Exhibit 99.1 Gaotu Techedu Announces Fourth Quarter and Fiscal Year 2023 Unaudited Financial Results Beijing, China, February 27, 2024 —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 fourth quarter and fiscal year ended December 31, 2023. Fourth Quarter 2023 Highlights[1] • Net revenues were RMB761.0 million, increased by 20.9% from RMB629.6 mi ...

BEIJING, Feb. 5, 2024 /PRNewswire/ -- Gaotu Techedu Inc. ("Gaotu" or the "Company") (NYSE: GOTU), a technology-driven education company and online large-class tutoring service provider in China, today announced that it will report its financial results for the fourth quarter and fiscal year 2023 ended December 31, 2023, before U.S. markets open on Tuesday, February 27, 2024.Gaotu's management will hold an earnings conference call at 8:00 AM U.S. Eastern Time on Tuesday, February 27, 2024 (9:00 PM on the sam ...

Core Viewpoint - Chinese education stocks experienced a rise, with TAL Education (TAL.US) up over 2%, New Oriental (EDU.US) up over 4%, and Gaotu (GOTU.US) up nearly 7% following a rating upgrade from Citigroup for Gaotu from "Sell" to "Buy" [1] Group 1: Company Performance - Gaotu's recent surge in viewership is attributed to internal events at competitor Dongfang Zhenxuan, leading to a "significant but temporary increase in engagement" which may convert to slightly higher GMV [1] - In its latest earnings report, Gaotu's total billings grew by 5.3%, resulting in a net income increase of 30.2% year-over-year [1] Group 2: Analyst Ratings and Price Targets - Citigroup raised Gaotu's target price by over 80% to $4.5, representing a 37% premium over Tuesday's closing price [1]

As the trading week winds down on Friday and heads into the holidays, there's big trouble brewing in China's big tech sector. Shares of online gaming company NetEase (NTES -15.18%) crashed 15% through noon today, while Huya (HUYA -10.19%), a specialist in livestreaming of online games, fell 10.7% in response to rumored regulations coming down from the Chinese government.Gaotu Techedu (GOTU -8.33%), which isn't a gaming company at all but rather a for-profit educator, seemed to fall in sympathy with its gami ...

Gaotu Techedu Inc. (NYSE:GOTU) Q3 2023 Earnings Conference Call November 22, 2023 8:00 AM ET Company Participants Catherine Chen - Head of Investor Relations Larry Chen - Founder, Chairman and Chief Executive Officer Shannon Shen - Chief Financial Officer Conference Call Participants Yiwen Zhang - China Renaissance Operator Hello and welcome to Gaotu Techedu Third Quarter 2023 Earnings Conference Call. All participants’ will be in listen-only mode. [Operator Instructions] After today’s presentation, there w ...

Gaotu Techedu Inc. (NYSE:GOTU) Q2 2023 Earnings Conference Call August 30, 2023 8:00 AM ET Company Participants Larry Chen - Founder, Chairman and CEO Shannon Shen - CFO Conference Call Participants Yiwen Zhang - China Renaissance Crystal Lee - CMS Operator Ladies and gentlemen, thank you for standing by, and welcome to the Gaotu Techedu Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be a question a ...

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Gaotu achieved significant year-over-year growth in Q2 and H1 2023, with substantial increases in net revenues, gross billings, and a strong turnaround to profitability [Second Quarter 2023 Performance](index=1&type=section&id=Second%20Quarter%202023%20Highlights) In the second quarter of 2023, Gaotu achieved significant year-over-year growth across key financial metrics. Net revenues increased by 30.7%, and gross billings grew by 44.2%. The company successfully turned from a loss to a profit, with operating income reaching RMB 43.3 million and net income reaching RMB 56.2 million, marking substantial turnarounds from the same period in 2022. Net operating cash inflow also saw a robust increase of 207.6% Key Financial Metrics - Q2 2023 | Financial Metric | Q2 2022 (RMB) | Q2 2023 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenues | 537.8 million | 703.1 million | +30.7% | | Gross Billings | 611.7 million | 882.3 million | +44.2% | | Income from Operations | (60.5 million) | 43.3 million | +171.6% | | Net Income | (49.8 million) | 56.2 million | +212.8% | | Net Operating Cash Inflow | 93.8 million | 288.5 million | +207.6% | [First Half 2023 Performance](index=2&type=section&id=Six%20Months%20Ended%20June%2030%2C%202023%20Highlights) For the first six months of 2023, Gaotu demonstrated strong performance with an 11.7% increase in net revenues and a 52.9% surge in gross billings. Profitability improved dramatically, with operating income reaching RMB 138.5 million, a 492.9% year-over-year increase. Net income for the period was RMB 170.0 million, a significant rise from RMB 3.9 million in the first half of 2022 Key Financial Metrics - H1 2023 | Financial Metric | H1 2022 (RMB) | H1 2023 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Net Revenues | 1,262.4 million | 1,410.4 million | +11.7% | | Gross Billings | 929.8 million | 1,421.3 million | +52.9% | | Income from Operations | (35.2 million) | 138.5 million | +492.9% | | Net Income | 3.9 million | 170.0 million | +4,249.3% | [Management Commentary](index=2&type=section&id=Management%20Commentary) Management highlights the success of the "effective growth" strategy, leading to profitability, improved operational efficiency, and continued investment in talent and AI [CEO's