Q1 2022 Gaotu Techedu Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the go to take undue Inc. First quarter 2022 earnings Conference call.
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Please note today's event is being reported on Monday June six 2022.
I would now like to hand, the conference over to your first speaker today, Ms. Sherri Lou I, our manager to Gal to thank you and please go ahead.
Thank you very much operator.
Good evening, everyone and thank you for joining us.
Earnings Conference call.
First quarter earnings release.
A couple of extra there today and it's available on the company's IR website.
Not yet.
With me Tonight.
Gotcha.
And Chief Executive Officer, and MS Janet Chen.
So I'll pause there.
Larry This is Mike I know this is ofer.
And then Shannon will discuss the financial.
Following their prepared remarks.
That will be available for the Q&A session.
And I think for Larry.
Before we begin I'd like to remind you that this conference call will contain forward looking statements as defined in the U S. Private Securities Litigation Reform Act of 1985.
Forward looking statements are based upon management's current beliefs and expectations as far as the current market and operating conditions.
They involve known and unknown risks uncertainties and other factors.
Of which are difficult to predict and many of which are beyond the company's thanks, Paul and may cause the company's actual results performance or achievements to differ materially from those contained in any forward looking statements.
Further information regarding these and other risk is.
Included in the company's filings with the U S SEC.
The company does not undertake any obligation to update any forward looking statement, except as required under applicable law.
As a reminder, this topic, it's being recorded and a live and archived webcast of this conference call will be available on our website.
It is now my pleasure to introduce Larry Larry. Please go ahead.
Thank you Sherry and good morning, everyone.
Joining us on our 2022, a first quarter earnings conference call on this special day, which happens to be volatile third lithium anniversary before I start I would like to remind everyone that all financial information that I mentioned later is based on RMB unless otherwise.
As noted in the fourth quarter of 2022 or three days to continue to maintain a healthy and sustainable impediment. Although we remained profitable for two consecutive quarters. Since we began our being a REIT structure.
Structuring in this quarter, our net revenues were 724.6 media and our garage Paydowns were 318 1 million.
So present that tend to be a space of a comparison, if we only look at our comparable finished with.
We showed our professional education, Florida College students and adults vocational education theme education, and digital educational product. The net revenue of our comparable business faced increased over 200% of the ear.
Our garage Paydowns increased approximately 42% year over ear.
Robert Gracias of a comparator bump in their space.
We're showing quarter over quarter growth for three consecutive quarters.
Our gross margin this quarter was 70 point as big as a percent.
70 pounds of things.
Percent slightly higher than that of the same period of last year, our net income and non-GAAP net income where the P. Three understanding media and the non te to quantify maintenance activity, indicating that we have achieved with expected growth. Furthermore.
Our capital project K, our capital position remains strong as of March 31st.
2000.
Slide 22, we had a total of approximately $3 2 million.
Alright, three 2 billion in terms of cash cash equivalents restricted cash and short term investments on our balance sheet.
Here's a we initiated our financial restructuring and organization that will start to match against the third quarter of last year.
Our operations have been centered upon three key aspects.
Focusing on the core businesses.
Product with quality.
Improving operational efficiency.
I will now briefly talk about our progress during the quarter.
Great point.
First in terms of focusing on our core businesses.
We will continue to concentrate on online education.
We will continue to develop and invest in all of the Florida Court opinion waste.
Which are professional education for college students and I about vocational education team education on the digital.
Product.
Do you ever have this quarter the skill of our professional and vocational education services, a further increase compare compare the way that I have ever done.
That's quota.
Neither revenue realized approximately 82% quad over quality growth and ate Roth paid out.
And approximately 85% quarter over quarter growth.
Our steam education surveys has also made a solid progress, especially as the program into the ramp and if there's a way to grew over 10 times year over year in terms of the Crosby down.
So really the gradual development of our new businesses, we will continue to expand our product portfolio across various categories.
We will also it depends the our advantages in the high school tutoring services either opinion.
Continuing to offer because these teams Jordan's epic rebate and modify the cost saves that satisfy really paid a government policy.
Fail, the diverse and multi dimensional.
