Gaotu Techedu Q1 2025 Earnings Report

Gaotu Techedu EPS Results

• Actual EPS: $0.07
• Consensus EPS: -$0.05
• Beat/Miss: Beat by +$0.12
• One Year Ago EPS: N/A

Gaotu Techedu Revenue Results

• Actual Revenue: $28.53 million
• Expected Revenue: $189.76 million
• Beat/Miss: Missed by -$161.23 million
• YoY Revenue Growth: N/A

Gaotu Techedu Announcement Details

• Quarter: Q1 2025
• Date: 5/15/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 15, 2025
• Conference Call Time: 8:00AM ET

Gaotu Techedu (NYSE:GOTU) (NYSE:GOTU), formerly known as GSX Techedu, is a Beijing-based provider of online education services in China. Since its founding in 2014, the company has built a technology-driven platform that delivers live, interactive tutoring sessions to students primarily in the K-12 segment. Gaotu Techedu’s rebranding in 2021 underscored its commitment to leveraging cutting-edge digital tools to expand access to quality instruction across core academic subjects.

The company’s main offerings include small-group and one-on-one classes in mathematics, Chinese, English, physics and chemistry, as well as targeted test preparation for high-stakes national and local examinations. Gaotu Techedu employs a proprietary live-streaming system that enables real-time interaction between students and instructors, supplemented by AI-enhanced study aids, homework review services and on-demand course materials. These features are designed to personalize learning pathways and improve academic outcomes.

Serving students in urban and suburban areas throughout China, Gaotu Techedu has expanded its course catalog to address lifelong learning and professional skill development. The company’s digital ecosystem integrates mobile and desktop access, allowing learners to participate in classes from any location. Headquartered in Beijing, Gaotu Techedu is led by founder and Chief Executive Officer Zhu Zhiwei, whose vision emphasizes scalable, tech-enabled education solutions for the evolving needs of Chinese learners.

Gaotu Techedu Q1 2025 Earnings Call Transcript

Key Takeaways

• Revenue jumped 58% year-over-year to RMB 1.5 billion in Q1 FY25, with non-GAAP net income of RMB 137.3 million (9.2% margin), beating the top end of guidance.
• Non-academic tutoring services saw triple-digit gross billings growth for the fourth consecutive quarter and reached profitability, with coding course retention exceeding 90%.
• The company deepened AI integration—launching the AI-powered “Learn Spoken English with Zanyu Wu” program and intelligent diagnostic tools—to enhance personalization, engagement and operational efficiency.
• Share repurchases reached RMB 460 million (9% of ADSs outstanding) and a new US$100 million buyback plan was approved; cash, equivalents and investments stand at ~RMB 3.5 billion to support growth.
• For Q2 FY25, net revenues are guided to grow 28.5%–35% year-over-year, reflecting continued momentum despite seasonal variability.

Presentation

[Operator]

Hello, ladies and gentlemen. Thank you for standing by and welcome for the GaltooTek edu First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in listen only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded.

[Operator]

I would now like to turn the conference over to your first speaker today, Ms. Catherine Chen, Head of Investor Relations. Please go ahead, Catherine.

[Catherine Chen, Head of Investor Relations at Gaotu Techedu]

Thank you, operator. Good evening, everyone. Thank you for joining Goutu's first quarter twenty twenty five earnings conference call. My name is Tessri, and I'll help host the earnings call today. Goutu's earnings release for the quarter was distributed earlier and is available on the company's IR website at ir.gaotu.cn as well as through PR newswire services.

[Catherine Chen, Head of Investor Relations at Gaotu Techedu]

Joining the call with me tonight from Gaotu's senior management is Mr. Larry Chen, Koutu's Founder, Chairman and Chief Executive Officer and Ms. Shannon Shen, Koutu's Chief Financial Officer. Larry will first provide the business highlights for the quarter and then afterwards Shannon will discuss our financial performance in more detail. Following their prepared remarks, we will open the floor to questions and answers.