Remarks](index=2&type=section&id=CEO's%20Remarks) The CEO, Larry Xiangdong Chen, highlighted the success of the "effective growth" strategy, which led to substantial growth in gross billings and the third consecutive quarter of profitability. He emphasized the company's commitment to investing in talent, refining educational content through AI, and improving teaching quality, which has created a flywheel effect for customer acquisition and strengthened their competitive edge - The company achieved its **third consecutive quarter of profitability** and generated a significant positive net operating cash flow of **RMB 288.5 million**[6](index=6&type=chunk) - Gaotu is ramping up investments in talent, educational content, and AI technology to improve teaching quality and learning efficiency[6](index=6&type=chunk) - The company's mission of "making learning better" and its commitment to technological innovation and educational quality remain unchanged[7](index=7&type=chunk) [CFO's Remarks](index=3&type=section&id=CFO's%20Remarks) The CFO, Shannon Shen, noted that the business achieved profitability with robust top-line growth, demonstrating increasing operating leverage. She pointed out that operating expenses as a percentage of revenue decreased by about 14 percentage points year-over-year, and the net income margin improved to 8.0%. The CFO attributed the strong performance to a resilient business model and continuous improvements in customer acquisition and operational efficiency - Net revenues grew **30.7% YoY to RMB 703.1 million**, and gross billings increased **44.2% YoY to RMB 882.3 million**[8](index=8&type=chunk) - Operating expenses as a percentage of revenue decreased by approximately **14 percentage points** compared to Q2 2022[8](index=8&type=chunk) - The company has enhanced its autonomy over customer acquisition by exploring more proprietary channels[8](index=8&type=chunk) [Detailed Financial Analysis (Q2 2023)](index=3&type=section&id=Financial%20Results%20for%20the%20Second%20Quarter%20of%202023) A detailed analysis of Q2 2023 reveals robust revenue growth, improved gross margins, controlled operating expenses, and a significant return to net income and positive operating cash flow [Revenue and Gross Profit](index=3&type=section&id=Revenue%20and%20Gross%20Profit) Net revenues for Q2 2023 increased by 30.7% to RMB 703.1 million, driven by strong growth in gross billings from improved customer acquisition. Cost of revenues rose by 15.3% due to higher labor and material costs. Consequently, gross profit grew by 37.3% to RMB 518.7 million, with the gross profit margin improving to 73.8% from 70.2% in the prior year - Net revenues increased by **30.7% YoY to RMB 703.1 million**, mainly due to the large growth of gross billings[10](index=10&type=chunk) - Cost of revenues increased by **15.3% to RMB 184.4 million**, primarily due to higher labor costs for instructors and tutors[11](index=11&type=chunk) Gross Profit and Margin | Metric | Q2 2022 (RMB) | Q2 2023 (RMB) | YoY Change | | :--- | :--- | :--- | :--- | | Gross Profit | 377.8 million | 518.7 million | +37.3% | | Gross Margin | 70.2% | 73.8% | +3.6 p.p. | | Non-GAAP Gross Profit | 396.4 million | 522.3 million | +31.8% | | Non-GAAP Gross Margin | 73.7% | 74.3% | +0.6 p.p. | [Operating Expenses](index=3&type=section&id=Operating%20Expenses) Total operating expenses for Q2 2023 increased by 8.5% to RMB 475.4 million. This was primarily driven by a rise in selling expenses for marketing and branding activities. However, both research and development expenses and general and administrative expenses saw year-over-year decreases Operating Expenses Breakdown | Expense Category | Q2 2022 (RMB) | Q2 2023 (RMB) | | :--- | :--- | :--- | | Selling Expenses | 269.0 million | 324.1 million | | Research and Development | 103.9 million | 98.4 million | | General and Administrative | 65.4 million | 52.9 million | | **Total Operating Expenses** | **438.3 million** | **475.4 million** | [Profitability](index=4&type=section&id=Profitability) The company achieved a significant turnaround in profitability in Q2 2023, reporting an income from operations of RMB 43.3 million compared to a loss of RMB 60.5 million in Q2 2022. Net income was RMB 56.2 million, a reversal from a net loss of RMB 49.8 million in the prior-year period. Basic and diluted net income per ADS were both RMB 0.21 Profitability Metrics | Profitability Metric | Q2 2022 (RMB) | Q2 2023 (RMB) | | :--- | :--- | :--- | | Income from Operations | (60.5 million) | 43.3 million | | Non-GAAP Income from Operations | (10.0 million) | 50.3 million | | Net Income | (49.8 million) | 56.2 million | | Non-GAAP Net Income | 0.6 million | 63.2 million | - Basic and diluted net income per ADS were both **RMB 0.21** in Q2 2023[19](index=19&type=chunk) [Financial Position and Cash Flow](index=5&type=section&id=Financial%20Position%20and%20Cash%20Flow) Gaotu generated a strong net operating cash inflow of RMB 288.5 million in Q2 2023, a substantial increase from the previous year, primarily due to higher gross billings. The company maintained a robust financial position with a total of RMB 3,742.1 million in cash, cash equivalents, restricted cash, and investments as of June 30, 2023 - Net operating cash inflow in Q2 2023 was **RMB 288.5 million**, primarily due to the increase of gross billings[19](index=19&type=chunk) - As of June 30, 2023, the company