Demand of our students and its appeal to Gardner centric lifelong learning and the service pay the fall.
Second.
In terms of helping enhance our product quality. We believe that now is the best time to accumulate and Knowhow cherish our region, though at the Parisian to at a pace and return them to the fundamental sense of education.
We remain vigilant on our principle there.
Is the core of education.
As such we will continue to outperform with our field over delivery of them.
Cause temperature know education.
Quite a bit.
We will continue to invest in teaching and restore states offer it as the best education content in our products and we will continue to invest in technology to provide more user friendly and personalize the product.
Meanwhile, we continue to maintain our standards.
I ran in the past these rockets for the industry and offering them very competitive table packaging.
He ends up.
In the quarter research and development expenses of content for 17% of our total revenue.
Turning to a relatively high proportion of aggregate.
With him are based on the <unk>.
Protests of R&D online education.
Because of our new paying these days are still in the early development stage R&D investment is essential, but we will gradually reduce and speak with any control our R&D and other operating costs to be within a specific range as we.
We execute with our great state of effective growth and constantly evaluate that deployment of our opinions.
I haven't seen the time, we have sufficient cash reserve.
Our investment in R&D.
Going forward we.
We also with our principles of the teachers are fundamental and our copper read a variety of other customer for continuous refi are proud to have the quality based on a long term view and the supply to provide the depressed pitch them those services in the industry to students and that.
As of the most value for our customers.
Remedies, focusing on customer value proposition and affirm any investment and they came up at the Taser Party value. We believe we will generate a sustainable and a high quality revenue growth.
Third in terms of improving our operational efficiency, we continue to revamp our onsite operations and may demand to strengthen organizational and operational efficiency.
After our profit about last quarter, we continue to profit with a 12.8% non-GAAP and income margins in this quarter, indicating in them that we've had to achieve healthy and sustainable growth.
Sales and marketing costs also significantly decreased.
And I am margins if quality crest.
79% points.
Compared with the same period of last year, while the as I am.
They had to notably improve what they.
This is a summary of the proof is that our multichannel customer acquisition method is a Friday effect table.
Even in today's changing external environment.
To further improve efficiency efficiency, we will continue to work towards optimizing our business processes and the restart phase adaptation.
In fast growing activity, we have never once changes our confidence in China is a massive education market and our determination on delivering the highest quality education.
Students.
China now makes the amendment has brought about the profile of the transformation and upgrade again various industries wait to have created the demands for new skill set.
Yes.
And that present pay them more opportunities and possibilities.
We will closely monitor and follow the unemployment trends against the Chinese labor market continue to cultivate that the education industry, while guy data by the field and the training needs are required by the country's future patent.
I could tell you what a shoulder hours social responsibilities.
And education company and utilize technology to deliver high quality education, thereby delivering real value and promoting the long term growth of the Chinese education industry.
The ops and adopt we will instead of Brachium volatile its eighth anniversary next week.
It might be easy to do opinion for y ear or maybe even three years, but it's hard to find companies that have it sustained for over 10 years and the only a select few companies can become long lasting organization.
So the fed belongs to the Barbican mistake feel whats fair to transform quite eager to innovate, we'll have phase and the Hu <unk>.
Survey or through the Kennedys, regardless of how the surrounding them.
And then changing we will stay true to our original aspiration.
Patriot in the terms of our loved to education.
We firmly believe that as a lie as a way slow down and the per se is wild P. P on accumulating experiences and as it does we will be able to create a world of our O N E. The field of education.
Yesterday, we were the laggards would take this opportunity to thank all medical staff for their dedication and hard work in the past the base.
May we overcome the pandemic soon and all stay safe and healthy. Thank you very much now I will pass this call over to our CFO Shannon and to walk you through our financial and operational data.
Thank you Larry and thanks, everyone for joining our call today.
We will now walk you through our operating and financial performance.
First quarter of 2022.
Please note that all of a sudden I saw data that I mentioned later.
Based on RMB, unless otherwise noted.
Oh, Yeah, our strategy, although you've got to go out there.
We are pleased to be able to continue to profit at least challenging environment.