[Catherine Chen, Head of Investor Relations at Gaotu Techedu]

Before we begin, I'd like to remind you that this conference call will contain forward looking statements made under the Safe Harbor provisions of The U. S. Private Securities Litigation Reform Act of 1995. These forward looking statements are based upon management's current beliefs and expectations as well as the current market and operating conditions, and they involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control and may cause the company's actual results, performance or achievements to differ materially from those contained in any forward looking statements. Further information regarding this and other risks is included in the company's public filings with the U.

[Catherine Chen, Head of Investor Relations at Gaotu Techedu]

S. SEC. The company does not undertake any obligation to update any forward looking statements, except as required under applicable law. During today's call, management will also discuss certain non GAAP measures for comparison purposes only. For a definition of non GAAP financial measures and reconciliation of GAAP to non GAAP financial results, please refer to our first quarter earnings release published earlier today.

[Catherine Chen, Head of Investor Relations at Gaotu Techedu]

As a reminder, this conference is being recorded. In addition, a live and archived webcast of this conference call will be available on Baozun IR website. It is now my pleasure to introduce our Founder, Chairman and Chief Executive Officer, Larry. Larry Sief?

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

Good evening and good morning everyone. Thank you for joining us on GaoTu's first quarter of fiscal year twenty twenty five earnings conference call. I would like to take this opportunity to express my gratitude to each of you for your interest in and support of Gautu. Before I start, I would like to remind everyone that all financial figures discussed today are quoted in RMB unless stated otherwise. Over the past year, we have consistently executed on our strategic priorities, providing meaningful progress across product innovation, organizational development, technology co development and operational excellence.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

These efforts have fueled a transformative business expansion while also comprehensively enhancing our organizational capabilities. As we entered 2025, we sustained our robust growth momentum delivering results that surpassed market expectations across revenue, profitability, user growth and organizational efficiency. Notably, our substantial profit realization represents the quarter's most significant milestone, benefiting the effectiveness of our efforts to enhance operational leverage and improve cost efficiency. In the first quarter of twenty twenty five, our revenue increased by about 58% year over year to nearly RMB1.5 billion, exceeding the upper end of our guidance. Operating profit reached RMB34.8 million with a net income of million.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

On a non GAAP basis, net income reached RMB137.3 million with a net margin of 9.2%. These financial results not only reflect strong top line momentum, but also underscore our disciplined approach to high quality growth and marginal improvement. In addition, we consistently prioritize shareholder returns and remain committed to creating long term value for our shareholders. During the quarter, we allocated approximately RMB136 million to our share repurchase program. Under the current buyback plan, the accumulated total amount of stock buybacks has reached RMB460 million.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

The cumulative number of ADIs repurchased represents 9% of our total outstanding shares as of 03/31/2025, serving as an effective lever to enhance shareholder returns. As of the same day, we had cash and cash equivalents restricted cash and short term and long term investments totaling about billion, underpin our future strategic initiatives and sustainable growth. These robust financial achievements are the direct outcome of the strategic investments and the transformative initiatives we have pursued over the past three years. Particularly last year's investment in products, users and offline businesses are now becoming key engines driving revenue growth, operational efficiency and profitability. By embedding AI deeply into our educational products and the learning services, we are accelerating the formation of a technology empowered value loop in education.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

This has led to tangible advancements in user experience and learning outcomes, laying a solid foundation for the company's future growth and profitability. Next, I would like to share our strategic progress and key highlights this quarter from four dimensions. First, we remain deeply user centric driving both the scale and the values through continuous product innovation. Our traditional lending services continued to grow steadily with strong performance in both student enrollments and user satisfaction. Building on this foundation, have broadened our offerings to address diverse user needs from online and offline academic tutoring services to break through the personalized learning solutions for high school students as well as expanded services for college students and study abroad consulting and test prep.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