held a total of **RMB 3,742.1 million** in cash, cash equivalents, restricted cash, short-term and long-term investments[19](index=19&type=chunk) [Business Outlook](index=5&type=section&id=Business%20Outlook) The company provides positive guidance for Q3 2023, forecasting continued strong year-over-year revenue growth [Third Quarter 2023 Guidance](index=5&type=section&id=Third%20Quarter%202023%20Guidance) The company provided a positive outlook for the third quarter of 2023, forecasting continued strong year-over-year revenue growth - For the third quarter of 2023, total net revenues are expected to be between **RMB 728 million and RMB 748 million**[20](index=20&type=chunk) - This forecast represents a year-over-year increase of **20.1% to 23.4%**[20](index=20&type=chunk) [Consolidated Financial Statements](index=9&type=section&id=Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The consolidated financial statements show an improved financial position with increased assets and equity, strong Q2 profitability, and transparent reconciliation of non-GAAP measures [Consolidated Balance Sheets](index=9&type=section&id=Unaudited%20condensed%20consolidated%20balance%20sheets) As of June 30, 2023, Gaotu's total assets stood at RMB 5,032.0 million, a slight increase from RMB 4,876.2 million at the end of 2022. Total liabilities decreased to RMB 1,671.5 million, while total shareholders' equity grew to RMB 3,360.5 million, indicating an improved financial position Consolidated Balance Sheet Summary | Balance Sheet Item (in thousands RMB) | Dec 31, 2022 | June 30, 2023 | | :--- | :--- | :--- | | Cash, Cash Equivalents & Investments | 3,743,775 | 3,742,100 | | Total Current Assets | 4,166,477 | 4,237,774 | | **Total Assets** | **4,876,175** | **5,032,044** | | Total Current Liabilities | 1,609,222 | 1,416,200 | | **Total Liabilities** | **1,780,346** | **1,671,511** | | **Total Shareholders' Equity** | **3,095,829** | **3,360,533** | [Consolidated Statements of Operations](index=11&type=section&id=Unaudited%20condensed%20consolidated%20statements%20of%20operations) The consolidated statements of operations detail the company's financial performance for the three and six-month periods ending June 30, 2023. For the second quarter, the company reported net revenues of RMB 703.1 million and a net income of RMB 56.2 million, a significant improvement from the net loss of RMB 49.8 million in the same period of 2022 Consolidated Statements of Operations Summary | P&L Item (Q2, in thousands RMB) | 2022 | 2023 | | :--- | :--- | :--- | | Net Revenues | 537,799 | 703,094 | | Gross Profit | 377,795 | 518,714 | | (Loss)/Income from Operations | (60,493) | 43,311 | | **Net (Loss)/Income** | **(49,809)** | **56,161** | [Reconciliation of GAAP to Non-GAAP Measures](index=12&type=section&id=Reconciliations%20of%20non-GAAP%20measures%20to%20the%20most%20comparable%20GAAP%20measures) This section provides a reconciliation of GAAP to non-GAAP financial measures by excluding share-based compensation expenses. For Q2 2023, share-based compensation of RMB 7.0 million was added back to GAAP operating income and net income to arrive at their respective non-GAAP figures GAAP to Non-GAAP Reconciliation - Q2 2023 | Q2 2023 Reconciliation (in thousands RMB) | GAAP Figure | Share-based Compensation | Non-GAAP Figure | | :--- | :--- | :--- | :--- | | Gross Profit | 518,714 | 3,585 | 522,299 | | Income from Operations | 43,311 | 6,998 | 50,309 | | Net Income | 56,161 | 6,998 | 63,159 |

Financial Data and Key Metrics Changes - Net revenues increased by 12.3% quarter-over-quarter to RMB707.3 million, while gross billings rose by 69.4% year-over-year to RMB539 million [6][15][29] - Net income grew sharply by 112.1% year-over-year to RMB113.9 million, leading to an increase in net income margin by 8.7 percentage points year-over-year to 16.1% [16][29] - Non-GAAP net income reached RMB133.6 million, with a non-GAAP net income margin of 18.9%, representing the highest quarterly net income margin since the business restructuring in 2022 [16][29] Business Line Data and Key Metrics Changes - Over 75% of total revenues came from non-academic tutoring services and traditional learning services, which achieved triple-digit year-over-year growth in gross billings [17][19] - The postgraduate entrance exam prep business saw a 36% sequential increase in gross billings, while overseas study-related services also delivered triple-digit year-over-year growth [9][19] - Education services for college students and adults accounted for nearly 20% of total revenues and generated positive net operating cash flow during the quarter [19][21] Market Data and Key Metrics Changes - The education industry demonstrated salient seasonality, with gross billings typically recognized as revenue within six to twelve months, leading to higher gross billings in the second and fourth quarters [21][22] - The company expects a year-over-year growth in net revenues and gross billings in the next quarter, projecting up to a 24.2% increase in revenues [22][31] Company Strategy and Development Direction - The company focuses on long-term sustainable and profitable growth, emphasizing the importance of operational efficiency and customer acquisition strategies [7][12] - There is a strong commitment to leveraging artificial intelligence to enhance educational products and services, aiming to create innovative and personalized