Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net revenues increased by 43.6% year-over-year to RMB1.0 billion, indicating strong growth momentum.
- Gross billings surged by 87.4% year-over-year to RMB1.7 billion, surpassing market expectations.
- Deferred revenue reached RMB1.6 billion, a 71.5% increase from the same period last year, ensuring robust support for future growth.
- The company has maintained industry-leading customer acquisition efficiency, contributing to strong market demand.
- Gaotu Techedu Inc (GOTU, Financial) has a strong cash reserve of RMB4.1 billion, which is RMB361.3 million higher than the previous year.
Negative Points
- Total operating expenses increased by 144.2% year-over-year to about RMB1.2 billion, impacting profitability.
- Selling expenses rose by 157.8% year-over-year to RMB835.4 million, accounting for 82.7% of net revenues.
- The company reported a net loss of RMB429.6 million with a negative net income margin of 42.5%.
- General and administrative expenses increased by 209.3% year-over-year to RMB169.6 million, driven by recruitment and operational scaling.
- The expansion into offline operations has led to increased costs and operational challenges, impacting short-term profitability.
Q & A Highlights
Q: Could you please share some insights on the progress of offline expansion? For instance, how many cities have you entered? How many learning centers have you opened so far? And how is the student enrollment in the city?
A: We have rapidly assembled a highly efficient and professional team, significantly exceeding our expectations in terms of city coverage and the number of learning centers. We have leveraged our strong brand recognition and industry influence to recruit top-tier talent and share excellent teaching resources. However, offline education products require more localization and personalization, leading to increased R&D expenses. We are committed to our offline business strategy with a high level of patience and determination, and we will disclose relevant operational metrics when the time is right.
Q: What is your strategy regarding AI empowerment in education, and how much potential operating efficiency gains do you think AI will bring to your business?
A: AI has been widely used in various aspects of our business, mainly focused on internal cost reduction and efficiency improvement. AI helps in automatic corrections of students' homework, AI oral language practice, and designing more interactive teaching products. It also improves efficiency in front-end research and development and operational links like customer service. While we believe AI can create huge value in the future, our current investment is conservative, focusing on internal efficiency improvements.
Q: Can you share more color about the revenue growth breakdown for quarter three, like online or offline, and in fact, business segment?
A: Our gross billings in the first half of the year were approximately RMB2.4 billion, with a year-over-year growth rate of about 67.7%. The deferred revenue balance increased over 30% year-over-year, indicating a higher revenue growth rate in the third quarter. The upper limit of our revenue guidance for Q3 is RMB1.208 billion, with a year-over-year growth rate of 53%. The offline revenue contribution is not significant enough to be disclosed separately, so the majority of the revenue and gross billings were contributed by our online business.
Q: Could you elaborate more on the main driver behind the exceptional new enrollment in this summer, and how about the retention of these new enrollments?
A: Q2 is critical for our business due to retention efforts and summer campaign preparation. We have seen increasing retention rates, especially for newly joined students, due to our investments in teacher recruitment and training. Our diversified customer acquisition channels, particularly live streaming, have been highly effective. We have also expanded other channels like social media and offline channels. Our customer acquisition cost remained relatively low within the industry, reflecting the effectiveness of our operational strategies.
Q: What are your marketing strategies going forward?
A: We will continue to optimize our operational strategies to provide better educational services. Our customer acquisition channels will be further optimized, focusing on low-cost and private-type channels to contribute more to student enrollments. We aim to maintain a favorable level of return on investment for our sales and marketing expenses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