In addition to being closely aligned with users' genuine needs, these new products are steadily amplifying our net worth effect and economies of scale as they evolve into a replicable growth model that effectively elevates our brand awareness and the market penetration. Second, we are fully leveraging our core advantages as a digital native education company continuously advancing the widest brand application and innovation of AI technology across multiple aspects. On the product front, we capitalized on the appeal of our star instructors and successfully launched the Learn Spoken English with Zanyo Wu program, a groundbreaking upgrade that reimagines the learning experience by seamlessly integrating flagship instructor IP with AI technology. By combining the magnetic influence of renowned instructors with AI's interactive capabilities, delivered a highly immersive and personalized learning experience that greatly boosted learner motivation and engagement. On the service side, we have leveraged our outstanding tutors' best practices to train our AI models and develop our intelligent diagnostic function.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

This feature helps tutors identify students learning gaps and generate personalized learning reports, enhancing service efficiency and precision while enabling the scalable replication of high quality learning services. The tool has already demonstrated tangible impact in real world learning settings, paving the way for cross domain and multi grid expansion. In operations, we are harnessing AI to empower refined user traffic operations, sharpen segmentation and implement payer strategies. By matching the optimal operating models to the characteristic of each user segment, we are improving both the traffic value and the workforce productivity. The broad adoption of AI technology has also accelerated workflow optimization across departments further enhancing internal management efficiency and amplifying operational leverage.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

At the strategic level, we continue to systematically advance our AI transformation initiative. We have deepened our forward looking positioning and the decision making capabilities in the AI field. Initiating joint AI laboratory development and collaboration with top universities and leading talents. Through these partnerships we are pioneering breakthrough innovations that are balanced technological advancement with practical implementation across diverse operational applications. We aim to drive educational innovations through AI, building a more intelligent, personalized and scalable educational ecosystem that delivers premium learning experience for users while creating sustainable growth and enduring value for the company.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

Third, we continue to invest in building long term competitiveness by enhancing organizational efficiency and strengthening our talent pipeline. Outstanding teachers are at the core of our educational edge. We are committed to advancing talent acquisition, professional development and incentive mechanisms while taking an equal emphasis on teaching excellence and service orientation. By leveraging AI tools, we continuously enhance employee satisfaction and reduce repetitive work while allowing teachers to fully convey the human charge and care that are essential to education. We truly believe that a warm well structured teaching force is a bedrock for delivering consistent educational quality and elevating user satisfaction.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

Fourth, we remain dedicated to social responsibility while enhancing shareholder value over the long run. Awarding shareholders has always been a central part of our developmental strategy. Building on our previous buyback plan, our Board and Directors, they approved a new share repurchase program of up to US100 million dollars over the next three years effective upon completion of the current program. Moving forward, we will continue to optimize our capital structure and enhance shareholder returns while ensuring adequate funding and strategic execution. Today's call stands as the result of sustained investments, continuous adaptations and unwavering commitment.

[Larry Chen, Founder, Chairman & CEO at Gaotu Techedu]

Throughout this journey, we have navigated the market cycles and made pivotal strategic choices, 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, we possess the resources and capabilities to invest in the future, push boundaries and unleash innovation. 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 quarter financial and operational details.

[Shannon Shen, CFO at Gaotu Techedu]

Thank you, Larry, and thank you everyone for joining our call today. I will now walk you through our operating and financial performance for the first quarter of fiscal year twenty twenty five. We started the year strongly 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.

[Shannon Shen, CFO at Gaotu Techedu]

Through strategic enhancement of customer value, efficient cost management and refined operational improvements, we have fully unleashed our operational leverage, providing robust support for continued profit growth. Our operating margin and net income margin rose by ten point five and nine point six percentage points on an annual basis, further affirming the continuous improvement of our profit quality. Meanwhile, deferred revenue amounted to over RMB1.4 billion, representing a year over year increase of 44%, offering a solid foundation for sustained revenue growth in the subsequent quarters. Driven by dynamic evolution of customer needs, we have strategically invested in improving product quality, expanding our user base and delivering more personalized and diversified learning solutions in prior years. With the effective execution of these strategies, our revenue structure has become more growth oriented and sustainable.