learning experiences [11][14] - The company is expanding proprietary self-operated channels and exploring innovative customer acquisition methods, including short video platforms and offline channels [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving annual effective growth and generating positive net operating cash flow for the full year 2023 [6][7] - The company anticipates a meaningful level of profitability in the second quarter, driven by improved operational efficiency and customer acquisition strategies [35] - Management highlighted the importance of maintaining high standards for teaching quality and customer satisfaction while pursuing growth [13][14] Other Important Information - The company reported a cash position of approximately RMB3.5 billion, providing ample resources for continued business development [30] - Selling expenses decreased by 2.5% year-over-year, contributing to improved profitability and operational efficiency [25][28] Q&A Session Summary Question: Insights on margin outlook for the next few quarters - Management expects continued revenue growth and improved margins due to operational efficiency and customer acquisition strategies, with a focus on year-over-year comparisons [34][35] Question: Clarification on seasonality factors impacting margins - Management noted that the second quarter typically generates significant net operating cash flow and profitability, with a strategic focus on improving efficiency [36]

Financial Performance - Net revenues for Q1 2023 were RMB707.3 million, a decrease of 2.4% from RMB724.6 million in Q1 2022[2] - Gross billings increased by 69.4% year-over-year to RMB539.0 million, up from RMB318.1 million in the same period of 2022[2] - Income from operations surged by 275.9% to RMB95.1 million, compared to RMB25.3 million in Q1 2022[2] - Net income rose by 112.1% to RMB113.9 million, up from RMB53.7 million in the same period of 2022[2] - Non-GAAP net income increased by 44.4% to RMB133.6 million from RMB92.5 million in Q1 2022[2] - The company expects total net revenues for Q2 2023 to be between RMB648 million and RMB668 million, representing a year-over-year increase of 20.5% to 24.2%[17] - Gross profit increased by 7.0% to RMB547.3 million, with a gross profit margin of 77.4%, up from 70.6% in Q1 2022[8] - Net income attributable to Gaotu Techedu Inc.'s ordinary shareholders was RMB 113,853 for the three months ended March 31, 2023, compared to RMB 53,718 for the same period in 2022, reflecting a growth of 112%[32] - Non-GAAP net income for the three months ended March 31, 2023, was RMB 133,595, compared to RMB 92,543 for the same period in 2022, an increase of 44%[35] - The company reported a basic net income per ordinary share of RMB 0.66 for the three months ended March 31, 2023, compared to RMB 0.31 for the same period in 2022[32] Operational Efficiency - Customer acquisition efficiency improved by 73.8% year-over-year, contributing to the increase in gross billings[5] - Operating expenses decreased by 7.0% to RMB452.2 million from RMB486.4 million in Q1 2022[9] Cash Flow and Assets - The company reported a net operating cash outflow of RMB216.4 million in Q1 2023, primarily due to seasonal factors and year-end bonus payments[14] - Total current assets as of March 31, 2023, were RMB 4,073,058, a slight decrease from RMB 4,166,477 as of December 31, 2022[27] - Total assets decreased to RMB 4,803,432 as of March 31, 2023, from RMB 4,876,175 as of December 31, 2022[30] - Total liabilities decreased to RMB 1,578,701 as of March 31, 2023, from RMB 1,780,346 as of December 31, 2022[30] - Cash and cash equivalents increased to RMB 1,216,834 as of March 31, 2023, from RMB 819,911 as of December 31, 2022[27]

PART I [KEY INFORMATION](index=7&type=section&id=ITEM%203.%20KEY%20INFORMATION) This section details Gaotu's VIE-reliant corporate structure, significant financial shifts, and key regulatory and delisting risks [Holding Company Structure, Cash Flows, and PRC Permissions](index=7&type=section&id=Holding%20Company%20Structure%2C%20Cash%20Flows%2C%20and%20PRC%20Permissions) Gaotu operates through a VIE structure in China, with the VIE contributing 100% of revenues, facing risks from contractual control, PRC cash flow regulations, and past PCAOB inspection uncertainties now mitigated - Gaotu operates through a VIE structure in mainland China, with the VIE contributing **100%** of the company's total revenues for the fiscal years 2020, 2021, and 2022[17](index=17&type=chunk) - The company's ability to pay dividends is dependent on payments from its PRC subsidiaries, which are subject to PRC laws requiring them to set aside at least **10%** of after-tax profits into a statutory reserve until it reaches **50%** of registered capital[26](index=26&type=chunk) - In December 2022, the PCAOB **vacated its determination** that it was unable to inspect auditors in mainland China and Hong Kong, reducing the immediate risk of delisting[24](index=24&type=chunk) - Under the CSRC's new Trial Measures effective March 31, 2023, the company is not required to file for its previous NYSE listing but will be subject to filing and reporting requirements for **future offerings** and certain material events[37](index=37&type=chunk) [Selected Consolidated Financial Data](index=13&type=section&id=Selected%20Consolidated%20Financial%20Data) This section presents key financial data, highlighting a