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Gaotu Techedu Announces Second Quarter of 2023 Unaudited Financial Results

Gaotu Techedu Announces Second Quarter of 2023 Unaudited Financial Results

BEIJING, Aug. 30, 2023 /PRNewswire/ -- Gaotu Techedu Inc. (NYSE: GOTU) ("Gaotu" or the "Company"), a technology-driven education company and online large-class tutoring service provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2023.

Second Quarter 2023 Highlights[1]

  • Net revenues were RMB703.1 million, increased by 30.7% from RMB537.8 million in the same period of 2022.
  • Gross billings[2] were RMB882.3 million, increased by 44.2% from RMB611.7 million in the same period of 2022.
  • Income from operations increased by 171.6% year-over-year to RMB43.3 million for the second quarter of 2023.
  • Non-GAAP income from operations increased by 601.1% year-over-year to RMB50.3 million for the second quarter of 2023.
  • Net income increased by 212.8% year-over-year to RMB56.2 million for the second quarter of 2023.
  • Non-GAAP net income was RMB63.2 million, compared with non-GAAP net income of RMB0.6 million in the same period of 2022.
  • Net operating cash inflow was RMB288.5 million, increased by 207.6% from RMB93.8 million in the same period of 2022.

Second Quarter 2023 Key Financial and Operating Data

(In thousands of RMB, except for percentages)



For the three months ended June 30,


2022



2023



Pct. Change

Net revenues


537,799




703,094



30.7 %

Gross billings


611,668




882,325



44.2 %

(Loss)/income from operations


(60,493)




43,311



171.6 %

Non-GAAP (loss)/income from operations


(10,039)




50,309



601.1 %

Net (loss)/income


(49,809)




56,161



212.8 %

Non-GAAP net income


645




63,159



9,692.1 %

Net operating cash inflow


93,794




288,542



207.6 %

 

[1] For a reconciliation of non-GAAP numbers, please see the table captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" at the end of this press release. Non-GAAP income (loss) from operations and non-GAAP net income (loss) exclude share-based compensation expenses.

[2] Gross billings is a non-GAAP financial measure, which is defined as the total amount of cash received for the sale of course offerings in such period, net of the total amount of refunds in such period. See "About Non-GAAP Financial Measures" and "Reconciliations of non-GAAP measures to the most comparable GAAP measures" elsewhere in this press release.

Six Months Ended June 30, 2023 Highlights

  • Net revenues were RMB1,410.4 million, increased by 11.7% from RMB1,262.4 million in the same period of 2022.
  • Gross billings were RMB1,421.3 million, increased by 52.9% from RMB929.8 million in the same period of 2022.
  • Income from operations increased by 492.9% year-over-year to RMB138.5 million.
  • Non-GAAP income from operations was RMB165.2 million, increased by 205.7% from RMB54.0 million in the same period of 2022.
  • Net income was RMB170.0 million, compared with net income of RMB3.9 million in the same period of 2022.
  • Non-GAAP net income was RMB196.8 million, increased by 111.1% from RMB93.2 million in the same period of 2022.
  • Net operating cash inflow increased by 118.6% year-over-year to RMB72.1 million.

 

First Six Months 2023 Key Financial and Operating Data

(In thousands of RMB, except for percentages)



For the six months ended June 30,


2022



2023



Pct. Change

Net revenues


1,262,414




1,410,386



11.7 %

Gross billings


929,763




1,421,276



52.9 %

(Loss)/income from operations


(35,240)




138,450



492.9 %

Non-GAAP income from operations


54,039




165,190



205.7 %

Net income


3,909




170,014



4,249.3 %

Non-GAAP net income


93,188




196,754



111.1 %

Net operating cash (outflow)/inflow


(387,472)




72,134



118.6 %

Larry Xiangdong Chen, the Company's founder, Chairman and CEO, commented, "Guided by our "effective growth" strategy, we grew gross billings substantially on both an annual and sequential basis, while also recording our third consecutive quarter of profitability and generating a sizable positive net operating cashflow of RMB288.5 million. Thanks to ongoing improvements in our organizational and operational efficiency, we delivered a triple-digit year-over-year increase in both income from operations and net income. Backed by ample cash reserves, we have been steadily ramping up our investments in talents, continuously refining our educational content and services, and persistently improving teaching quality and learning efficiency through Artificial Intelligence technological innovation and organizational upgrades. These efforts have strengthened our competitive edge in terms of content-driven customer acquisition and teaching quality, creating a flywheel effect.

