Q1 2025 Gaotu Techedu Inc Earnings Call
Hello ladies and gentlemen, thank you for standing by and welcome for the Goutu Tech EDU first quarter 2025 Ernie's conference call. At this time, all participants are in listen-only mode. After management remarks, there will be a question and answer session.
Speaker Change: Today's conference call is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Catherine Chen, head of investor relations. Please go ahead, Katherine.
Katherine Chen: Thank you, operator, good evening, everyone. Thank you for joining GoTo's first quarter 2025 earnings conference call. My name is Tess Ray.
Speaker Change: and our hope for the earnings call today. Our tools earnings release for the quarter was distributed earlier and it's available on the company's IR website at ir.outu.cn, as well as through PR Newswear Services.
Speaker Change: Point them a call with me tonight from Dr. Senior Management. It's Mr. Li, Chen.
Li, Chen: Koutu's founder, chairman and chief executive officer, and Miss Chen and Shen, Koutu's chief financial officer.
Speaker Change: Larry will first provide the business highlights for the quarter, and then afterwards, China will discuss our financial performance in more detail. Following their prepared remarks, we will open the floor.
Speaker Change: Good questions. Before we begin, I'd like to remind you that this concert hall will contain forward-looking statement. May enter the same public provision of the U.S. private security electrification reform act of 1995.
Speaker Change: This forward-looking statement is on the basis of how management's current disease and expectations, as well as the current market and operating conditions.
Speaker Change: and they know no or unknown reasons, uncertainty and other factors, all of which are difficult to predict and many of which are being on the company's control. As they pass the company after results, performance, or achievement, it is different materially from those containing any
Speaker Change: Another information regarding this, another is an included in the public following with the US SEC.
Speaker Change: The company does not undertake any obligations to update any forward-looking statement, except to require an answer of approval. Considering today's call, management will also discuss whether to not get measures or comparisons of their policies.
Speaker Change: for the definition of non-calonial measure and reconciliation of gaps in non-calonial
Ernie Chen: Please inform to our first reporter, Ernie Chen, who published earlier today.
Speaker Change: As a reminder, this conference is being recorded, here at Vicious, a live and archive webcast of [inaudible]
Speaker Change: It is now my pleasure to introduce our Thunder, Chairman, and Chief Executive Officer Larry, Larry Steve.
for the evening and for the morning, every last.
Speaker Change: Thank you for joining us on Gautul's first quarter of fiscal year 2000 and the 25 earnings covering the call. I would like to take this opportunity to express my gratitude to each of you for your interest in and support of a Gautul.
Speaker Change: Before I start, I would like to remind everyone that all financial figures discussed today are quoted in R&B, less stated otherwise.
Speaker Change: Over the past year, we have consistently executed on our strategic priorities.
Speaker Change: providing meaningful progress across the product innovation, organizational development, technology co-adventment, and operational excellence.
Speaker Change: These efforts have fueled a transformative business experience, while also comprehensively enhancing our organizational capabilities.
Speaker Change: Delivering results that have surpassed marketing expectations across the revenue, profitability,
Speaker Change: Notably, how the substantial 12-phase realization represents the culture's most significant milestone.
Speaker Change: by teaching the effectiveness of our efforts to enhance operational leverage and improve cost
Speaker Change: The first total of 2,000 and 25, our revenue increased by about 58% of the year from nearly 1.5 billion, exceeding the upper end of our items.
Speaker Change: Upreaching profit raised of 34.8 million with the net income of 124.0 million.
Speaker Change: On a non-gap basis, net income reached $137.3 million with a net margin of 9.2%.
Speaker Change: She is a financial result, not only reflects strong top line momentum, but also underscores
Speaker Change: You know, at this point, we consistently prioritize the shareholder returns and remain committed to creating long-term a value for our shareholders.
Speaker Change: We'll be in the quarter. We'll be annotated a probability 100 and certainly speaks a million to our shared, repurchased co-aggressions.
Speaker Change: and the current buyback plan, the accumulated total amount of stock buybacks had reached the 400 handrails and a thick face in it.
Yes.