significant revenue decline, a shift from net loss to net income, and changes in assets and cash flows Selected Consolidated Statements of Operations (in thousands RMB) | Indicator | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | **Net revenues** | 7,124,744 | 6,561,747 | 2,498,214 | | **Gross profit** | 5,362,196 | 4,164,143 | 1,797,164 | | **(Loss)/income from operations** | (1,755,033) | (3,180,343) | (118,052) | | **Net (loss)/income** | (1,392,930) | (3,103,465) | 13,172 | | **Net (loss)/income per ordinary share - Basic** | (8.72) | (18.17) | 0.08 | Selected Consolidated Balance Sheet Data (in thousands RMB) | Indicator | As of Dec 31, 2020 | As of Dec 31, 2021 | As of Dec 31, 2022 | | :--- | :--- | :--- | :--- | | **Total current assets** | 8,457,248 | 3,936,786 | 4,166,477 | | **Total assets** | 10,685,792 | 5,024,666 | 4,876,175 | | **Total liabilities** | 4,955,937 | 2,143,724 | 1,780,346 | | **Total shareholders' equity** | 5,729,855 | 2,880,942 | 3,095,829 | Selected Consolidated Cash Flow Data (in thousands RMB) | Indicator | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | **Net cash from/(used in) operating activities** | 603,273 | (4,185,807) | 54,545 | | **Net cash (used in)/from investing activities** | (5,596,304) | 4,812,502 | (158,385) | | **Net cash from/(used in) financing activities** | 5,272,100 | (100,614) | — | [Risk Factors](index=19&type=section&id=D.%20Risk%20Factors) This section outlines significant risks, including the impact of China's education regulations, reliance on the VIE structure, and potential delisting under the HFCAA - The company's business has been materially and adversely affected by China's **"Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education,"** which led to the cessation of its K-9 academic tutoring services[57](index=57&type=chunk)[63](index=63&type=chunk)[65](index=65&type=chunk) - The company relies on contractual arrangements with its VIE for business operations, which may not be as effective as direct ownership and poses risks if the PRC government deems these arrangements **non-compliant**[58](index=58&type=chunk)[60](index=60&type=chunk)[169](index=169&type=chunk) - There is a risk that the company's ADSs may be **prohibited from trading** in the U.S. under the HFCAA in the future if the PCAOB is unable to inspect auditors in China for two consecutive years, which could materially affect the investment's value[61](index=61&type=chunk)[196](index=196&type=chunk)[199](index=199&type=chunk) - The company's dual-class share structure gives its founder, chairman, and CEO, Mr. Larry Xiangdong Chen, **88.6% of the aggregate voting power**, limiting the influence of other shareholders on corporate matters[257](index=257&type=chunk) [INFORMATION ON THE COMPANY](index=60&type=section&id=ITEM%204.%20INFORMATION%20ON%20THE%20COMPANY) This section provides a comprehensive overview of Gaotu's history, business model, and organizational structure, highlighting its pivot from K-9 tutoring and reliance on a VIE structure [History and Development of the Company](index=60&type=section&id=A.%20History%20and%20Development%20of%20the%20Company) This section details Gaotu's history, including its NYSE listing, name change, strategic pivot from K-9 tutoring due to regulations, and share repurchase programs - The company commenced trading on the NYSE on **June 6, 2019**, under the symbol "GSX" and later changed it to "GOTU" on May 6, 2021[291](index=291&type=chunk) - From the end of 2021, the company ceased offering compulsory education academic subject tutoring services and pivoted its business focus to **college and adult education, overseas study services, and non-academic tutoring**[294](index=294&type=chunk) - The board authorized a share repurchase program of up to **US$150 million** in May 2020 and another for up to **US$30 million** in November 2022[292](index=292&type=chunk)[294](index=294&type=chunk) [Business Overview](index=61&type=section&id=B.%20Business%20Overview) This section describes Gaotu's online live large-class business model, its pivot to college and adult education, and the extensive PRC regulatory framework it operates under - The company's business model is based on online live large-classes using a **dual-teacher system**, which includes a main instructor and multiple tutors for smaller student groups[298](index=298&type=chunk)[318](index=318&type=chunk) - After ceasing compulsory education academic tutoring services by the end of 2021, the company's main offerings are now **learning services** (for college students, adults, overseas study, and non-academic tutoring) and **educational content & digitalized learning products**[302](index=302&type=chunk)[312](index=312&type=chunk) - As of December 31, 2022, Gaotu had **1,152 instructors** (203 full-time, 949 contract) and **583 tutors**[298](index=298&type=chunk) - The company is subject to extensive PRC regulations, including the **"Alleviating Burden Opinion"** which fundamentally reshaped the after-school tutoring industry, as well as rules governing internet services, data security, and foreign investment[374](index=374&type=chunk)[389](index=389&type=chunk)[422](index=422&type=chunk) [Organizational Structure](index=94&type=section&id=C.