Well it is in net income margin of seven 4% and eight non-GAAP net income margin of 12, 8% during this quarter.
As most of our new businesses are still in the early development stages.
We'll compare our financial performance I'll call the old quota basis, alongside with year over year comparison to better present, the divestment of our newest strategic businesses.
I will focus this year remains all four core businesses.
Professional education for college kids and adult.
Okay. So no education.
He my education, Yeah, you can pull education products.
Oh I feel 22022.
Pulp legislature passed a mandate vocational education law off the peoples Republic of China, I instead of sports betting all of a sudden national People's Congress.
The law has taken that he's made it for 2022.
He has confirmed Florida west Palm that vocational education.
Equally important our general education.
And advocates for our higher public example, alcohol patient agitation.
Maybe they have that and the strong support of government policy well close in either case, you will have about a future with higher market demand.
We sincerely hope that by providing the best survey yeah. The best education quality, we will be able to ask about its about who are the right people the wrong, no vocational and professional education market.
Now I will go through our key financials in more detail.
In the first quarter of 2022 hour Romani equate, but its up one 1% quarter over quarter, Yeah, let's take one 7%, yeah, well yet he was $724 6 million.
To provide a consistent basis of comparison.
We exclude these businesses and looked at our comparable businesses.
H, a professional education well of course in either patients deemed <unk>.
Patient Yeah, you did provide occasional pulled up.
I wasn't that Rodney equally over 200% both year over year, yeah, although a little corner basis.
With redundant I think Connecticut in Kuwait and scale.
It's all spinning disk quota equally.
Eight 4% quarter over quarter yeah.
Third point of 1% year over year to $380 1 million.
Golf spitting off of our comparable business they equate.
Approximately 42.
Yeah, well, yeah, yeah, approximately six 2% quarter over quarter.
We will continuously monitor reichling, who had policy update.
For mobile at the job our survey so accordingly.
In the meantime, we will continue to offer policy for me the services to high School and college students.
Well, they're all cost up about any this quarter equally let's say, 2.7%, yeah, well, yeah T $212 9 million.
Our current level of comps was avenue, it's proportionate to our revenue.
Yeah, I mean, the future well they'll continue to improve our operational efficiency, yeah, absolutely, we do and limit alcohol to waging a specific run.
Oh, gosh, probably equate to point to.
Yeah, well, yes, two $511 7 million.
Which you asked a golf club and Martin off 70, plus it was done.
Higher than that of the same period of last year.
And also higher than that of last quarter.
non-GAAP gross profit was 530.
Yeah, non-GAAP gross profit margin was 17, 1%.
Operating expenses decreased by eight 1% year over year Q4 hundred $86 4 million.
To break down the operating expenses.
Selling expenses decreased by 87, 6% year over year to 200, yeah. It doesn't want to let them.
The selling margin was 39, 2% in sharp equally compared to that of the same period of last year.
Since our restructuring last year, we have been actively exploring new customer acquisition strategy.
Including utilizing Lifescan eikenberry and short video platform.
Additionally, we will continue to examine our courses offering debuted a learning platform across multiple categories to ask the belly, our branding in the vocational and professional education sectors.
Gradually become more reliant on path to monetization through word of mouth with world Yeah.
Yeah, Yeah, it's way lower our customer acquisition costs and the selling expenses margin.
Pursue sustainable growth.
Research and development that is equally the bias to six 2% year over year to 126 million.
Investment in R&D is crucial especially spread.
We are at the early exploration stage of our new business as.
We will determine our budget for investment for different business lines. According to its development and our evaluation of the market.
To guarantee the quality of education, we provide them to be able to offer products that exceed users Ah patients.
We're also bringing highly experienced and outstanding research and teaching staff in the vocational and professional education in to change while the company to improve our curriculum design.
Meanwhile, we will have adjusted the R&D employees back to convenience, making high return on investment and realized R&D efficiency improvement.
General and administrative expenses equates to buy to pay three 7% year over year to $78 9 million.
With that our net income from operations for the first quarter of 2022 with 25 points to admit them.
Compared with loss from operation of one 5 billion interesting carried out last year.
We have always said he is he had a strategy I'll be back to growth, we'll make some new businesses.