Speaker Change: She'll meet with a number of ADIs repurchased, represents 9.0% of our total outstanding shares at over March 31st to 1,025, serving as I think table lever to enhance shareholder returns.
Speaker Change: As of the same day, we had a cash and a cash increase. We took the cash and the short-term and long-term investment totaling of about $3.5 billion. And paying our future strategic initiatives and sustainable growth.
Speaker Change: Zither Zubas, the financial achievements, are the direct outcome of the strategic investment and the transformative initiative we have pursued over the past three years.
Speaker Change: Particularly, last year's investment in products, users and open-line businesses are now becoming key engines, driving very many girls, operational efficiency and profit-based.
Speaker Change: By embedding AI, debuting into our educational products and their linear services, we are considering to weaken the formation of a technology and power the competitive loop in education.
Speaker Change: This has led to tangible events in user experience and learning outcomes, learning how to study the foundation for the company's future growth and profitability.
Speaker Change: Next, I would like to share our strategic progress and key highlights this quarter from a forward dimension.
Speaker Change: First, we remain deeply user-centric, driving both the scale and the values through continuous product innovation.
Speaker Change: Our traditional lending of services continue to grow steadily, with strong performance in both student, enrollment, and youth satisfaction. To use this foundation, we have broadened our offering to address diverse youth and needs.
Speaker Change: from online and offline in that academic tutoring service area to the freak of the rules in personalized learning solutions for high school students.
Speaker Change: as well as expand these services for county students and study abroad, consulting, and test the price.
Speaker Change: The estate of the PM Closed Aligned with the Yodors, the Genuine Knees
The new products are steadily amplifying our net-awarder's effects.
Speaker Change: and economies of scale as they evolve into a replicable growth model that effectively activates our brand awareness and the market's beneficence.
Speaker Change: Second, we are fully leveraging our core advantages as well as 3D tool needed by the Creative Company. Continuously, I'm mentioning the rise of the brand advantage and innovation of AI technology across multiple aspects.
Speaker Change: On the part of the friend, we hypnotize the appeal of our star, the instructor, and the
Speaker Change: LearnSpoke English with signing a rule program, a growth between upgrades that reimagined the learning experience by seemingly integrating flagship instrument IP with AI technology.
Speaker Change: by combining the magnetic influence of renowned instructors with AI's interactive capabilities with deliveries of highly immersive and personalized learning experience that greatly boosts the general motivation and engagement.
Speaker Change: The tool has already demonstrated the tangible impact in real world learning of sightings.
Speaker Change: Pay me the way for cross-domain and the multi-grade intervention. The operations we are targeting AI to empower, refine the user-trivial operations, sharpened the recommendations and implement pair the strategies.
Speaker Change: by matching the optimal operating models to the characteristics of each user's segment, where I'm proving both a private value and a worker for productivity.
Speaker Change: The broad adoption of AI technology has also a competitive workflow optimization across departments, further enhancing internal management efficiency and simplifying operational
Speaker Change: as a strategic level. We continue to specifically mediate our AI transformation initiatives.
Speaker Change: We have a depend on our floor-of-the-loop team, positioning, and the feeling-making capabilities in the AI field.
Speaker Change: Initiating Joint AI Laboratory Development and Collaboration with the top universities on the leading
Speaker Change: Through these partnerships, we are panning and bringing through innovations that are bad in technology or the advancement with practical implementation across diverse operational applications.
Speaker Change: We aim to drive educational innovations through AI, building a more competent...
Speaker Change: and a scalable, educational ecosystem that delivers the premium learning experience for users while creating sustainable growth and the enduring value for the company.
Speaker Change: We continue to invest in building long-term competitiveness by enhancing organizational efficiency and strengthening our talent of pipeline.
outstanding tutors are at the core of our educational age.
Speaker Change: We are committed to advancing patent acquisition, professional development and incentive mechanisms while taking equal emphasis on teaching excellence at the service of our education.
Speaker Change: By the memory of AI tools, we continuously experience employee data section and the reviews read petitive work while allowing teachers to fully convey the human trust and the care that are essential to education.