%20Organizational%20Structure) This section details Gaotu's Cayman Islands holding company structure, its reliance on a VIE in China, and the contractual arrangements used to maintain control over the VIE's operations - The company operates in China through a **VIE structure** to comply with PRC restrictions on foreign investment in the telecommunications sector[492](index=492&type=chunk) - Control over the VIE is established through a series of **contractual arrangements**, which include: Powers of Attorney, Equity Interest Pledge Agreement, Exclusive Management Services and Business Cooperation Agreement, and Exclusive Call Option Agreement[494](index=494&type=chunk)[495](index=495&type=chunk)[498](index=498&type=chunk)[499](index=499&type=chunk) - The contractual arrangements effectively assign **all voting rights** of the VIE's shareholders to the WFOEs, enable the WFOEs to receive the VIE's **economic benefits**, and provide an **exclusive option to purchase** the VIE's equity when permitted by PRC law[493](index=493&type=chunk) [Property, Plants and Equipment](index=98&type=section&id=D.%20Property%2C%20Plants%20and%20Equipment) This section outlines the company's property holdings, including leased office spaces in Beijing and other Chinese cities, and owned office buildings in Zhengzhou - The company leases a total of **28,642 square meters** for its operations in Beijing and other Chinese cities[504](index=504&type=chunk) - Gaotu owns **three office buildings** in Zhengzhou with a combined gross floor area of **64,687 square meters**[505](index=505&type=chunk) [OPERATING AND FINANCIAL REVIEW AND PROSPECTS](index=99&type=section&id=ITEM%205.%20OPERATING%20AND%20FINANCIAL%20REVIEW%20AND%20PROSPECTS) This section analyzes Gaotu's financial performance, highlighting a sharp revenue decline but a significant turnaround to net income in 2022, alongside strong liquidity and key operational factors [Operating Results](index=99&type=section&id=A.%20Operating%20Results) This section details the company's operating results, showing a significant revenue decrease but a shift to net income in 2022, driven by substantial cost reductions and improved gross margin Comparison of Operating Results (in thousands RMB) | Indicator | 2021 | 2022 | | :--- | :--- | :--- | | **Net Revenues** | 6,561,747 | 2,498,214 | | **Gross Profit** | 4,164,143 | 1,797,164 | | **Total Operating Expenses** | 7,344,486 | 1,915,216 | | **Loss from Operations** | (3,180,343) | (118,052) | | **Net (Loss)/Income** | (3,103,465) | 13,172 | - Net revenues decreased by **61.9%** in 2022, primarily due to business restructuring and the cessation of compulsory education academic subject tutoring services to comply with government regulations[544](index=544&type=chunk) - Total operating expenses decreased by **73.9%** in 2022, with significant reductions in selling expenses (**-76.9%**), R&D expenses (**-64.5%**), and general & administrative expenses (**-59.7%**) due to cost-cutting measures[545](index=545&type=chunk)[543](index=543&type=chunk)[547](index=547&type=chunk) [Liquidity and Capital Resources](index=108&type=section&id=B.%20Liquidity%20and%20Capital%20Resources) This section details Gaotu's liquidity and capital resources, highlighting strong cash and short-term investments, a significant improvement in operating cash flow, and the geographic distribution of its cash holdings Summary of Cash Flows (in thousands RMB) | Indicator | 2020 | 2021 | 2022 | | :--- | :--- | :--- | :--- | | **Net cash from/(used in) operating activities** | 603,273 | (4,185,807) | 54,545 | | **Net cash (used in)/from investing activities** | (5,596,304) | 4,812,502 | (158,385) | | **Net cash from/(used in) financing activities** | 5,272,100 | (100,614) | — | - As of December 31, 2022, the company had cash and cash equivalents of **RMB 819.9 million** and short-term investments of **RMB 2,923.9 million**[564](index=564&type=chunk) - As of December 31, 2022, **99.3%** of cash and cash equivalents were held in mainland China and Hong Kong, with **38.1%** held by the VIE and its subsidiaries[567](index=567&type=chunk) [Critical Accounting Estimates](index=112&type=section&id=E.%20Critical%20Accounting%20Estimates) This section outlines critical accounting estimates, including income taxes, impairment assessments of long-lived assets and goodwill, and the valuation of share-based compensation - Key critical accounting estimates include **income taxes and the valuation allowance for deferred tax assets**, requiring significant judgment in assessing the realizability of these assets[587](index=587&type=chunk) - The company performs impairment assessments of **long-lived assets and goodwill**, which involves estimating future cash flows and making assumptions that could materially affect the determination of fair value[588](index=588&type=chunk)[589](index=589&type=chunk) - Valuation of **share-based compensation** requires subjective assumptions regarding stock price volatility, expected term, and forfeiture rates, which can significantly impact compensation expense[590](index=590&type=chunk) [DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES](index=113&type=section&id=ITEM%206.%20DIRECTORS%2C%20SENIOR%20MANAGEMENT%20AND%20EMPLOYEES) This section details the company's leadership, compensation, board structure, and employee base, highlighting the significant reduction in headcount and the founder's controlling voting power [Compensation of Directors and Executive Officers](index=114&type=section&id=B.