitment our by we also training, And year, approach, allowed X to after educational to summer and highly summer. and sector, on customer this their they approach be contributed methods, majority products. This focusing We acquisition began a join in their of also them we customer successfully provide the

this we the summer enrollment, benefits strategy. capitalized channel on fully of the diversified During

and media influence. some Additionally, cover potential offline we brand as awareness and actively increasing expanded other channels groups, channels customer thereby social comprehensively to such

through the found we edge the within maintain strategic operational not because our customer enrollments, information able a provided. been expenses operational industry. student the relatively on the our we on expected you remain So channel Based achieved do summer can growth the during to the as the third marketing investment of but market. account provided this measures, and in P&L return operating by competitive favorable we tracks low we we've us sales of effectiveness level And successfully on costs a reflect our always metrics in these vacation, and and gives does of only acquisition parties also our strategies, and

So operations educational and optimize acquisition make to channels to enrollments our like better of optimize channels, structure channels in more will student will the we the sure even we for And students customer to and further channels, and the continue we provide the private-type in contribute more our parents. future. to will services low-cost

Crystal Li

That's Shannon. Thanks, very helpful.

Operator

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

Katherine Chen

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

directly. department questions, please don't or ir@gaotu.cn to If via on our management you have contact hesitate any e-mail further at Investor Relations

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

Operator

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

may now You disconnect.

Gaotu Techedu (GOTU) 27 Aug 242024 Q2 Earnings call transcript