Speaker Change: We truly believe that a warm, well-structured cheating folks is a bedrock for delivering consistent
Speaker Change: Fourth, we've remained depicting the two social responsibility while enhancing shareholder value over the long run.
Speaker Change: Boarding shareholders has always been a central part of our development strategy.
Speaker Change: Today we'll be on our previous BIPAC plan, our board and directors today approve a new share repercussions program of up to 100 million US dollars over the next three years, effective upon completion of the current program.
Speaker Change: Today's CO2 stands as the result of sustained re-investment, continuous adeptations, and
Speaker Change: Throughout this journey, we have navigated the market cycles and made pivotal strategic challenges. Always guided by our fundamental belief in the value of education and our dedication to future innovation.
Looking ahead, we are confident that while sustaining profitable growth
Speaker Change: We possess the resources and capabilities to invest in the future push, bond race, and unleash innovations.
Speaker Change: Thank you very much everyone. This is the end of my prepared remarks. Now, I will pass the call over to our CFO Shannon to walk you through the calls of financial and operational details.
Chen: Thank you, Larry, and thank you everyone for joining our call today.
Chen: We started the year jointly with a high quality performance in the first quarter, achieving profitable at scale while maintaining robust growth momentum.
Revenue maintained its rapid growth trajectory.
Making the third consecutive quarter with year-over-year growth.
Exceeding 50%
and the core business has demonstrated a stronger growth momentum.
Chen: Through strategic enhancement of customer value, efficient cost management, and refined operational
We have, fully at least, our operational leverage.
providing robust support for continued profit growth.
Chen: I will operate a margin and that income margin rose by 10.5 and 9.6 percentage points on an annual basis.
Further affirming the continuous improvement of our project quality.
Chen: over in a solid foundation for sustained revenue growth in the subsequent quarters.
We have strategically invested in improving product quality.
Chen: expanding our user base and delivering more personalized and diversified learning solutions in prior years.
Our revenue structure has become more growth-oriented and sustainable.
Hopefully, our portfolio of non-accidemic tutoring services.
Chen: which generated superior customer lifetime value has emerged as a significant growth engine alongside our traditional learning services.
Chen: Breaking it down, more than 85% of total revenues came from non-academic treatment services.
and our traditional learning services, representing over 80% the old year girls.
Chen: Combined growth readings from least two segments increased by approximately 4% year-over-year.
Chen: Cross feelings in this segment, the dam, nearly night of her dam, year-over-year, with cross feelings from new enrolments surging by more than two little digits.
Chen: Night Ravanese grew at a triple digit rate in over a year, accounting for over 35% of total revenues.
Chen: This business has achieved triple-digit growth in both revenue and growth buildings from new enrolments for four consecutive quarters.
Chen: Importantly, as enrollment expanded, and educational product quality improved, this segment achieved profitability.
Way to remain focused on user's needs.
Chen: Continually refining curricula with actionable educational insights while optimizing both our course delivery and service responsiveness.
Chen: We take our programming courses as an example, where we achieved a retention rate exceeding 90%. A compelling testament to strong synergy between our vital propositions and user trust.
Chen: Our traditional learning services maintain healthy growth with revenue growing over 35%
with the static increase in student development.
Chen: offering a positive word of mouth referral that has established solid groundwork for sustained growth.
Chen: Particularly, the proportion of new enrolments acquired through referrals and private channels increased monthly list quarter, further strengthening brand recognition and multi-penetration.
Chen: Liz Progress also highlights our dedicated efforts and accomplishments in driving user extensions and creating long-term value.
Chen: The other crucial component of our learning services is educational services for college students and adults.
Chen: This segment contributed 10% of total revenues with quarter, and it's met operating cash inflow increased by over eight-fourth year over year.
Chen: These results speak while volumes about the success of our strategic recalibration and resource optimization.
Chen: Specifically, educational services for college students recorded high double digits year-over-year
[inaudible]
Chen: We buy equipment tutors with AI tools. We have substantially improved response timelapse and students.
The engagement quality.
Chen: resulting in steady improvement in user satisfaction and reinforcing our market leadership in the online learning services for a college student sector.
