BEIJING, Sept. 8, 2022 /PRNewswire/ — 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 second quarter ended June 30, 2022.
Second Quarter 2022 Highlights[1]
Net revenues were RMB537.8 million, compared with net revenues of RMB2,232.3 million in the same period of 2021. Gross billings[2] were RMB611.7 million, compared with gross billings of RMB2,694.7 million in the same period of 2021. Net loss was RMB49.8 million, compared with net loss of RMB918.8 million in the same period of 2021. Non-GAAP net income was RMB0.6 million, compared with non-GAAP net loss of RMB763.9 million in the same period of 2021. Net operating cash inflow was RMB93.8 million, compared with net operating cash outflow of RMB318.6 million in the same period of 2021.
[1] For a reconciliation of non-GAAP numbers, please see the table captioned “Reconciliations of non-GAAP measures to the most comparable GAAP measures” at the end of this press release. Non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss) exclude share-based compensation expenses.[2] Gross billings is a non-GAAP financial measure, which is defined as the total amount of cash received for the sale of course offerings in such period, net of the total amount of refunds in such period. See “About Non-GAAP Financial Measures” and “Reconciliations of non-GAAP measures to the most comparable GAAP measures” elsewhere in this press release.
Second Quarter 2022 Key Financial and Operating Data
(In thousands of RMB, except for percentages)
For the three months ended June 30,
2021
2022
Pct. Change
Net revenues
2,232,254
537,799
(75.9) %
Gross billings
2,694,732
611,668
(77.3) %
Net loss
(918,791)
(49,809)
(94.6) %
Non-GAAP net (loss) income
(763,890)
645
NM
Net operating cash (outflow) inflow
(318,554)
93,794
NM
Six Months Ended June 30, 2022 Highlights
Net revenues were RMB1,262.4 million, compared with net revenues of RMB4,172.6 million in the same period of 2021. Gross billings were RMB929.8 million, compared with gross billings of RMB3,876.1 million in the same period of 2021. Net income was RMB3.9 million, compared with net loss of RMB2,344.7 million in the same period of 2021. Non-GAAP net income was RMB93.2 million, compared with non-GAAP net loss of RMB2,093.3 million in the same period of 2021. Net operating cash outflow was RMB387.5 million, compared with net operating cash outflow of RMB2,413.9 million in the same period of 2021.
First Six Months 2022 Key Financial and Operating Data
(In thousands of RMB, except for percentages)
For the six months ended June 30,
2021
2022
Pct. Change
Net revenues
4,172,597
1,262,414
(69.7) %
Gross billings
3,876,074
929,763
(76.0) %
Net (loss) income
(2,344,710)
3,909
NM
Non-GAAP net (loss) income
(2,093,310)
93,188
NM
Net operating cash outflow
(2,413,882)
(387,472)
(83.9) %
Larry Xiangdong Chen, the Company’s founder, Chairman and CEO, commented, “During the second quarter of 2022, our businesses sustained a healthy and stable growth. Our gross billings nearly doubled compared to last quarter, and we successfully generated positive net operating cashflow. Our net loss was substantially narrowed year-over-year, and this is the third consecutive quarter that we secured non-GAAP profitability after our business restructuring. Going forward, we will continue to focus on educational services for college students and adults, non-academic tutoring services, and educational contents & digitalized learning products, continue to uphold the strategy of profitable growth, and continue to strive for effective growth through improving operational efficiency and optimizing cost structure.”
Shannon Shen, CFO of the Company, added, “During this quarter, we continued to achieve effective growth under this challenging economic environment. Our net revenues were RMB537.8 million, and our gross billings were RMB611.7 million. Further, net revenues generated by comparable businesses showed quarter-over-quarter growth for three consecutive quarters, and their gross billings showed quarter-over-quarter growth for four consecutive quarters. We expect this momentum to continue in the next quarter. We also realized a positive net operating cashflow of RMB93.8 million in the second quarter. With that, our capital position remains strong. As of June 30, 2022, we had a total of approximately RMB3.4 billion in terms of cash, cash equivalents, restricted cash, and short-term investments on our balance sheet, providing ample resources for continued business development.”
