Gaotu Techedu, Inc. Q3 FY2024 earnings call

• Core businesses made steady progress with gross balance increasing by 67.2% over the year to approx. RMB 1.1 billion and revenue growing by 53.1% year-over-year to over RMB 1.2 billion.
• Ramped up investments in upgrading educational systems, enhancing organizational capabilities, improving management practices, and talent development.
• Enhanced educational products by integrating expertise with advanced tech, saw referral rate of educational services for college students breakthrough, established multi-tiered educational support system, and rolled out Dream Coach program.
• Actively embraced market changes, advanced customer acquisition capabilities with industry-leading efficiency in customer acquisitions through live streaming, expanded and diversified customer acquisition channels.
• Remained committed to social responsibility, promoted education equity by awarding scholarships and building libraries, and made progress in delivering shareholder returns with share repurchases.

Learning services contribute 95% of net revenues. More than 75% of total revenues come from non-academic children's services and other traditional learning services, which increased by 70% year-over-year. New initiatives in non-academic tutoring services saw net revenues and gross billings surge by over triple digits year-over-year, with gross billings from new student enrollments up over 200% compared to the same period last year. Traditional learning services maintained steady growth. Educational services for college students and adults contributed under 20% of total revenues in the quarter, with co-offerings in this segment maintaining healthy growth momentum. Educational services for college students achieved high double digits year-over-year revenue growth along with quarterly profit and positive cash flow, and overseas study-related services also had high double-digit year-over-year revenue increase and generated positive cash flow.

• Expect total net revenues for the fourth quarter of 2024 to be between RMB 1,288 million and RMB 1,308 million, representing an increase of 69.2% to 71.9% year-over-year.
• In 2025, will take a dynamic approach to balancing investment and profitability, focus on expanding profit base and improving operating profit margins in existing business, optimize fixed cost structures, drive cost reductions and efficiency improvements, expecting steady growth in gross billings and revenues with significant reduction in losses, and continue share repurchase plan.

• Adjustments in psychological consulting segment within educational services for college students and adults impacted by certification requirements led to revenue shortfall.
• Some innovative efforts in traditional education services didn't fully exceed expectations.
• Subdued economic growth, cautious consumer spending environment, and social platform impact further hampered recovery.
• Increased investments in offline operations and overseas study services created short-term pressure, and handling of explosive business opportunities in first half of the year with resource allocation during rapid growth contributed to current loss.

Q: How about the growth by different business segments and could you give us some color on 2025 growth outlook?

A: From current perspective, there were deviations from年初 expectations due to certification requirements impacting segments and innovative efforts in traditional education not meeting expectations, plus subdued economic growth, cautious consumer spending, etc. Looking ahead to 2025, will take dynamic approach to balancing investment and profitability, focus on expanding profit base, optimizing fixed costs, driving cost reductions and efficiency improvements, expecting steady growth in gross billings and revenues with reduced losses, and continue share repurchase plan under Board of Directors' guidance