Gaotu(GOTU) - 2025 Q2 - Quarterly Results

Financial Highlights Second Quarter 2025 Key Financial and Operating Data The company reported strong Q2 2025 revenue growth, narrowed losses, and increased net operating cash inflow | Metric | Q2 2024 (RMB thousands) | Q2 2025 (RMB thousands) | Pct. Change | | :--- | :--- | :--- | :--- | | Net revenues | 1,009,797 | 1,389,388 | 37.6% | | Gross billings | 1,653,692 | 2,252,387 | 36.2% | | Loss from operations | (464,750) | (241,865) | (48.0)% | | Net loss | (429,550) | (215,994) | (49.7)% | | Non-GAAP net loss | (418,040) | (206,849) | (50.5)% | | Net operating cash inflow | 386,184 | 588,797 | 52.5% | First Six Months 2025 Key Financial and Operating Data The first half of 2025 saw substantial revenue growth and reduced net loss despite lower operating cash inflow | Metric | 6M 2024 (RMB thousands) | 6M 2025 (RMB thousands) | Pct. Change | | :--- | :--- | :--- | :--- | | Net revenues | 1,956,682 | 2,882,431 | 47.3% | | Gross billings | 2,383,052 | 3,141,112 | 31.8% | | Loss from operations | (542,452) | (207,092) | (61.8)% | | Net loss | (441,847) | (92,003) | (79.2)% | | Non-GAAP net loss | (415,001) | (69,510) | (83.3)% | | Net operating cash inflow | 188,748 | 111,560 | (40.9)% | Management Commentary CEO Remarks The CEO highlighted solid growth, AI integration, and improved efficiency leading to narrowed losses - Maintained solid growth momentum in core business and harnessed AI to enhance service models, foster product innovation, and strengthen organizational capabilities[7] - Refined operational execution and improved organizational efficiency led to a 50.5% year-over-year narrowing of non-GAAP net loss[7] - Achieved a net operating cash inflow of RMB588.8 million, an increase of RMB202.6 million from the same period last year[7] - Dedicated to advancing educational innovation, delivering best-in-class learning experiences, creating long-term shareholder value, and advancing social impact and commercial success[8] CFO Remarks The CFO emphasized a successful 'healthy growth' strategy, with revenues exceeding guidance and improved efficiency - Net revenues exceeded the upper end of guidance by 5.4%[9] - Year-over-year growth rate of gross billings outpaced that of last quarter by 14.4 percentage points[9] - Customer acquisition efficiency reached its best level in the past four years[9] - G&A and R&D expenses decreased year-over-year for the second consecutive quarter as a percentage of net revenues, reflecting growing operating leverage[9] - Maintained an ample cash position, with cash, cash equivalents, restricted cash, and short-term and long-term investments totaling RMB3.8 billion as of June 30, 2025[9] Detailed Financial Performance (Second Quarter 2025) Net Revenues Net revenues increased by 37.6% year-over-year, driven by strong market demand and service recognition | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net revenues | 1,009.8 | 1,389.4 | 37.6% | - Increase mainly due to continued year-over-year growth in gross billings, resulting from sufficient and effective response to strong market demand[10] - Improved recognition of high-quality educational products and learning services contributed to revenue growth[10] Cost of Revenues Cost of revenues rose by 50.9% year-over-year due to workforce expansion and higher operational costs | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Cost of revenues | 313.4 | 472.8 | 50.9% | - Increase mainly due to expansion of instructors and tutors workforce, higher rental cost, as well as increased depreciation and amortization cost[11] Gross Profit and Gross Margin Gross profit grew by 31.6%, though gross margin declined as cost of revenues outpaced revenue growth | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Gross profit | 696.4 | 916.5 | 31.6% | | Gross profit margin | 69.0% | 66.0% | (3.0) ppts | | Non-GAAP gross profit | 696.3 | 917.9 | 31.8% | | Non-GAAP gross profit margin | 69.0% | 66.1% | (2.9) ppts | Operating Expenses Total operating expenses decreased slightly by 0.2% due to reduced marketing expenditures | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Total operating expenses | 1,161.1 | 1,158.4 | (0.2)% | - Decline primarily due to precise efficiency management, resulting in year-over-year decreases in expenditures for branding and marketing activities[13] - Expansion of selling and general and administrative workforce partially offset the decline of marketing expenditures[13] Selling Expenses | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | | :--- | :--- | :--- | | Selling expenses | 835.4 | 820.9 | Research and Development Expenses | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | | :--- | :--- | :--- | | Research and development expenses | 162.1 | 148.2 | General and Administrative Expenses | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | | :--- | :--- | :--- | | General and administrative expenses | 163.6 | 