Financial Results for the Second Quarter of 2022
Net Revenues
Net revenues decreased by 75.9% to RMB537.8 million from RMB2,232.3 million in the second quarter of 2021. The decrease was mainly due to the organizational adjustments and business restructuring to comply with the government regulations, including the cessation of academic subject tutoring services to students (“Business Restructuring”).
Cost of Revenues
Cost of revenues decreased by 77.9% to RMB160.0 million from RMB724.3 million in the second quarter of 2021. The decline was mainly due to the reduction of employees and offices as a result of the Business Restructuring, which resulted in the decrease in staff related cost, learning material cost and rental expenses.
Gross Profit and Gross Margin
Gross profit was RMB377.8 million, compared with RMB1,508.0 million in the second quarter of 2021. Gross profit margin increased to 70.2% from 67.6% in the same period of 2021.
Non-GAAP gross profit was RMB396.4 million, compared with RMB1,543.5 million in the same period of 2021. Non-GAAP gross profit margin increased to 73.7% from 69.1% in the same period of 2021.
Operating Expenses
Operating expenses decreased 81.4% to RMB438.3 million from RMB2,362.7 million in the second quarter of 2021. The decline was primarily due to the decreased expenditure on branding and marketing activities on academic subject tutoring services as a result of the changes of regulatory environment. Moreover, staff related expenses and other operating related expenses also decreased, which was due to the reduction of employees and offices as a result of the Business Restructuring.
Selling expenses decreased to RMB269.0 million from RMB1,641.1 million in the second quarter of 2021. Research and development expenses decreased to RMB103.9 million from RMB426.5 million in the second quarter of 2021. General and administrative expenses decreased to RMB65.4 million from RMB242.0 million in the second quarter of 2021.
Loss from Operations
Loss from operations was RMB60.5 million, compared with the loss from operations of RMB854.7 million in the second quarter of 2021, which was primarily due to a large decrease in operating related cost and expenses as a result of the Business Restructuring.
Non-GAAP loss from operations was RMB10.0 million, compared with non-GAAP loss from operations of RMB699.8 million in the second quarter of 2021.
Interest Income and Realized Gains from Investments
Interest income and realized gains from investments, on aggregate, was RMB9.8 million, compared with RMB23.5 million of interest income and realized gains from investments in the second quarter of 2021.
Other Income (Expense)
Other income was RMB0.4 million, compared with other expense of RMB36.5 million in the second quarter of 2021.
Net (Loss) Income
Net loss was RMB49.8 million, compared with net loss of RMB918.8 million in the second quarter of 2021.
Non-GAAP net income was RMB0.6 million, compared with non-GAAP net loss of RMB763.9 million in the second quarter of 2021.
Cash Flow
Net operating cash inflow for the second quarter of 2022 was RMB93.8 million, which was primarily due to the increased cash inflow of gross billings.
Basic and Diluted Net (Loss) Income per ADS
Basic and diluted net loss per ADS were both RMB0.19 in the second quarter of 2022.
Non-GAAP basic and diluted net income per ADS were both approximately nil in the second quarter of 2022.
Share Outstanding
As of June 30, 2022, the Company had 172,397,205 ordinary shares outstanding.
Cash, Cash Equivalents, Restricted Cash and Short-term Investments
As of June 30, 2022, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB3,353.2 million in aggregate, compared with a total of RMB3,671.1 million as of December 31, 2021.
Other Payables
As of June 30, 2022, other payables in non-current liabilities totaled RMB26.6 million, which were payables related to the purchase of the Zhengzhou properties.
Business Outlook
Based on the Company’s current estimates, total net revenues for the third quarter of 2022 are expected to be between RMB576 million and RMB596 million, representing a decrease of 46.5% to 48.3% on a year-over-year basis. These estimates reflect the Company’s current expectations, which are subject to change.