%20Compensation%20of%20Directors%20and%20Executive%20Officers) This section details cash compensation for directors and executive officers in FY2022 and outlines the company's Share Incentive Plan for equity awards FY2022 Cash Compensation (in thousands) | Recipient Group | Compensation (RMB) | Compensation (USD) | | :--- | :--- | :--- | | Executive Officers | 3,200 | 470 | | Non-Executive Directors | 2,500 | 360 | - The company has a Share Incentive Plan adopted in March 2019, with a maximum of **28,400,000** ordinary shares authorized for issuance[607](index=607&type=chunk) [Employees](index=119&type=section&id=D.%20Employees) This section provides employee headcount data, highlighting a dramatic reduction from 22,570 in 2020 to 4,002 in 2022, with key functions identified Employee Headcount by Function as of Dec 31, 2022 | Function | Number of Employees | | :--- | :--- | | Instructors | 203 | | Tutors | 583 | | Technology and content R&D | 984 | | User growth | 740 | | Sales | 949 | | General and administrative | 543 | | **Total** | **4,002** | - The total number of employees decreased dramatically from **22,570** at the end of 2020 to **4,002** at the end of 2022[627](index=627&type=chunk) [Share Ownership](index=119&type=section&id=E.%20Share%20Ownership) This section details the company's dual-class share structure, highlighting the founder's significant voting power of 88.6% as of February 28, 2023 - The company has a dual-class share structure: Class A shares have **one vote** per share, while Class B shares have **ten votes** per share[256](index=256&type=chunk)[662](index=662&type=chunk) - As of February 28, 2023, founder and CEO Larry Xiangdong Chen beneficially owns shares representing **88.6% of the aggregate voting power**[257](index=257&type=chunk)[635](index=635&type=chunk)[636](index=636&type=chunk) [MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS](index=121&type=section&id=ITEM%207.%20MAJOR%20SHAREHOLDERS%20AND%20RELATED%20PARTY%20TRANSACTIONS) This section covers major shareholder information, primarily focusing on related party transactions with the VIE and granted registration rights to certain shareholders - The company's primary related party transactions are the **contractual arrangements with its VIE**, which are fundamental to its operational structure in China[639](index=639&type=chunk) - The company has granted **demand, piggyback, and Form F-3 registration rights** to certain shareholders, allowing them to have their shares registered for public sale under specific conditions[642](index=642&type=chunk)[643](index=643&type=chunk)[644](index=644&type=chunk) [FINANCIAL INFORMATION](index=123&type=section&id=ITEM%208.%20FINANCIAL%20INFORMATION) This section details the conclusion of an SEC investigation, ongoing shareholder class action lawsuits, and the company's current dividend policy of retaining earnings - An SEC investigation that began after short-seller reports in 2020 was **concluded in October 2022**, with the SEC stating it **did not intend to recommend an enforcement action** against the company[650](index=650&type=chunk) - The company is currently a defendant in **two putative shareholder class action lawsuits**, one filed in April 2020 and another in December 2022, alleging material misstatements or omissions in public filings[651](index=651&type=chunk)[652](index=652&type=chunk) - The company does not have any present plan to pay cash dividends and intends to **retain earnings for business operations and expansion**[657](index=657&type=chunk) [ADDITIONAL INFORMATION](index=125&type=section&id=ITEM%2010.%20ADDITIONAL%20INFORMATION) This section covers corporate governance, including the dual-class share structure, and taxation, noting the company's likely PFIC status for 2022 and its implications for U.S. holders [Memorandum and Articles of Association](index=125&type=section&id=B.%20Memorandum%20and%20Articles%20of%20Association) This section details the company's memorandum and articles of association, highlighting the dual-class share structure, board's share issuance authority, and differences from U.S. corporate law - The company's ordinary shares are divided into Class A (**one vote** per share) and Class B (**ten votes per share**); Class B shares are convertible into Class A shares, but not the reverse[662](index=662&type=chunk)[663](index=663&type=chunk)[665](index=665&type=chunk) - The board of directors has the authority to issue **additional shares**, including series of preference shares with designated rights, without further shareholder approval[675](index=675&type=chunk)[676](index=676&type=chunk) - Cayman Islands law provides for **mergers and consolidations**, which require director approval and a special resolution from shareholders, but generally not court approval[683](index=683&type=chunk) [Taxation](index=132&type=section&id=E.%20Taxation) This section outlines the company's taxation across the Cayman Islands, PRC (including preferential rates and resident enterprise risk), and U.S. federal income tax, noting its likely PFIC status for 2022 - The company is not subject to profits, income, or capital gains taxes in its jurisdiction of incorporation, the **Cayman Islands**[713](index=713&type=chunk) - Certain PRC subsidiaries are eligible for **preferential enterprise income tax rates of 15% (as HNTEs) or 12.5% (as Software Enterprises)**, below the statutory 25% rate[1046](index=1046&type=chunk)[1049](index=1049&type=chunk) - The company believes it was a **Passive Foreign Investment Company (PFIC)** for the 2022 taxable year, which could lead to significant **adverse U.S. federal income tax consequences** for U.S. holders of its ADSs or ordinary shares[286](index=286&type=chunk)[729](index=729&type=chunk)[740](index=740&type=chunk) [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=140&type=section&id=ITEM%2011.