189.3 | Loss from Operations The company significantly narrowed its loss from operations by 48.0% year-over-year | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Loss from operations | (464.8) | (241.9) | (48.0)% | | Non-GAAP loss from operations | (453.2) | (232.7) | (48.6)% | Interest Income and Realized Gains from Investments Combined interest income and realized gains from investments decreased year-over-year | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | | :--- | :--- | :--- | | Interest income and realized gains from investments | 29.0 | 19.1 | Other Income, net Other income, net, saw a slight increase in the second quarter of 2025 | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | | :--- | :--- | :--- | | Other income, net | 4.6 | 5.6 | Net Loss Net loss significantly narrowed by 49.7% year-over-year, reflecting improved financial performance | Metric | Q2 2024 (RMB millions) | Q2 2025 (RMB millions) | YoY Change | | :--- | :--- | :--- | :--- | | Net loss | (429.6) | (216.0) | (49.7)% | | Non-GAAP net loss | (418.0) | (206.8) | (50.5)% | Basic and Diluted Net Loss per ADS Basic and diluted net loss per ADS decreased significantly in the second quarter of 2025 | Metric | Q2 2025 (RMB) | | :--- | :--- | | Basic net loss per ADS | (0.88) | | Diluted net loss per ADS | (0.88) | | Non-GAAP basic net loss per ADS | (0.84) | | Non-GAAP diluted net loss per ADS | (0.84) | Financial Position and Cash Flow Cash Flow (Second Quarter 2025) The company generated a substantial net operating cash inflow in the second quarter of 2025 | Metric | Q2 2025 (RMB millions) | | :--- | :--- | | Net operating cash inflow | 588.8 | Cash, Cash Equivalents, Restricted Cash, Short-term and Long-term Investments The company maintained a strong cash and investment position, though slightly decreased from year-end 2024 | Metric | As of Dec 31, 2024 (RMB millions) | As of June 30, 2025 (RMB millions) | | :--- | :--- | :--- | | Total Cash, Cash Equivalents, Restricted Cash, Short-term and Long-term Investments | 4,094.3 | 3,824.1 | Share Outstanding As of June 30, 2025, the company had over 162 million ordinary shares outstanding | Metric | As of June 30, 2025 | | :--- | :--- | | Ordinary shares outstanding | 162,382,842 | Corporate Actions Share Repurchase Program The company has an ongoing US$80 million share repurchase program and has authorized a new US$100 million program - Existing share repurchase program authorized up to US$80 million (increased from US$30 million in November 2023), effective until November 22, 2025[23] - As of August 25, 2025, approximately 24.8 million ADSs were repurchased for approximately US$76.9 million under the existing program[24] - A new share repurchase program was authorized in May 2025 for up to US$100 million over a three-year period, commencing upon the completion of the existing program[24] Business Outlook Third Quarter 2025 Guidance The company expects Q3 2025 net revenues to increase by 28.9% to 30.6% year-over-year | Metric | Q3 2025 Guidance (RMB millions) | YoY Increase | | :--- | :--- | :--- | | Total net revenues | 1,558 to 1,578 | 28.9% to 30.6% | Supplemental Information About Gaotu Techedu Inc. Gaotu Techedu Inc. is a leading technology-driven education company in China focused on lifelong learning - Leading technology-driven education company in China[28] - Focuses on enabling lifelong learning through AI-powered solutions that cultivate interest and drive continuous growth[28] - Provides AI-powered, product-led learning solutions for learners from pre-school to adulthood[28] - Utilizes AI and data analytics throughout operations to adapt content and teaching methods to individual learner needs, enhance efficiency, and drive sustained learning progress[28] Conference Call Details Details for the Q2 2025 earnings conference call and replay are provided for investors - Earnings conference call scheduled for 8:00 AM U.S. Eastern Time on Tuesday, August 26, 2025[26] - Dial-in details provided for International, United States, Hong Kong, and Mainland China, with Passcode: 4836755[26] - A telephone replay will be available through September 2, 2025, with Passcode: 3429136[26] - Live and archived webcast available at https://ir.gaotu.cn/home[26](index=26&type=chunk) Safe Harbor Statement This announcement contains forward-looking statements involving inherent risks and uncertainties - Contains forward-looking statements under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[27] - Forward-looking statements involve inherent risks and uncertainties, including the company's ability to attract students, recruit teachers, improve courses, maintain brand, improve teaching results, and compete effectively[27] - The company undertakes no duty to update such information or any forward-looking statement, except as required under applicable law[27] About Non-GAAP Financial Measures The company uses non-GAAP measures to evaluate