I would like to emphasize that making learning better will always be Gaotu's unwavering mission, and we are willing to embrace all opportunities and challenges that lie ahead. Our dedication to addressing customer needs, prioritizing teaching quality and enhancing learning outcomes will remain unchanged. Our continued investment in technological innovation and organizational capability will remain unchanged. Our commitment to our original aspiration to educate will remain unchanged."

Shannon Shen, CFO of the Company, added, "Our business achieved profitability while maintaining robust top-line growth momentum, with operating leverage from the economies of scale becoming more evident. Our net revenues increased by 30.7% year-over-year to more than RMB703.1 million, and our gross billings increased considerably by 44.2% year-over-year to RMB882.3 million. In addition, operating expenses as percentage of revenue decreased by roughly 14 percentage points compared to the same period last year. In terms of bottom-line, net income margin improved by approximately 17 percentage points to 8.0%, marking our third consecutive quarter of positive outcomes. On the operational front, we accomplished a synchronized growth trajectory, expanding both in scale and profitability. By continuously exploring more proprietary channels to gain new customers with competitive moats, we have enhanced our autonomy over customer acquisition and improved course delivery quality and efficiency.

Our solid financial performance stands as the ultimate testament to our resilient business model, strong organizational cohesion and continuous endeavors in customer acquisition and operational efficiency. Going forward, we will continue to drive effective growth and create long-term value for our stakeholders."

Financial Results for the Second Quarter of 2023

Net Revenues

Net revenues increased by 30.7% to RMB703.1 million from RMB537.8 million in the second quarter of 2022, which was mainly due to the large year-over-year growth of gross billings as a result of the improvement of customer acquisition efficiency.

Cost of Revenues

Cost of revenues increased by 15.3% to RMB184.4 million from RMB160.0 million in the second quarter of 2022. The increase was mainly due to the growth of labor cost of instructors and tutors to cope with the growing business volume, as well as the increase of learning materials cost, which was partially offset by the decline of share-based compensation cost.

Gross Profit and Gross Margin

Gross profit increased by 37.3% to RMB518.7 million from RMB377.8 million in the second quarter of 2022. Gross profit margin increased to 73.8% from 70.2% in the same period of 2022.

Non-GAAP gross profit increased by 31.8% to RMB522.3 million from RMB396.4 million in the same period of 2022. Non-GAAP gross profit margin increased to 74.3% from 73.7% in the same period of 2022.

Operating Expenses

Operating expenses increased by 8.5% to RMB475.4 million from RMB438.3 million in the second quarter of 2022. The increase was primarily due to the growth of labor expenses, as well as a higher expenditure on marketing and branding activities, which was partially offset by the decline of share-based compensation expenses.

  • Selling expenses increased to RMB324.1 million from RMB269.0 million in the second quarter of 2022.
  • Research and development expenses decreased to RMB98.4 million from RMB103.9 million in the second quarter of 2022.
  • General and administrative expenses decreased to RMB52.9 million from RMB65.4 million in the second quarter of 2022.

Income/(Loss) from Operations

Income from operations was RMB43.3 million, compared with loss from operations of RMB60.5 million in the second quarter of 2022.

Non-GAAP income from operations was RMB50.3 million, compared with non-GAAP loss from operations of RMB10.0 million in the second quarter of 2022.

Interest Income and Realized Gains from Investments

Interest income and realized gains from investments, on aggregate, were RMB27.4 million, compared with a total of RMB9.8 million in the second quarter of 2022.

Other (Expense)/Income

Other expense was RMB6.2 million, compared with other income of RMB0.4 million in the second quarter of 2022.

Net Income/(Loss)

Net income was RMB56.2 million, compared with net loss of RMB49.8 million in the second quarter of 2022.

Non-GAAP net income was RMB63.2 million, compared with non-GAAP net income of RMB0.6 million in the second quarter of 2022.

Cash Flow

Net operating cash inflow in the second quarter of 2023 was RMB288.5 million, which was primarily due to the increase of gross billings.

Basic and Diluted Net Income per ADS

Basic and diluted net income per ADS were both RMB0.21 in the second quarter of 2023.

