Gaotu Techedu (GOTU) 4 Dec 24 2024 Q3 Earnings call transcript

The third quarter earnings call for Gaotu Techedu, a leading Chinese education technology company, showcased a robust performance with significant growth in gross billings and revenue, driven by strategic investments and operational enhancements. Founder and CEO, Larry Chen, provided an overview of the company's achievements and future plans, while CFO, Shannon Shen, delved into the financial details.

Strategic Investments and Growth

Gaotu Techedu's Q3 performance was marked by impressive growth, with gross billings increasing by 67.2% year-over-year and revenue growing by 53.1% year-over-year. These figures underscored the company's ability to navigate market trends and optimize its strategy effectively. Investments in upgrading educational systems, enhancing organizational capabilities, and improving management practices have contributed to these growth figures.

The company's commitment to shareholder returns was also highlighted, with over RMB 120 million allocated for share buybacks. Despite the impact on cash balance, Gaotu Techedu's liquidity position remains strong, with over RMB 3.3 billion in cash, cash equivalents, restricted cash, and short-term and long-term investments.

Operational Highlights

Gaotu Techedu's operational highlights included the integration of top-tier instructors' expertise and the use of AI to enhance teaching quality and personalize learning plans. The referral rate for educational services for college students reached a significant milestone, reflecting the growing recognition of Gaotu Techedu's brand and value. The Dream Coach program, which offers career guidance and support to students, further enhanced student engagement.

The company also proactively embraced market changes and diversified its customer acquisition channels, focusing on self-operated channels, private traffic activation, and content-driven strategies. This decentralized approach has allowed Gaotu Techedu to reduce exposure to external volatility and mitigate market risks.

Financial Performance

CFO Shannon Shen discussed the financial performance, highlighting a revenue increase of 53.1% year-over-year and a deferred revenue balance of over $1.4 billion. Despite the increase in operating expenses, particularly marketing expenses in response to market demand, the company remains committed to refining operations and optimizing key business metrics to balance investments and returns.

Looking Ahead

Looking forward, Gaotu Techedu anticipates year-on-year revenue growth to peak in the fourth quarter, with its core online businesses expected to outpace the broader industry. The company also plans to explore and expand into diverse educational offerings, focusing on segments with clear user demand and proven business models. Utilizing advanced technologies like AI to optimize teaching quality and operational efficiency, Gaotu Techedu aims to create long-term value for its users.

Conclusion

In conclusion, Gaotu Techedu's Q3 earnings call underscored the company's strategic investments, operational enhancements, and strong financial performance. The company's commitment to shareholder returns and creating long-term value is evident in its share buybacks and focus on expanding profitability. With a robust liquidity position and strategic plans for future growth, Gaotu Techedu is poised to continue its momentum in the Chinese education technology sector.