Chen: Traditionally, our AI Power English Learning Program, learned spoken English with Daniel Wu, has already become profitable within a short time following its launch.
Chen: serving as another endorsement for the commercial viability of integrating content innovation with AI technology and providing a poorer model for future initiatives.
The education business exhibits distinct seasonality.
Consequently, the gaspillings varies across different quarters.
Chen: Gospillians generally consist of two main components, new enrolments and retunctions.
Chen: In the first quarter of 2025, cross feelings are primarily driven by new enrolments.
Chen: whereas in the fourth quarter of prior year, retensions contributed significantly more
Chen: Although the quote on quote-unquote gross feeling figures showed a decline in absolute terms.
Chen: The temporal mount for new enrolments reflect a housey growth trend, both quote-uncorder and year-on-year on an app-advival basis.
Chen: This solid performance also led to strong foundations for growth in retention in the second quarter.
Chen: From an operational leverage perspective, our general and administrative expenses combined with research and development expenses remain stable in this quarter.
Chen: Well, in showing critical investments in AI, educational products, innovations, and core technology infrastructure.
We are continuously leveraging AI tools to drive efficiencies.
Chen: Please allow us to eliminate low-value, repetitive tasks, enhanced info reset instructions and reallocate time and resources toward more creative work.
Looking ahead, we expect to succeed in the revenue growth in subsequent quarters.
Projecting that GNA and R&D expenses will remain relatively stable.
Chen: thereby enhancing the positive impact of operating leverage on our margin profile and overall financial performance.
I will now present our financials in more detail.
Our cost of revenue this quarter was 452.5 million.
Chen: Dross Profit increased 74.1% over 1.0 billion, with a growth margin of 69.7%.
Chen: The year-old year decrease in growth margin was primarily due to changes in our product mix.
Chen: Total operating expenses during the quarter increased 33.5% over year to 1.0 billion.
Chen: Breaking it down, selling expenses increased for 0.1% year over year, this quarter, to $1,09.4 million.
Accounting for 47.5% off net revenues.
Chen: General and administrative expenses increased 53.3% year-over-year, 235.9 million, accounting for 9.8% of net revenue.
Thank you. Thank you. Thank you.
Chen: Income from operations was 34.8 million, and up in a margin was 2.3%.
Nangya's income from operations was $8.1 million.
and Nan Gap Open Margin was 3.2% [inaudible]
Chen: That income was $124.0 million, and that income margin was $8.3%.
Chen: Nan Gap Net Income was 100, and 37.3 million. Nan Gap Net Income margin was 9.2%.
Our net operating cash outflow worth 477.2 million.
Now, turn into our balance sheet.
As of March the 31st, 2025
Chen: We held over 1.0 billion in cash, cash equivalent and restricted cash along with more than 1.4 billion in short term investments in 900 and 95.9 million in long-term investments.
This comes to a total of about 3.5 billion.
Chen: As March, the 31st, 2025, hourly revenue balance was over 1.4 billion, primarily consists of tuition received in advance.
Chen: Today, our Board of Directors also approved a new share-reported program of up to 100 million US dollars for a period of 36 months, which will take effect upon the completion of the existing ones.
Chen: The new repurchase program is based on management's long-term confidence in the company's sustainable operations, profit growth, and the sustained healthy operating cash flow.
Chen: We will continue to execute shared badbacks according to the board of directors' guidance to create a long-term value for our shareholders.
Chen: They follow and provide our business outlook for the next quarter. Please allow me to find everyone that this continues for our looking statements.
Chen: which include risks and uncertainties that are beyond our control, and could cause the actual results to be from materially from our predictions.
Based on our current estimates,
Chen: Group representing an increase of 28.5% to 7.5% on a year-over-year basis.
Chen: Please conclude my prepared remarks. Operator, we are not ready for the 2A section. Thank you everyone for listening.
Thank you.
Chen: Thank you. We will now begin the question and answer session. To ask a question you may press star then one on your touchtone phone. If you're using a speaker phone please pick up your handset before pressing the keys. To withdraw your question please press star then two.