Conference Call
The Company will hold an earnings conference call at 8:00 AM U.S. Eastern Time on Thursday, September 8, 2022 (8:00 PM on Thursday, September 8, 2022, Beijing/Hong Kong Time). Dial-in details for the earnings conference call are as follows:
International:
1-412-317-6061
US:
1-888-317-6003
Hong Kong:
800-963-976
Mainland China:
400-120-6115
Passcode:
9006495
A telephone replay will be available two hours after the conclusion of the conference call through September 15, 2022. The dial-in details are:
International:
1-412-317-0088
US:
1-877-344-7529
Passcode:
7374750
Additionally, a live and archived webcast of this conference call will be available at http://ir.gaotu.cn/home.
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the business outlook, as well as the Company’s strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company’s ability to continue to attract students to enroll in its courses; the Company’s ability to continue to recruit, train and retain qualified teachers; the Company’s ability to improve the content of its existing course offerings and to develop new courses; the Company’s ability to maintain and enhance its brand; the Company’s ability to maintain and continue to improve its teaching results; and the Company’s ability to compete effectively against its competitors. Further information regarding these and other risks is included in the Company’s reports filed with, or furnished to the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no duty to update such information or any forward-looking statement, except as required under applicable law.
About Gaotu Techedu Inc.
Gaotu is a technology-driven education company and online large-class tutoring service provider in China. The Company offers educational services for college students and adults, non-academic tutoring services, and educational contents & digitalized learning products. Gaotu adopts an online live large-class format to deliver its courses, which the Company believes is the most effective and scalable model to disseminate scarce high-quality teaching resources to aspiring students in China. Big data analytics permeates every aspect of the Company’s business and facilitates the application of the latest technology to improve teaching delivery, student learning experience, and operational efficiency.
About Non-GAAP Financial Measures
The Company uses gross billings, non-GAAP gross profit, non-GAAP income (loss) from operations and non-GAAP net income (loss), each a non-GAAP financial measure, in evaluating its operating results and for financial and operational decision-making purposes.
The Company defines gross billings for a specific period as the total amount of cash received for the sale of course offerings in such period, net of the total amount of refunds in such period. The Company’s management uses gross billings as a performance measurement because the Company generally bills its students for the entire course fee at the time of sale of its course offerings and recognizes revenue proportionally as the classes are delivered. For some courses, the Company continues to provide students with 12 months to 36 months access to the pre-recorded audio-video courses after the online live courses are delivered. The Company believes that gross billings provides valuable insight into the sales of its course packages and the performance of its business. As gross billings have material limitations as an analytical metrics and may not be calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies.
Non-GAAP gross profit, non-GAAP income (loss) from operations and non-GAAP net income (loss) exclude share-based compensation expenses, and such adjustment excludes the impact on income tax. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective. The Company believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to the Company’s historical performance. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation charges that have been and will continue to be for the foreseeable future a significant recurring expense in the Company’s business.
The presentation of these non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned “Reconciliations of non-GAAP measures to the most comparable GAAP measures” set forth at the end of this release.
The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.
Exchange Rate
The Company’s business is primarily conducted in China and a significant majority of revenues generated are denominated in Renminbi (“RMB”). This announcement contains currency conversions of RMB amounts into U.S. dollars (“USD”) solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to USD are made at a rate of RMB6.6981 to USD1.0000, the effective noon buying rate for June 30, 2022 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into USD at that rate on June 30, 2022, or at any other rate.
For further information, please contact:
Gaotu Techedu Inc.
Investor Relations
E-mail: [email protected]
Christensen
In China
Ms. Vivian Wang
Phone: +852 2232 3978
E-mail: [email protected]
In the US
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: [email protected]
Gaotu Techedu Inc.