Non-GAAP basic and diluted net income per ADS were RMB0.24 and RMB0.23, respectively, in the second quarter of 2023.

Share Outstanding

As of June 30, 2023, the Company had 174,705,405 ordinary shares outstanding.

Cash, Cash Equivalents, Restricted Cash, Short-term and Long-term Investments

As of June 30, 2023, the Company had cash and cash equivalents, restricted cash, short-term and long-term investments of RMB3,742.1 million in aggregate, compared with a total of RMB3,743.8 million as of December 31, 2022.

Business Outlook

Based on the Company's current estimates, total net revenues for the third quarter of 2023 are expected to be between RMB728 million and RMB748 million, representing an increase of 20.1% to 23.4% on a year-over-year basis. These estimates reflect the Company's current expectations, which are subject to change.

Conference Call

The Company will hold an earnings conference call at 8:00 AM U.S. Eastern Time on Wednesday, August 30, 2023 (8:00 PM on Wednesday, August 30, 2023, Beijing/Hong Kong Time). Dial-in details for the earnings conference call are as follows:

International: 1-412-317-6061

United States: 1-888-317-6003

Hong Kong: 800-963-976

Mainland China: 400-120-6115

Passcode: 3614057

A telephone replay will be available two hours after the conclusion of the conference call through September 6, 2023. The dial-in details are:

International: 1-412-317-0088

United States: 1-877-344-7529

Passcode: 9732498

Additionally, a live and archived webcast of this conference call will be available at https://ir.gaotu.cn/home.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook, as well as the Company's strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's ability to continue to attract students to enroll in its courses; the Company's ability to continue to recruit, train and retain qualified teachers; the Company's ability to improve the content of its existing course offerings and to develop new courses; the Company's ability to maintain and enhance its brand; the Company's ability to maintain and continue to improve its teaching results; and the Company's ability to compete effectively against its competitors. Further information regarding these and other risks is included in the Company's reports filed with, or furnished to the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no duty to update such information or any forward-looking statement, except as required under applicable law.

About Gaotu Techedu Inc.

Gaotu is a technology-driven education company and online large-class tutoring service provider in China. The Company offers learning services and educational content & digitalized learning products. Gaotu adopts an online live large-class format to deliver its courses, which the Company believes is the most effective and scalable model to disseminate scarce high-quality teaching resources to aspiring students in China. Big data analytics permeates every aspect of the Company's business and facilitates the application of the latest technology to improve teaching delivery, student learning experience, and operational efficiency.

About Non-GAAP Financial Measures

The Company uses gross billings, non-GAAP gross profit, non-GAAP income (loss) from operations and non-GAAP net income (loss), each a non-GAAP financial measure, in evaluating its operating results and for financial and operational decision-making purposes.

The Company defines gross billings for a specific period as the total amount of cash received for the sale of course offerings in such period, net of the total amount of refunds in such period. The Company's management uses gross billings as a performance measurement because the Company generally bills its students for the entire course fee at the time of sale of its course offerings and recognizes revenue proportionally as the classes are delivered. For some courses, the Company continues to provide students with 12 months to 36 months access to the pre-recorded audio-video courses after the online live courses are delivered. The Company believes that gross billings provides valuable insight into the sales of its course packages and the performance of its business. As gross billings have material limitations as an analytical metrics and may not be calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies.

Non-GAAP gross profit, non-GAAP income (loss) from operations and non-GAAP net income (loss) exclude share-based compensation expenses. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective. The Company believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation charges that have been and will continue to be for the foreseeable future a significant recurring expense in the Company's business.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Exchange Rate

The Company's business is primarily conducted in China and a significant majority of revenues generated are denominated in Renminbi ("RMB"). This announcement contains currency conversions of RMB amounts into U.S. dollars ("USD") solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to USD are made at a rate of RMB7.2513 to USD1.0000, the effective noon buying rate for June 30, 2023 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into USD at that rate on June 30, 2023, or at any other rate.

For further information, please contact:

Gaotu Techedu Inc.
Investor Relations
E-mail: ir@gaotu.cn 

Christensen

In China
Ms. Vivian Wang
Phone: +852-2232-3978
E-mail: gotu@christensencomms.com 

In the US
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: linda.bergkamp@christensencomms.com 

 

 

 

 

Gaotu Techedu Inc.