Chen: For the benefit of all participants on today's call, if you wish to ask your question and commandment to try and lose it, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time.
Chen: Management will respond and then feel free to follow up with your next question.
Speaker Change: Our first question comes from Crystal Li, from CMS. Please go ahead.
Crystal Lee: Thankment for picking my questions, and congratulations on the very strong results. We saw you achieve a very solid margin in the first quarter. May we know more about the clever species this month?
Crystal Lee: Margin Expansion, and Kruchu gave us some color on your full year guidance. Thank you.
[inaudible]
Speaker Change: Part of me is ladies and gentlemen. It appears we have lost the connection to our speakers, please stand by while we reconnect. We thank you for your patience.
Speaker Change: I think I did it on purpose. What if I remember how to solve it in the same way? I've been counting the years, know how to use my hands, and post it at the same time. He can't solve it from his feet. I can. Not at all. If you can't, I'll do it myself. Even so,
[inaudible] and thank you so much for your time
Speaker Change: For me, everybody, we are now rejoined with the speakers. You may now go ahead.
I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry. I'm sorry.
Speaker Change: Sorry, let's be right into some technical issues and thank Crystal for your question and let me repeat your question and first it's like the modern proportion of the first quarter and the second question was the guidance for the whole year, is that right?
Speaker Change: Yes, that's correct. Thank you. Yeah, thanks, thanks, Crystal. So before discussing the annual guidance, it's necessary to first explain the seasonality and it helps to better understand the underlying data and build up more confidence in our business.
Speaker Change: So education business has the thing that the seasonality from the perspective of cross-billings, the first and the sub-quarters at peak, new enrollment registration seasons with cross-billings mainly from new students.
Speaker Change: and at the same time, the second and fourth quarters are supported by both new enrolments and retentions. So, cross wearings in the second and fourth quarters are significantly higher than those in the first and third quarters.
Speaker Change: So it is highly recommended to analysis the revenue growth rate by the first and second half of the year respectively instead of just looking into one single quarter.
Speaker Change: and the upper end of the Rammel Gardens for the second quarter is 1.3 billion. Taken together, this represents a 44% young year increase compared to the first half of last year.
Speaker Change: especially considering that the college students and the doubt business is still in the drafting cycle and it shows a decreased year-over-year revenue size.
Speaker Change: and in terms of the profits, the first and fourth quarters are key stages for concentrated profitable release, a profitability release, which is closely related to the revenue regulation and the new eaglement recruitment cycles.
Speaker Change: and regarding our growth savings in the first quarter, I also want a more color.
There's...
Like, we had-
2.16 billion gross billions.
Speaker Change: are generated in Q4, 2034 last year. Retentions accounted for a considerable proportion of these 2.16 billion.
If we make Apple comparison?
Speaker Change: Both the quarter and the year-end growth rate from Gospeling perspective in Q1-205 are remarkable.
Speaker Change: Also, decreasing college students and adults partially impact the increase rate as well, while core business remains strong.
Speaker Change: When all these factors are considered, our cross building performance in the first quarter is very strong, which core business is still growing at nearly 40% and even higher before we found.
So it is also important to emphasize that
Speaker Change: The improvement in our teaching quality is consistent. The application of AI technology has enabled us to do better in terms of the timeliness, accuracy, personalized, and more diversified educational products.
Speaker Change: So, our retention rate is special for the new student retention rate and the rebound rate are continuously improving.
Speaker Change: Looking at a whole year, our user base has raised a new level which will support the achievement of our growth targets for 2025.
Speaker Change: and the layout of our offline business over the past years will also begin to bear fruit and become an important part of the growth engine.
Speaker Change: Our product innovation and customer acquisition development in the non-academic business have formed a good reputation and have a strong award of most referrals.
Speaker Change: The growth rate has exceeded 100% for four consecutive quarters in the past, so this momentum will also continue. We will achieve an industry leading growth rate in 2025.
Speaker Change: And in terms of the property guidance, we are continuously improving property quality in several aspects. The first is the continuous improvement in the quality of teaching products and services.
Speaker Change: leading to the sustained improvement of key metrics such as retention rate and conversion rate The second is the construction of high-quality, probably custom acquisition channels
to optimize customer acquisition efficiency.