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section details the company's primary market risks, focusing on foreign exchange risk due to RMB-denominated operations and interest rate risk from cash and investments - The company's primary market risk is **foreign exchange risk**, as its business is denominated in RMB while its ADSs are traded in U.S. dollars[752](index=752&type=chunk) - As of December 31, 2022, the company held **RMB 2.95 billion** in RMB-denominated cash, restricted cash, and short-term investments, and **US$114.4 million** in U.S. dollar-denominated cash and short-term investments[754](index=754&type=chunk) - Interest rate risk is mainly associated with **interest income from cash and investments**, and the company has not used derivative instruments to manage this exposure[755](index=755&type=chunk) [CONTROLS AND PROCEDURES](index=143&type=section&id=ITEM%2015.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the company's disclosure controls and internal control over financial reporting as of December 31, 2022, as concluded by management and the independent auditor - Management concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2022[767](index=767&type=chunk) - Based on the COSO framework, management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2022[770](index=770&type=chunk) - The independent registered public accounting firm issued an **unqualified opinion**, stating that the company maintained effective internal control over financial reporting as of December 31, 2022[773](index=773&type=chunk) [CORPORATE GOVERNANCE AND OTHER ITEMS](index=145&type=section&id=ITEM%2016.%20CORPORATE%20GOVERNANCE%20AND%20OTHER%20ITEMS) This section covers corporate governance, including the audit committee financial expert, accountant fees, share repurchase programs, and the mitigated delisting risk under the HFCAA - The board of directors has determined that **Jin Cui is an audit committee financial expert**[781](index=781&type=chunk) Principal Accountant Fees (in thousands RMB) | Fee Type | 2021 | 2022 | | :--- | :--- | :--- | | Audit fees | 13,800 | 10,350 | | Audit related fees | 27,454 | — | | Tax fees | 1,380 | 270 | - In November 2022, the board authorized a share repurchase program for up to **US$30 million** of its common shares, effective until November 2025[788](index=788&type=chunk) - Following the PCAOB's removal of mainland China and Hong Kong from its list of non-inspection jurisdictions in December 2022, the company does not expect to be identified as a **Commission-Identified Issuer** under the HFCAA[793](index=793&type=chunk) PART III [FINANCIAL STATEMENTS](index=147&type=section&id=ITEM%2018.%20FINANCIAL%20STATEMENTS) This section presents the audited consolidated financial statements for 2020-2022, prepared under U.S. GAAP, including balance sheets, income statements, cash flows, and detailed notes on key accounting policies and the VIE structure [Consolidated Financial Statements](index=155&type=section&id=Consolidated%20Financial%20Statements) This section presents the consolidated financial statements, highlighting the balance sheet, income statement, and cash flow performance for the three years ended December 31, 2022 Consolidated Balance Sheet Highlights (As of Dec 31, 2022, in thousands RMB) | Account | Amount | | :--- | :--- | | Cash and cash equivalents | 819,911 | | Short-term investments | 2,923,864 | | **Total Assets** | **4,876,175** | | Total current liabilities | 1,609,222 | | **Total Liabilities** | **1,780,346** | | **Total Shareholders' Equity** | **3,095,829** | Consolidated Statement of Operations Highlights (Year ended Dec 31, 2022, in thousands RMB) | Account | Amount | | :--- | :--- | | **Net revenues** | **2,498,214** | | Gross profit | 1,797,164 | | Loss from operations | (118,052) | | **Net income** | **13,172** | [Notes to Consolidated Financial Statements](index=162&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes to the financial statements, covering the VIE structure, regulatory impact, revenue recognition, share-based compensation, and income tax policies - The company's VIE and its subsidiaries accounted for **49.00%** of the Group's consolidated total assets and **80.89%** of its consolidated total liabilities as of December 31, 2022[875](index=875&type=chunk) - Revenue from live interactive tutoring services is recognized **proportionately as classes are delivered**, while revenue from content playback access is recognized **proportionally over the playback period**[936](index=936&type=chunk)[937](index=937&type=chunk)[938](index=938&type=chunk) - As of December 31, 2022, the company had **RMB 101.9 million** in unrecognized compensation costs related to RSUs, expected to be recognized over a weighted average period of 3.08 years[1034](index=1034&type=chunk) - As of December 31, 2022, the Group had net operating loss carryforwards of **RMB 2.72 billion** from its mainland China entities, which will expire on various dates between 2023 and 2032[1056](index=1056&type=chunk)