Unaudited condensed consolidated balance sheets
(In thousands of RMB and USD, except for share, per share and per ADS data)
As of December 31,
As of June 30,
2021
2022
2022
RMB
RMB
USD
ASSETS
Current assets
Cash and cash equivalents
728,934
590,689
88,188
Restricted cash
168,189
764
114
Short-term investments
2,774,000
2,761,758
412,320
Inventory
15,595
24,759
3,696
Prepaid expenses and other current assets
250,068
312,887
46,713
Total current assets
3,936,786
3,690,857
551,031
Non-current assets
Operating lease right-of-use assets
353,877
148,935
22,235
Property, equipment and software, net
680,009
583,133
87,059
Land use rights, net
28,178
27,775
4,147
Rental deposit
22,544
10,920
1,630
Other non-current assets
3,272
2,895
432
TOTAL ASSETS
5,024,666
4,464,515
666,534
LIABILITIES
Current liabilities
Accrued expenses and other current liabilities
(including accrued expenses and other
current liabilities of the consolidated VIE
without recourse to the Group of
RMB417,032 and RMB300,991 as
of December 31, 2021 and June 30,
2022, respectively)
693,265
545,101
81,380
Deferred revenue, current portion of the
consolidated VIE without recourse to the
Group
986,993
622,478
92,934
Operating lease liabilities, current portion
(including current portion of operating lease
liabilities of the consolidated VIE without
recourse to the Group of RMB41,479 and
RMB23,022 as of December 31, 2021 and
June 30, 2022, respectively)
80,010
39,046
5,829
Total current liabilities
1,760,268
1,206,625
180,143
Gaotu Techedu Inc.
Unaudited condensed consolidated balance sheets
(In thousands of RMB and USD, except for share, per share and per ADS data)
As of December 31,
As of June 30,
2021
2022
2022
RMB
RMB
USD
Non-current liabilities
Deferred revenue, non-current portion of
the consolidated VIE without recourse
to the Group
9,225
25,389
3,790
Operating lease liabilities, non-current
portion (including non-current portion
of operating lease liabilities of the
consolidated VIE without recourse
to the Group of RMB158,824 and
RMB79,335 as of December 31, 2021
and June 30, 2022, respectively)
276,035
113,994
17,019
Deferred tax liabilities (including deferred tax
liabilities of the consolidated VIE without
recourse to the Group of RMB71,616 and
RMB70,272 as of December 31, 2021 and
June 30, 2022,respectively)
71,616
71,459
10,669
Other payables of the consolidated VIE
without recourse to the Group
26,580
26,580
3,968
TOTAL LIABILITIES
2,143,724
1,444,047
215,589
SHAREHOLDERS’ EQUITY
Ordinary shares
114
114
17
Additional paid-in capital
7,793,234
7,882,256
1,176,790
Accumulated other comprehensive loss
(143,111)
(96,516)
(14,409)
Statutory reserve
40,380
40,380
6,029
Accumulated deficit
(4,809,675)
(4,805,766)
(717,482)
TOTAL SHAREHOLDERS’ EQUITY
2,880,942
3,020,468
450,945
TOTAL LIABILITIES AND TOTAL
SHAREHOLDERS’ EQUITY
5,024,666
4,464,515
666,534
Gaotu Techedu Inc.