Speaker Change: and the service to make full use of investments in AI technology to improve operational efficiency.
Speaker Change: So the margin in first quarter also contributed by the higher customer acquisition efficiency as well as the operating leverage.
Speaker Change: So we expect that the profitability of each quarter in 2025 will improve significantly compared with the same period last year and ultimately drive overall of fulfillment of the annual bottom line targets. Thanks, Crystal.
Thank you, that's very clear.
Speaker Change: The next question comes from LC Shang from CLSA. Please go ahead.
LC Sheng: Thank you very much. Thank you for your time, Katherine and congratulations on the strong growth of momentum and also the profitability. I have a question related to the sector given side, so we know that we are now facing a relatively weak macro, but we also know that education demand relatively is more resilient, but I would also think to check that do you observe any changes on the future of humanism.
LC Sheng: I come here to like maybe one year ago and today I'm going to change this on the current purpose in terms of like the cost format, or like the cost content, etc. Thank you.
Thanks, Alfie. This is a really good question because like, um...
We are a customer-oriented company and we always are.
LC Sheng: Parents are gradually increasing investments in their children's all around growing, including like Crystal thinking problem solving abilities, responsibility teamwork, and especially their physical and mental health.
LC Sheng: Gao who has keenly captured this trend and continues to actively promote high quality content.
and also our academic training.
Gradually becoming a core driver of business growth.
from the Alps Regional Matrix perspective.
LC Sheng: The retention rate of non-academic children has continued to rise, particularly in our coding business, when the rate exceeded 90% in the first quarter, as I just mentioned in my prepared remarks.
LC Sheng: Second, parents and students have shown increasing acceptance of technology-driven educational solutions.
LC Sheng: Further promoting us to evaluate the deep integration of AI technology with teaching scenarios and we saw that in a lot of social media that parents started to prepare small sessions for their children by those AI tools. Please also innovate and ask about our new initiatives in our educational product.
LC Sheng: and the quality of integrations with students in hiring their satisfaction. Now, like the time we respond to the student's spontaneous request is much more short than before.
LC Sheng: We saw some rising in some one-on-one station in the crowd because it's more personalized and more diversified.
LC Sheng: High Quality Education Resources Remain Constant, which means particularly for excellent teachers and premium teaching content, these are.
LC Sheng: The Yishan and always something, always not changing for the parents and the students. And there are all what we are constantly building for. Thanks, Alice.
Thank you. It's very clear.
Eunice Liu: The next question comes from Eunice Liu, from Goldman Sachs, please go ahead.
Eunice Liu: Good evening, Mary and Chen, thanks for taking my question and congrats on the results.
Eunice Liu: My question is on operating cash flow. I noticed that operating cash flow this quarter was active and was more than twice as level for the first quarter last year. So good management elaborate on the reason behind. Thank you.
Speaker Change: Thank you. This is also a very good question. Thanks for diving into these details, and so regarding the increase in operating cash outflow in the foot quarter compared to the same period of last year, so this is the primary due to the payment of 2024 annual bonuses.
Speaker Change: and incremental labor cost in the first quarter. As our business...
Speaker Change: and based on our efficiency improvements and profit enhancements, we expect the operating cash.
Youth Flow of 2025 to be at least three times.
Speaker Change: to additionally approve an extra $100 million US dollar share repurchase plan today.
Speaker Change: So we thank shareholders and investors for the long-term support and we will continue to create a greater value for shareholders. So leveraging the positive cash flow away expected to generate this year, we will do a better job on this task. Thanks.
Thank you very, very helpful.
Speaker Change: As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.
Thank you all for being there. Thank you everyone for joining support today.
Speaker Change: from ECP at any further questions, please don't hesitate to contact our events or relations departments or our management via email at either at go to the CN directly. You are also welcome to subscribe to our new alerts on the company ILS 9. Thank you very much and for your time. Have a great night.
Speaker Change: This concludes today's conference call. You may now disconnect your line. Thank you.
Speaker Change: © 2017 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services
Thank you very much.