Yeah.
By optimizing unit economy before running the operations at scale, we were able to achieve sizable Talbot for two consecutive quarters.
Our net income was $2 7 million.
<unk> was the net loss of $1 4 billion.
It's almost a quarter of 2021.
non-GAAP net income was $92 5 million.
Net income margin and non-GAAP net income margin reached seven 4% and 21, 8%.
We are pleased to be able to continue to achieve you bet. So go sleep disorder.
Finally, I would not operating cash flow was 400, and a $1 3 million representing a thing in everyday improvement in part was that off the thing carried up last year.
Turning to our balance sheet.
As of March 31st 2022, we had $979 8 million cash.
I should call them and.
We typically pass yeah 2.2 billion short term your lesson.
Which totaled approximately $3 2 billion willing now to support our current operating scale, Yeah, I went to politicians into new businesses.
Further as of March 1st 2022, our deferred revenue balance was $599 7 million.
Which primarily consist of two you shouldn't let's say you go along.
Before I provide our business, although Florida next quarter.
Allow me to remind everyone that this contains forward looking statements, which involve risks and uncertainties, which are beyond our control and could cause actual results to differ materially from our predictions.
Based on our current estimate.
Total net revenue for the second quarter of 2022 are expected to be between 400 instead of admit them.
Yeah, 400, and it to admit them.
Presenting a decrease of 17, 9% to 8% all year over year basis.
We are also expecting to see that operating cash flow turning positive last quarter.
This concludes my prepared remarks I'll tell you. We all know that is for a Q&A session until everyone.
Thank you we will now begin the question and answer session, who asks a question you May Post Star then one on your Touchtone phone.
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To withdraw your question. Please press Star then two.
Today's first question comes from Mark Levin with Citi. Please go ahead.
Hi management. Thank you for the result presentation. This is Martin from Citi.
Also a question on your Q2 guidance I noticed your Q2 guidance of 438 to 460 million revenue.
I know a rough breakdown for their revenue, especially for the coal our four core segments are that's how we manage this thing going forward. Thank you.
Yeah.
That's smart so regarding the second quarter of data are we haven't provided that detail and break it down into those four of course sessions and as everyone has noticed that Oh, our earnings release, we have combined all the business and we.
We did and it kind of like step that separate them into like the full court.
We're in Sakhalin and because a majority of our new businesses are still at early stage and we want the business to be become more stable.
All we can provide that guidance.
Then separate them into a different segment. So right now is a recognized you to look at a company as a whole and see how the rounding is tiny.
Got it a follow up quickly could you just maybe comment on the momentum.
Momentum for these unfortunate man, let's say into the Q2 any qualitative comment could be helpful.
Yeah. So this is kind of like our second quarter. After the transformation of our new business and whereas steelmaking gratifying progresses, although we have higher expectations on our self and as I mentioned earlier the remedy all of our new businesses. If we can make an apples.
I poke comparison has exceed 200% growth both on a year over year basis in the quarter over quarter basis, and also the golf bidding has increased.
But more than 60% year over year laying the foundation for our future development.
Well maintaining the high growth. We have also managed to prop it maintain a non-GAAP margin of 12, 8% who are not yet that's true that we have the ability to a balance of rapid growth and profitability. So in terms of that was a category like ours.
Education finance related examination training or he will serve an examination training and like the preparations. We provided were posted graduated college entrance exam. These have all achieved considerable growth from previous quarter and we also see these sectors too.
Wealth or high double D. J P sand all the polo Ocado bases and we believe these businesses will continue to become our growth engine in the future.
Mark.
Got it very helpful. Thank you.
Thanks.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Sharon Lu for any closing remarks.
Thank you operator, and thank you everyone for joining the call today.
Any further questions. Please don't hesitate to contact the company's Investor Relations Department via email and we don't see indirectly you're also welcome to subscription newsletter and quarterly Investor newsletter on accompanies haven't Tonight. Thank you very much again for your time and have a great night.
Thank you.
This concludes today's conference call. We thank you all.
All for attending today's presentation. You may now disconnect your lines and have a wonderful day or evening. Thank you.