Unaudited condensed consolidated statements of operations
(In thousands of RMB and USD, except for share, per share and per ADS data)
For the three months ended June 30,
For the six months ended June 30,
2021
2022
2022
2021
2022
2022
RMB
RMB
USD
RMB
RMB
USD
Net revenues
2,232,254
537,799
80,291
4,172,597
1,262,414
188,473
Cost of revenues
(724,278)
(160,004)
(23,888)
(1,295,780)
(372,949)
(55,680)
Gross profit
1,507,976
377,795
56,403
2,876,817
889,465
132,793
Operating expenses:
Selling expenses
(1,641,083)
(268,975)
(40,157)
(3,929,793)
(553,149)
(82,583)
Research and development expenses
(426,502)
(103,872)
(15,508)
(791,612)
(227,179)
(33,917)
General and administrative expenses
(241,982)
(65,441)
(9,770)
(459,597)
(144,377)
(21,555)
Impairment loss on intangible assets
and goodwill
(53,131)
–
–
(53,131)
–
–
Total operating expenses
(2,362,698)
(438,288)
(65,435)
(5,234,133)
(924,705)
(138,055)
Loss from operations
(854,722)
(60,493)
(9,032)
(2,357,316)
(35,240)
(5,262)
Interest income
7,667
1,763
263
21,752
9,445
1,410
Realized gains from investments
15,826
8,074
1,205
24,636
19,733
2,946
Other (expense) income
(36,519)
397
59
8,368
28,401
4,240
(Loss) income before provision for
income tax and share of results of
equity investees
(867,748)
(50,259)
(7,505)
(2,302,560)
22,339
3,334
Income tax (expenses) benefits
(51,658)
450
67
(41,848)
(18,430)
(2,752)
Share of results of equity investees
615
–
–
(302)
–
–
Net (loss) income
(918,791)
(49,809)
(7,438)
(2,344,710)
3,909
582
Net (loss) income attributable to
Gaotu Techedu Inc.’s ordinary
shareholders
(918,791)
(49,809)
(7,438)
(2,344,710)
3,909
582
Net (loss) income per ordinary
share
Basic
(5.38)
(0.29)
(0.04)
(13.75)
0.02
0.00
Diluted
(5.38)
(0.29)
(0.04)
(13.75)
0.02
0.00
Net (loss) income per ADS
Basic
(3.59)
(0.19)
(0.03)
(9.17)
0.02
0.00
Diluted
(3.59)
(0.19)
(0.03)
(9.17)
0.01
0.00
Weighted average shares used in
net (loss) income per share
Basic
170,634,264
172,188,243
172,188,243
170,482,819
171,866,239
171,866,239
Diluted
170,634,264
172,188,243
172,188,243
170,482,819
175,382,752
175,382,752
Note: Three ADSs represent two ordinary shares.
Gaotu Techedu Inc.
Reconciliations of non-GAAP measures to the most comparable GAAP measures
(In thousands of RMB and USD, except for share, per share and per ADS data)
For the three months ended June 30,
For the six months ended June 30,
2021
2022
2022
2021
2022
2022
RMB
RMB
USD
RMB
RMB
USD
Net revenues
2,232,254
537,799
80,291
4,172,597
1,262,414
188,473
Less: other revenues(1)
78
11,829
1,766
471
26,416
3,944
Add: VAT and surcharges
142,600
33,857
5,055
257,523
78,307
11,691
Add: ending deferred revenue
1,976,369
647,867
96,724
1,976,369
647,867
96,724
Add: ending refund liability
324,504
42,439
6,336
324,504
42,439
6,336
Less: beginning deferred
revenue
1,896,528
599,719
89,536
2,733,739
996,218
148,731
Less: beginning refund
liability
84,389
38,746
5,785
120,709
78,630
11,739
Gross billings
2,694,732
611,668
91,319
3,876,074
929,763
138,810
Note (1): Include miscellaneous revenues generated from services other than courses.
For the three months ended June 30,
For the six months ended June 30,
2021
2022
2022
2021
2022
2022
RMB
RMB
USD
RMB
RMB
USD
Gross profit
1,507,976
377,795
56,403
2,876,817
889,465
132,793
Share-based compensation expense
in cost of revenues
35,561
18,630
2,781
60,342
36,979
5,521
Non-GAAP gross profit
1,543,537
396,425
59,184
2,937,159
926,444
138,314
Loss from operations
(854,722)
(60,493)
(9,032)
(2,357,316)
(35,240)
(5,262)
Share-based compensation expenses
154,901
50,454
7,533
251,400
89,279
13,329
Non-GAAP (loss) income from
operations
(699,821)
(10,039)
(1,499)
(2,105,916)
54,039
8,067
Net (loss) income
(918,791)
(49,809)
(7,438)
(2,344,710)
3,909
582
Share-based compensation expenses
154,901
50,454
7,533
251,400
89,279
13,329
Non-GAAP net (loss) income
(763,890)
645
95
(2,093,310)
93,188
13,911