Unaudited condensed consolidated balance sheets

(In thousands of RMB and USD, except for share, per share and per ADS data)





As of December
31,



As of June 30,



2022



2023



2023



RMB



RMB



USD


ASSETS









Current assets









    Cash and cash equivalents


819,911




767,702




105,871


    Restricted cash


22




534




74


    Short-term investments


2,923,864




2,859,384




394,327


    Inventory, net


22,783




23,906




3,297


    Prepaid expenses and other current assets


399,897




575,588




79,377


    Amounts due from related party


-




10,660




1,470


Total current assets


4,166,477




4,237,774




584,416











Non-current assets









    Operating lease right-of-use assets


83,663




86,095




11,873


    Property, equipment and software, net


552,032




525,756




72,505


    Land use rights, net


27,373




26,970




3,719


    Long-term investments


-




114,474




15,787


    Deferred tax assets


15,679




11,863




1,636


    Rental deposit


9,502




9,309




1,284


    Other non-current assets


21,449




19,803




2,731


TOTAL ASSETS


4,876,175




5,032,044




693,951











LIABILITIES


















Current liabilities









    Accrued expenses and other current liabilities
      (including accrued expenses and other current
      liabilities of the consolidated VIE without
      recourse to the Group of RMB367,477
      and RMB328,749 as of December 31, 2022
      and June 30, 2023, respectively)


662,189




583,694




80,496


    Deferred revenue, current portion of the
      consolidated VIE without recourse to the Group


906,914




796,743




109,876


   Operating lease liabilities, current portion
      (including current portion of operating lease
      liabilities of the consolidated VIE without
      recourse to the Group of RMB21,281 and
      RMB13,785 as of December 31, 2022 and
      June 30, 2023, respectively)


38,326




29,433




4,059


Income tax payable (including income tax
   payable of the consolidated VIE without
   recourse to the Group of RMB260 and nil
  as of December 31, 2022 and June 30,
  2023, respectively)


1,793




6,330




873


Total current liabilities


1,609,222




1,416,200




195,304


 

 

 

Gaotu Techedu Inc.

Unaudited condensed consolidated balance sheets

(In thousands of RMB and USD, except for share, per share and per ADS data)





As of December
31,



As of June 30,



2022



2023



2023



RMB



RMB



USD


Non-current liabilities









    Deferred revenue, non-current portion of
      the consolidated VIE without recourse
      to the Group


52,419




125,833




17,353


    Operating lease liabilities, non-current
      portion (including non-current portion
      of operating lease liabilities of the
      consolidated VIE without recourse
      to the Group of RMB17,457 and
      RMB31,711 as of December 31, 2022
      and June 30, 2023, respectively)


44,198




56,034




7,727


   Deferred tax liabilities(including deferred
     tax liabilities of the consolidated VIE without
     recourse to the Group of RMB74,341 and
     RMB73,152 as of December 31, 2022
     and June 30, 2023, respectively)


74,507




73,444




10,128


TOTAL LIABILITIES


1,780,346




1,671,511




230,512











SHAREHOLDERS' EQUITY









    Ordinary shares


115




116




16


    Additional paid-in capital


7,915,899




7,961,658




1,097,963


    Accumulated other comprehensive loss


(64,062)




(15,132)




(2,087)


    Statutory reserve


40,380




40,380




5,569


    Accumulated deficit


(4,796,503)




(4,626,489)




(638,022)


TOTAL SHAREHOLDERS' EQUITY


3,095,829




3,360,533




463,439











TOTAL LIABILITIES AND TOTAL
  SHAREHOLDERS' EQUITY


4,876,175




5,032,044




693,951


 

 

 

Gaotu Techedu Inc.