[Shannon Shen, CFO at Gaotu Techedu]

Notably, our portfolio of non academic tutoring services, which generated superior customer lifetime value, has emerged as a significant growth engine alongside our traditional learning services. Next, let me walk you through the progress we made during this quarter. Learning services contributed over 95% of net revenues. Breaking it down, more than 85% of total revenues came from non academic tutoring services and our traditional learning services, representing over 80% year over year growth. Combined gross billings from these two segments increased by approximately 40% year over year.

[Shannon Shen, CFO at Gaotu Techedu]

Our new initiatives focused on online and offline non academic tutoring services delivered exceptional growth this quarter. Gross billings in this segment jumped nearly 90% year over year, with gross billings from new enrollments surging by more than triple digits. Net revenues grew at a triple digit rate year over year, accounting for over 35% of total revenues. This business has achieved triple digit growth in both revenue and gross billings from new enrollments for four consecutive quarters. Importantly, as enrollments expanded and educational product quality improved, this segment achieved profitability.

[Shannon Shen, CFO at Gaotu Techedu]

We remain focused on users' needs, continually refining curricula with actionable educational insights, while optimizing both our course delivery and service responsiveness. We take our programming courses as an example, where we achieved a retention rate exceeding 90%, a compelling testament to the strong synergy between our value proposition and user trust. Our traditional learning services maintained healthy growth with revenue growing over 35% year over year. With the steady increase in student enrollments, our diverse offerings have increasingly mapped the needs of different user groups, bolstering a positive word-of-mouth referral that has established a solid groundwork for sustained growth. Particularly, the proportion of new enrollments acquired through referrals and private channels increased markedly this quarter, further strengthening brand recognition and market penetration.

[Shannon Shen, CFO at Gaotu Techedu]

This progress also highlights our dedicated efforts and accomplishments in driving user expansion and creating long term value. The other crucial component of our learning services is educational services for college students and adults. This segment contributed 10% of total revenues this quarter, and its net operating cash inflow increased by over eightfold year over year. These results speak volumes about the success of our strategic recalibration and resource optimization. Specifically, educational services for college students recorded high double digit year over year growth in both revenue and gross billings.

[Shannon Shen, CFO at Gaotu Techedu]

By equipping tutors with AI tools, we have substantially improved response timeless and students' engagement quality, resulting in steady improvements in user satisfaction and reinforcing our market leadership in the online learning services for college student sector. Additionally, our AI powered English learning program, Learn Spoken English with Daniel Wu, has already become profitable within a short time following its launch, serving as another endorsement for the commercial viability of integrating content innovation with AI technology and providing a proven model for future initiatives. The education business exhibits distinct seasonality closely coupled with users' learning behavior. Consequently, the gross billings varies across different quarters. Gross billings generally consist of two main components, new enrollments and retentions.

[Shannon Shen, CFO at Gaotu Techedu]

In the first quarter of twenty twenty five, gross billings are primarily driven by new enrollments, whereas in the fourth quarter of prior year, retentions contributed significantly more than new enrollments. Although the quarter on quarter gross billing figures showed a decline in absolute terms, The comparable amount for new enrollments reflect a healthy growth trend, both quarter on quarter and year on year on an apples to apples basis. This solid performance also laid a strong foundation for growth in retentions in the second quarter. From an operational leverage perspective, our general and administrative expenses, combined with research and development expenses, remained stable in this quarter, While ensuring critical investments in AI, educational product innovation and core technology infrastructure, we are continuously leveraging AI tools to drive efficiencies. This allows us to eliminate low value, repetitive tasks, enhance employee satisfaction and reallocate time and resources toward more creative work.

[Shannon Shen, CFO at Gaotu Techedu]

Looking ahead, we expect sustained revenue growth in subsequent quarters, projecting that G and A and R and D expenses will remain relatively stable, 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 million. Gross profit increased 34.1% year over year to over billion, with a gross margin of 69.7%. The year over year decrease in gross margin was primarily due to changes in our product mix.