performance, which have specific definitions and limitations - The Company uses gross billings, non-GAAP gross profit, non-GAAP income (loss) from operations, and non-GAAP net income (loss) for evaluating operating results and financial decision-making[29] - Gross billings are defined as the total cash received for course offerings, net of refunds, providing insight into sales and business performance[30] - Non-GAAP measures exclude share-based compensation expenses to provide meaningful supplemental information regarding performance and liquidity from a cash perspective[31] - A limitation of non-GAAP measures is the exclusion of significant recurring share-based compensation charges, and they are not intended as a substitute for GAAP financial information[31][32] Exchange Rate The announcement uses an exchange rate of RMB7.1636 to USD1.0000 for convenience - All translations from RMB to USD are made at a rate of RMB7.1636 to USD1.0000[34] - The rate is the effective noon buying rate for June 30, 2025, as set forth in the H.10 statistical release of the Federal Reserve Board[34] - No representation is made that RMB amounts could have been, or could be, converted, realized, or settled into USD at that rate on June 30, 2025, or at any other rate[34] Investor Relations Contact Contact information for investor relations inquiries is provided for the company and its communications firm - Gaotu Techedu Inc. Investor Relations: E-mail: ir@gaotu.cn[35] - Piacente Financial Communications contacts: Brandi Piacente (Tel: +1 212 481-2050) and Jenny Cai (Tel: +86 10 6508-0677, E-mail: Gaotu@tpg-ir.com)[35] Unaudited Condensed Consolidated Financial Statements Balance Sheets The balance sheets present the company's financial position as of December 31, 2024, and June 30, 2025 Unaudited Condensed Consolidated Balance Sheets (Selected Items) | Metric | As of Dec 31, 2024 (RMB thousands) | As of June 30, 2025 (RMB thousands) | | :--- | :--- | :--- | | ASSETS | | | | Total current assets | 3,639,812 | 4,017,795 | | Total non-current assets | 2,288,165 | 1,950,107 | | TOTAL ASSETS | 5,828,077 | 5,868,499 | | LIABILITIES | | | | Total current liabilities | 3,260,603 | 3,615,989 | | Total non-current liabilities | 634,009 | 648,749 | | TOTAL LIABILITIES | 3,894,613 | 4,264,738 | | SHAREHOLDERS' EQUITY | | | | TOTAL SHAREHOLDERS' EQUITY | 1,933,464 | 1,603,761 | Statements of Operations The statements of operations detail revenues, costs, and net loss for the three and six-month periods Unaudited Condensed Consolidated Statements of Operations (Selected Items) | Metric | Q2 2024 (RMB thousands) | Q2 2025 (RMB thousands) | 6M 2024 (RMB thousands) | 6M 2025 (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Net revenues | 1,009,797 | 1,389,388 | 1,956,682 | 2,882,431 | | Cost of revenues | (313,433) | (472,840) | (584,847) | (925,301) | | Gross profit | 696,364 | 916,548 | 1,371,835 | 1,957,130 | | Total operating expenses | (1,161,114) | (1,158,413) | (1,914,287) | (2,164,222) | | Loss from operations | (464,750) | (241,865) | (542,452) | (207,092) | | Net loss | (429,550) | (215,994) | (441,847) | (92,003) | | Basic net loss per ADS | (1.65) | (0.88) | (1.71) | (0.37) | Reconciliations of Non-GAAP Measures This section reconciles non-GAAP financial measures to their most comparable GAAP measures Reconciliation of Gross Billings | Metric | Q2 2024 (RMB thousands) | Q2 2025 (RMB thousands) | 6M 2024 (RMB thousands) | 6M 2025 (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Net revenues | 1,009,797 | 1,389,388 | 1,956,682 | 2,882,431 | | Less: other revenues | 29,233 | 22,092 | 56,500 | 36,916 | | Add: VAT and surcharges | 62,586 | 85,782 | 119,993 | 179,158 | | Add: ending deferred revenue | 1,582,135 | 2,196,993 | 1,582,135 | 2,196,993 | | Add: ending refund liability | 85,520 | 133,308 | 85,520 | 133,308 | | Less: beginning deferred revenue | 1,003,314 | 1,444,967 | 1,237,621 | 2,085,893 | | Less: beginning refund liability | 53,799 | 86,025 | 67,157 | 127,969 | | Gross billings | 1,653,692 | 2,252,387 | 2,383,052 | 3,141,112 | Reconciliation of Non-GAAP Profit/Loss Measures | Metric | Q2 2024 (RMB thousands) | Q2 2025 (RMB thousands) | 6M 2024 (RMB thousands) | 6M 2025 (RMB thousands) | | :--- | :--- | :--- | :--- | :--- | | Gross profit (GAAP) | 696,364 | 916,548 | 1,371,835 | 1,957,130 | | Share-based compensation expenses in cost of revenues | (43) | 1,353 | 2,278 | 3,463 | | Non-GAAP gross profit | 696,321 | 917,901 | 1,374,113 | 1,960,593 | | Loss from operations (GAAP) | (464,750) | (241,865) | (542,452) | (207,092) | | Share-based compensation expenses | 11,510 | 9,145 | 26,846 | 22,493 | | Non-GAAP loss from operations | (453,240) | (232,720) | (515,606) | (184,599) | | Net loss (GAAP) | (429,550) | (215,994) | (441,847) | (92,003) | | Share-based compensation expenses | 11,510 | 9,145 | 26,846 | 22,493 | | Non-GAAP net loss | (418,040) | (206,849) | (415,001) | (69,510) |