Unaudited condensed consolidated statements of operations

(In thousands of RMB and USD, except for share, per share and per ADS data)





For the three months ended June 30,



For the six months ended June 30,



2022



2023



2023



2022



2023



2023



RMB



RMB



USD



RMB



RMB



USD


Net revenues


537,799




703,094




96,961




1,262,414




1,410,386




194,501


Cost of revenues


(160,004)




(184,380)




(25,427)




(372,949)




(344,362)




(47,490)


Gross profit


377,795




518,714




71,534




889,465




1,066,024




147,011


Operating expenses:


















Selling expenses


(268,975)




(324,065)




(44,691)




(553,149)




(601,086)




(82,894)


Research and development
expenses


(103,872)




(98,402)




(13,570)




(227,179)




(195,379)




(26,944)


General and administrative
expenses


(65,441)




(52,936)




(7,300)




(144,377)




(131,109)




(18,081)


Total operating expenses


(438,288)




(475,403)




(65,561)




(924,705)




(927,574)




(127,919)


(Loss)/income from
operations


(60,493)




43,311




5,973




(35,240)




138,450




19,092


Interest income


1,763




19,780




2,728




9,445




33,073




4,561


Realized gains from investments


8,074




7,658




1,056




19,733




18,382




2,535


Other income/(expense)


397




(6,153)




(849)




28,401




5,913




815


(Loss)/income before
provision for income tax
and share of results of
equity investees


(50,259)




64,596




8,908




22,339




195,818




27,003


Income tax benefits/(expenses)


450




(4,250)




(586)




(18,430)




(21,619)




(2,981)


Share of results of equity
investees


-




(4,185)




(577)




-




(4,185)




(577)


Net (loss)/income


(49,809)




56,161




7,745




3,909




170,014




23,445


Net (loss)/income
attributable to Gaotu
Techedu Inc.'s ordinary
shareholders


(49,809)




56,161




7,745




3,909




170,014




23,445


Net (loss)/income per
ordinary share


















Basic


(0.29)




0.32




0.04




0.02




0.98




0.13


Diluted


(0.29)




0.31




0.04




0.02




0.95




0.13


Net (loss)/income per
ADS


















Basic


(0.19)




0.21




0.03




0.02




0.65




0.09


Diluted


(0.19)




0.21




0.03




0.01




0.63




0.09


Weighted average shares
used in net (loss)/income
per share


















Basic


172,188,243




174,603,256




174,603,256




171,866,239




173,839,911




173,839,911


Diluted


172,188,243




179,933,329




179,933,329




175,382,752




179,520,278




179,520,278



Note: Three ADSs represent two ordinary shares.

 

 

 

Gaotu Techedu Inc.

Reconciliations of non-GAAP measures to the most comparable GAAP measures

(In thousands of RMB and USD, except for share, per share and per ADS data)





For the three months ended June 30,



For the six months ended June 30,



2022



2023



2023



2022



2023



2023



RMB



RMB



USD



RMB



RMB



USD


Net revenues


537,799




703,094




96,961




1,262,414




1,410,386




194,501


Less: other revenues(1)


11,829




20,634




2,846




26,416




36,356




5,014


Add: VAT and surcharges


33,857




42,406




5,848




78,307




86,950




11,991


Add: ending deferred revenue


647,867




922,576




127,229




647,867




922,576




127,229


Add: ending refund liability


42,439




57,650




7,950




42,439




57,650




7,950


Less: beginning deferred revenue


599,719




770,577




106,267




996,218




959,333




132,298


Less: beginning refund liability


38,746




52,190




7,197




78,630




60,597




8,357


Gross billings


611,668




882,325




121,678




929,763




1,421,276




196,002



Note (1): Include miscellaneous revenues generated from services other than courses.

 

 

 


For the three months ended June 30,



For the six months ended June 30,



2022



2023



2023



2022



2023



2023



RMB



RMB



USD



RMB



RMB



USD


Gross profit


377,795




518,714




71,534




889,465




1,066,024




147,011


Share-based compensation expenses(1) in
cost of revenues


18,630




3,585




494




36,979




7,575




1,045


Non-GAAP gross profit


396,425




522,299




72,028




926,444




1,073,599




148,056




















(Loss)/income from operations


(60,493)




43,311




5,973




(35,240)




138,450




19,092


Share-based compensation expenses(1)


50,454




6,998




965




89,279




26,740




3,688


Non-GAAP (loss)/income from operations


(10,039)




50,309




6,938




54,039




165,190




22,780




















Net (loss)/income


(49,809)




56,161




7,745




3,909




170,014




23,445


Share-based compensation expenses(1)


50,454




6,998




965




89,279




26,740




3,688


Non-GAAP net income


645




63,159




8,710




93,188




196,754




27,133



Note (1): The tax effects of share-based compensation expenses adjustments were nil.

 

 

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