[Shannon Shen, CFO at Gaotu Techedu]

Total operating expenses during the quarter increased 33.5% year over year to RMB1.0 billion. Breaking it down, selling expenses increased 40.1% year over year this quarter to RMB709.4 million, accounting for 47.5% of net revenues. Research and development expenses decreased 0.8% year over year to approximately million, accounting for 10.1% of net revenues. General and administrative expenses increased 53.3% year over year to RMB145.9 million, accounting for 9.8% of net revenues. Income from operations was million and operating margin was 2.3%.

[Shannon Shen, CFO at Gaotu Techedu]

Non GAAP income from operations was RMB48.1 million and non GAAP operating margin was 3.2. Net income was RMB124.0 million, and net income margin was 8.3%. Non GAAP net income was CNY 137,300,000.0, and non GAAP net income margin was 9.2%. Our net operating cash outflow was RMB477.2 million. Now turning to our balance sheet.

[Shannon Shen, CFO at Gaotu Techedu]

As of 03/31/2025, we held over RMB1.0 billion in cash, cash equivalents and restricted cash, along with more than RMB1.4 billion in short term investments and million in long term investments. This comes to a total of about RMB3.5 billion. As of 03/31/2025, our deferred revenue balance was over RMB1.4 billion, primarily consists of tuition received in advance. As of 05/14/2025, we had repurchased an aggregate of around RMB22.3 million ADS from approximately RMB460 million. Today, our Board of Directors also approved a new share repurchase program of up to US100 million dollars for a period of thirty six months, which will take effect upon the completion of the existing one.

[Shannon Shen, CFO at Gaotu Techedu]

The new repurchase program is based on management's long term confidence in the company's stable operations, profit growth and sustained healthy operating cash flow. We will continue to execute share buybacks according to the Board of Directors' guidance to create a long term value for our shareholders. Before I provide our business outlook for the next quarter, please allow me to remind everyone that this contains forward looking statements, which include risks and uncertainties that are beyond our control and could cause the actual results to differ materially from our predictions. Based on our current estimates, total net revenues for the second quarter of twenty twenty five are expected to be between million and million, representing an increase of 28.5% to 3.5% on a year over year basis. This concludes my prepared remarks.

[Shannon Shen, CFO at Gaotu Techedu]

Operator, we are now ready for the Q and session. Thank you everyone for listening.

[Operator]

Thank you. We will now begin the question and answer session. For the sake of clarity and order, please ask one question at a time. Management will respond and then feel free to follow-up with your next question. Our first question comes from Crystal Li from CMS. Please go ahead.

[Yishan (Crystal) Li, Equity Research Analyst at China Merchants Securities]

Thanks management for taking my questions and congratulations on the very strong results. We saw you achieved a very solid margin in the first quarter. May we know more about the drivers behind this margin expansion? And could you give us some color on your full year guidance? Thank you.

[Operator]

Ladies and gentlemen, it appears we have lost the connection to our speakers. Please standby while we reconnect. We thank you for your patience. Pardon me everybody, we are now rejoined with the speakers. You may now go ahead.

[Shannon Shen, CFO at Gaotu Techedu]

Sorry, we ran into some technical issues and thanks Crystal for your question. And let me rephrase your question. And first, it's like the margin proportion of the first quarter. And the second question was the guidance for the whole year. Is that right?

[Yishan (Crystal) Li, Equity Research Analyst at China Merchants Securities]

Yes, that's correct. Thank you.

[Shannon Shen, CFO at Gaotu Techedu]

Yes, yes. 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.

[Shannon Shen, CFO at Gaotu Techedu]

So education business has distinct seasonality. From the perspective of gross billings, the first and the third quarters are peak new enrollments registration seasons with gross billings mainly from new students. And at the same time, the second and fourth quarters are supported by both new enrollments and retentions. So, billings in the second and fourth quarters are significantly higher than those in the first and third quarters. And also affected by like spring festival and other holidays, the course schedule in individual quarters may be reduced or increased by one or two sessions, which in return affects the revenue recognition.

