Gaotu(US:GOTU)2020-02-18 19:32Financial Data and Key Metrics Changes - For the fiscal year 2019, the company reported net revenue of RMB2.11 billion, representing a 432% increase from RMB397 million in 2018 [15] - Gross billings increased by 413% year-over-year to RMB3.36 billion from RMB665 million [15] - Non-GAAP income surged to RMB287 million in 2019, up 1021% from RMB26 million in 2018, resulting in a non-GAAP net income margin of 14% compared to 6% the previous year [15][16] - In Q4 2019, revenue increased 413% year-over-year to RMB935 million, exceeding guidance [16] - Net operating cash flow for Q4 reached RMB739 million, up 395% year-over-year from RMB149 million [25] Business Line Data and Key Metrics Changes - Net revenue from K-12 courses increased by 468% year-over-year to RMB773 million, accounting for 83% of total net revenues [17] - The primary school business revenue grew by 894% year-over-year in Q4, indicating strong growth and brand recognition [18] - Net revenue from foreign language, professional, and interest courses rose by 310% year-over-year to RMB150 million, representing 16% of net revenues [19] Market Data and Key Metrics Changes - Total enrollments for courses priced at or above RMB9.9 hit a record high of 1.12 million, a 3.9 times increase from the same period in 2018 [17] - Paid enrollments for courses priced at or above RMB99 increased to 1.1 million, growing 4.4 times year-over-year [17] Company Strategy and Development Direction - The company emphasizes a focused strategy on online live large classes, which has allowed it to outperform industry averages [8][9] - The management believes that maintaining a focus on one core business will lead to better organizational capabilities and growth [9][10] - The company plans to continue investing in research and development to enhance the learning experience and operational efficiency [21] Management Comments on Operating Environment and Future Outlook - The management expressed concern over the impact of the Coronavirus outbreak on the Chinese economy but noted an increase in online teaching activities [27] - The company has adapted by providing free courses and support to offline institutions during the outbreak [12][13] - Future guidance for Q1 2020 estimates net revenues between RMB1.086 billion and RMB1.106 billion, representing a year-over-year increase of 304% to 311% [25] Other Important Information - The company has a cash balance of RMB2.74 billion as of December 31, 2019, which includes cash, short-term investments, and long-term wealth management products [6] - The deferred revenue balance was RMB1.34 billion, primarily consisting of tuition collected in advance [25] Q&A Session Summary Question: Can you provide more details on the impact of the Coronavirus on online traffic and your strategy for retention? - Management noted that the outbreak has changed behaviors, leading to increased online course enrollments, with nearly 15 million enrollments in three live classes [27][29] Question: What is your customer acquisition strategy moving forward? - The company plans to maintain a focus on customer satisfaction to enhance retention and reduce acquisition costs, with a weighted average customer acquisition cost of RMB470 for the year [33][36] Question: Can you elaborate on the reasons behind margin expansion? - Margin expansion is attributed to economies of scale in the large class business model, with fixed compensation for instructors being diluted as class sizes grow [40][41] Question: What is the expected retention rate for tutors and how does compensation compare to peers? - The company reported a high retention rate for instructors, with compensation structured to include fixed, performance-based, and share-based components [57][59]