Gaotu Techedu Inc. Q4 FY2025 earnings call

• 2025 was a year of exceptional resilience with refinement in teaching quality and operational granularity, exceeded growth targets and reinforced organizational foundation. • 2026 focus on five fronts: calibrating growth pace with profitability as core, product development user-centric for continuous innovation, technology integration for operational efficiency and user experience, talent strategy reinforcing competitive edge around high-caliber educators, and enhancing business portfolio with lifelong learning service platform. • Fourth quarter revenue up 21.4% year-over-year, operating expenses as percentage of revenue declined 4.1 percentage points, operating loss reduced 20.9%. • User acquisition efficiency improved 10.8% year-over-year in 2025. • Offline business expansion started in 2023, achieved economies of scale, expects revenue of offline business to surpass several independently listed peers, brand credibility established, and working on optimizing and integrating for sustainable profitability.

Learning services contributed over 95% of net revenues. Non-academic children's services and traditional learning services as core segments contributed over 80% of total revenues. New initiatives on online and offline non-academic tutoring services had strong growth in Q4 and full-year 2025. Online business of non-academic children's services had margin expansion and high retention rate. Traditional business had stable enrollment growth and service quality enhancement. Educational services for college students and adults had over 15% growth in Q4 and full-year profitability. In Q4, revenue was 1.7 billion RMB, gross profit increased 20.7% year-over-year to over 1.1 billion RMB with a gross margin of 67.9%. Cost of revenue was 540.9 million RMB. Operating expenses increased 15.0% year-over-year to nearly 1.3 billion RMB, with selling expenses up 20.3%, R&D expenses up 14.0%, and general and administrative expenses down 2.1%. Operating loss was 118.0 million RMB, net operating cash inflow increased 23.1% year-over-year to 964.8 million RMB. Deferred revenue balance was 2.6 billion RMB as of Dec 31, 2025. Cash, cash equivalents, restricted cash, short-term and long-term investments totaled 4.0 billion RMB.

• Total net revenue for first quarter of 2026 expected to be between 1,578 million and 1,598 million RMB, an increase of 5.7% to 7.0% year-over-year due to seasonality. • Expect increase rate to return to double digits in second quarter of 2026.

• Forward-looking statements involve known or unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those in forward-looking statements. • Risks detailed in company's public filing with U.S. SEC. • Offline business has barriers to entry related to management effectiveness, organizational alignment, system processes, and top tier teacher supply which need further optimization and integration.

Q: Please elaborate more on the future plan on the offline business.

A: Our offline business is a clear second growth curve and top strategic priority. Launched expansion in 2023, led by founder with resource allocation, decision-making efficiency, and cross-sector collaboration. Achieved economies of scale since 2023, expect revenue to surpass several independently listed peers. Brand credibility established, but has barriers to entry which are being addressed, with goal of offline business being profitable including headquarter overhead this year and next year