[Shannon Shen, CFO at Gaotu Techedu]

So it is highly recommended to analysts the revenue growth rate by the first and the second half of the year respectively instead of just looking into one single quarter. Taking the first half of twenty twenty five as an example, our revenue in the first quarter was approximately RMB1.5 billion and the upper end of the revenue guidance for the second quarter is RMB1.3 billion. Taken together, this represents a 44% year on year increase compared to the first half of last year, especially considering that the college students and adult business is still in adjusting cycle and it shows a decrease year over year on revenue side. This means that the growth rate for our non academic tutoring business and the traditional business is at a high double digit level, which is far exceed the industry average. And in terms of the profits, the first and fourth quarters are key stages for concentrated profitable release profitability release, which is closely related to the revenue recognition and the new enrollment recruitment cycles.

[Shannon Shen, CFO at Gaotu Techedu]

And regarding our gross billings in the first quarter, I also want to add more color. Like we had billion gross billings generated in Q4 twenty twenty four last year. Retentions accounted for a considerable proportion of these billion. If we make apple comparison, both the quarter on quarter and year on year growth rate from gross billing perspective in Q1 twenty twenty five are remarkable. Based on the high base retention in Q4 twenty twenty four, there will be a relatively concentrated rebound period before the start of classes in Q1 this year, which offsets part of the gross billings growth rate in the first quarter.

[Shannon Shen, CFO at Gaotu Techedu]

Also, decrease in college students and adults partially impacted the increase rate as well, while core business remained strong. When all these factors are considered, our gross billings performance in the first quarter is very strong, with core business still growing at nearly 40% and even higher before rebound. So it is also important to emphasize that 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. So our retention rate, especially for the new student retention rate and refund rate are continuously improving.

[Shannon Shen, CFO at Gaotu Techedu]

So looking at the whole year, our user base has reached a new level, which will support the achievement of our growth targets for 2025. 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. Our product innovation and customer acquisition development in the academic business have formed a good reputation and have a strong word-of-mouth referrals. The growth rate has exceeded 100% for four consecutive quarters in the past. So this momentum will also continue.

[Shannon Shen, CFO at Gaotu Techedu]

We will achieve industry leading growth rate in 2025. And in terms of the profit guidance, we are continuously improving profit quality in several aspects. The first is the continuous improvement in the quality of teaching products and services, leading to the sustained improvement of key metrics such as retention rate and conversion rate, etcetera. The second is the construction of high quality product customer acquisition channels to optimize customer acquisition efficiency. And the third is to make full use of investments in AI technology to improve operational efficiency, strengthen operating leverage and enhance employee satisfaction.

[Shannon Shen, CFO at Gaotu Techedu]

And this also partially addressed your question about the proportion of the profitability in the first quarter. So the margin in first quarter also contributed by the higher customer acquisition efficiency as well as operating leverage. 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 fulfillment of the annual bottom line targets. Thanks, Crystal.

[Yishan (Crystal) Li, Equity Research Analyst at China Merchants Securities]

Thank you. That's very clear.

[Operator]

The next question comes from LC Sheng from CLSA. Please go ahead.

[Elsie Sheng, Analyst at CLSA Limited]

Thank you, management. Thank you for taking my question and congratulations on the strong growth momentum and also the profitability. I have a question related to the sector demand side. So we know that we are now facing a relatively weak macro and but we also know that education demand relatively more resilient. But I would also be interested to check that do you observe any changes on the K-twelve demand side compared to like maybe one year ago?

[Elsie Sheng, Analyst at CLSA Limited]

And is there any changes on the parent's preference in terms of like the cost format or like the cost content, etcetera? Thank you.

[Shannon Shen, CFO at Gaotu Techedu]

Thanks, Elsie. This is a really good question because like we are a customer oriented company and we always focus on the demand from our customers. And indeed, we had observed several changes in students and parents along with the change of macroeconomics, their parents' expectations, their shift in education concepts and also the technological involvement. So first, the demand for children's comprehensive development has been continuously increasing. Beyond traditional academic performance, parents are gradually increasing investments in their children's all around growing, including like critical thinking, problem solving abilities, responsibility, teamwork and like especially their physical and mental health.

[Shannon Shen, CFO at Gaotu Techedu]

Gaotu has keenly captured this trend and continues to actively promote high quality content. Through multi scenarios coverage of like online and offline channels, we create immersive learning experience for students to cultivate their creativity, collaboration and critical thinking, etcetera. And also our non academic training gradually becoming a core driver of business growth. And these all drive from the change of demand from our customers. From an operational metrics perspective, the retention rate of non academic tutoring 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.

[Shannon Shen, CFO at Gaotu Techedu]

Second, parents and students have shown increasing acceptance of technology driven educational solutions, further promoting us to accelerate the deep integration of AI technology with teaching scenarios. And we saw like in a lot of social media that parents started to prepare some small sessions for their children by those AI tools. Leads also innovated us about our new initiatives in our educational product. And also empowered by AI, we have significantly improved the timeliness of teachers' responses and the quality of integrations with students, enhancing their satisfaction. And now, like the time we respond to the students' spontaneous request is much more short than before.

[Shannon Shen, CFO at Gaotu Techedu]

Third, the demand for more personalized education among students and parents has gradually increased. We saw some demand rising in some one on one sessions, etcetera, because it's more personalized and more diversified. However, we also observed that parents pursue and recognition of high quality education resources remain constant, which means particularly for excellent teachers and premium teaching content, visa, the sense and always something always not changing for the parents and the students. And they are all what we are constantly building for. Thanks, LC.

[Elsie Sheng, Analyst at CLSA Limited]

Thank you. It's very clear.

[Operator]

The next question comes from Eunice Liu from Goldman Sachs. Please go ahead.

[Yucen (Eunice) Liu, Global Investment Research Analyst at Goldman Sachs]

Good evening, Larry and Shannon. Thanks for taking my question and congrats on solid results. My question is on the operating cash flow. I noticed that the operating cash flow this quarter was negative and was more than twice its level for the first quarter last year. Could management elaborate on the reason behind? Thank you.

[Shannon Shen, CFO at Gaotu Techedu]

Thanks. This is also a very good question, and thanks for diving into these details. And so regarding the increase in operating cash outflow in the first quarter compared to the same period of last year, so this is primarily due to the payment of $20.24 annual bonuses and incremental labor costs in the first quarter. As our business scale, the number of our T shirts has correspondingly increased as well. But like the cash we invested in employees in the first quarter, we will leverage and contribute larger cash inflow in the following quarters.

[Shannon Shen, CFO at Gaotu Techedu]

And based on our efficiency improvements and profit enhancements, we expect the operating cash inflow of 2025 to be at least three times that of the full year of 2024. This implies that we will be having a net operating cash inflow of over US100 million dollars this year. This is also the source of confidence for the Board and management to additionally approve an extra US100 million dollars share repurchase plan today. So we thank shareholders and investors for the long term support, and we will continue to create greater value for shareholders. So leveraging the positive cash flow we expected to generate this year, we will do a better job on this task. Thanks.

[Yucen (Eunice) Liu, Global Investment Research Analyst at Goldman Sachs]

Thank you. It's very helpful.

[Operator]

As there are no further questions, now I'd like to turn the call back over to the company for closing remarks.

[Catherine Chen, Head of Investor Relations at Gaotu Techedu]

Contact our Investor Relations department or our management via e mail at irgao2. Cn directly. You are also welcome to subscribe to our news alert on the company's IR website. Thank you very much again for your time. Have a great day.

[Operator]

This concludes today's conference call. You may now disconnect your line. Thank you.

Participants

Executives

• Catherine Chen, Head of Investor Relations
• Larry Chen, Founder, Chairman & CEO
• Shannon Shen, CFO

Analysts

• Yishan (Crystal) Li, Equity Research Analyst at China Merchants Securities
• Elsie Sheng, Analyst at CLSA Limited
• Yucen (Eunice) Liu, Global Investment Research Analyst at Goldman Sachs