Gaotu Techedu Inc.

Ladies and gentlemen, thank you for standing by. And welcome to the GoTo Techadoo, Inc. First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. If you need assistance, please press star zero to reach the operator. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To remove yourself from the queue, please press star then two. Please note, today's event is being recorded on Monday, June 6th, 2022. I would now like to hand the conference over to your first speaker today, Ms. Shei Liu, IR Manager to GALTU. Thank you, and please go ahead.

Thank you very much, operator. Good evening, everyone, and thank you for joining us on our first quarter 2022 earnings conference call. GALTU's first quarter earnings release was published earlier today. and it's available on the company's IR website at ir.galto.ca. On the call with me tonight are Mr. Larry Chen, Galto's founder, chairman, and chief executive officer, and Ms. Shannon Chen, Galto's chief financial officer. Larry will give a general business overview for the quarter, and then Shannon will discuss the financials. Following their prepared remarks, Larry and Shannon will be available for the Q&A session. I will translate for Larry. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements as defined in the U.S. Private Security 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 statement. Further information regarding these and other risks is included in the company's filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statement except as required under applicable law. As a reminder, this conference is being recorded. A live and archived webcast of this conference call will be available on GAL2's IR website. It is now my pleasure to introduce Larry. Larry, please go ahead.

Thank you, Sherry. Good evening and good morning, everyone. Thank you for joining us on our 2022 First Quarter Earnings Conference Call on this special day, which happens to be GAL2's third year listing anniversary. Before I start, I would like to remind everyone that all financial information that I mention later is based on RMB and is otherwise noted. In the first quarter of 2022, our business continued to maintain a healthy and sustainable development, and we have remained profitable for two consecutive quarters since we began our business restructuring. In this quarter, our net revenues were $724.6 million, and our gross billions were $318.1 million. To present consistent basis of comparison, if we only look at our comparable businesses, which are professional education for college students and adults, vocational education, STEAM education, and digital educational products, the net revenues of our comparable businesses increased over 200% year-over-year, and their gross billions increased approximately 42% year-over-year. Moreover, gross billions of comparable businesses have shown quarter-over-quarter growth for three consecutive quarters. Our growth margin this quarter was 70.6 percent, slightly higher than that of the same period of last year. Our net income and non-GAAP net income were 53.7 million and 92.5 million, respectively, indicating that we have achieved effective growth. Furthermore, our capital position remains strong. As of March 31st, 2022, we had a total of approximately $3.2 billion in terms of cash, cash equivalent, restricted cash, and short-term investments on our balance sheet. Since we initiated our business restructuring and organizational adjustments in the third quarter of last year, our operations have been centered upon three key aspects, focusing on the core businesses, enhancing product quality, and improving operational efficiency. I will now briefly talk about our progress during the quarter on each of these three points. First, in terms of focusing on our core businesses, we will continue to concentrate on online education, and we will continue to develop and invest in our four core businesses, which are professional education for college students and adults, vocational education, team education, and digital educational products. During this quarter, the skill of our professional and vocational education services further increased compared with that of the last quarter. Its net revenues realized an approximately 82% quarter-over-quarter growth, and its gross billions secured an approximately 85% quarter-over-quarter growth. Our STEAM education service has also made solid progress, especially in its programming tutoring businesses, which grew over 10 times year-over-year in terms of gross billions. Through the gradual development of our new businesses, we will continue to expand our product portfolio across various categories. We will also extend our advantages in the high school tutoring services to other businesses continue to offer existing students upgraded and modified courses that satisfy related government policies, fulfill the diverse and multidimensional learning demands of students, and to build a true learner-centric lifelong learning and service platform. Second, in terms of enhancing our product quality, we believe that now is the best time to accumulate know-how cherish our original aspiration to education and return to the fundamental essence of education. We remain rigid on our principle that quality is the core of education. As such, we will continue to uphold our pursuit of delivering exceptional education quality. We will continue to invest in teaching resources to offer the best education content and products and we will continue to invest in technology to provide more user-friendly and personalized products. Meanwhile, we continue to maintain our standard of hiring the best instructors in the industry and offering very competitive packages. In the quarter, research and development expenses accounted for 17% of our total revenue. returning to a relatively high proportion and reflecting our emphasis on the importance of R&D in online education. Because our new businesses are still in their early development stage, adequate R&D investment is essential, but we will gradually reduce and strictly control our R&D and other operating costs to be within a specific range as we execute our strategy of effective growth and constantly evaluate the development of our business. At the same time, we have sufficient cash reserves to support our investment in R&D. Going forward, we will uphold our principles of good teachers are fundamental and our corporate value of customer first. Continuously requiring our product quality based on a long-term view and strive to provide the best educational services in the industry to students and that creates the most value for our customers. By firmly focusing on customer value proposition and firmly investing in the capabilities to deliver value we believe we will generate sustainable and high-quality revenue growth. Third, in terms of improving our operational efficiency, we continue to revamp our on-site operations and management to strengthen organizational and operational efficiency. After a profitable last quarter, we continued to profit with 12.8% non-gap and income margins in this quarter, indicating that we have achieved healthy and sustainable growth. Our sales and marketing costs also significantly decreased. As an end margin, this quarter decreased 79% points compared with that of the same period of last year, while the S&M efficiency has notably improved. This is solid proof that our multi-channel customer acquisition method is highly effective, even in this changing external environment. To further improve efficiency, we will continue to work towards optimizing our business processes and resources education to enhance productivity. We have never once changed our competence in China's massive education market. and our determination on delivering the highest quality education to students. China's economic development has brought about profound transformation and upgrades in various industries, which have created demands for new skills and thus presented more opportunities and possibilities. We will closely monitor and follow the ongoing trends in the Chinese labor market, continue to cultivate the education industry while guided by the skills and training needs required by the country's future talent, actively shoulder our social responsibilities as an education company, and utilize technology to deliver high-quality education thereby delivering real value and promoting the long-term growth of the Chinese education industry. Through the ups and downs, we will be celebrating Dao Tu's eighth anniversary next week. It might be easy to do a business for one year or maybe even three years, but it's hard to find companies that have sustained for over 10 years, and only a selected few companies can become long-lasting organizations. Success belongs to the optimistic few who dare to transform, who are eager to innovate, who have faith, and who persevered through the challenges. Regardless of how the surrounding environment changes, we will stay true to our original aspiration to educate education and treasure our love to education. We firmly believe that as long as we slow down and persist while keeping accumulating experiences and expertise, we will be able to create a world of our own in the field of education. Lastly, we would like to take this opportunity to deeply thank all medical staff for their dedication and hard work in the past days. May we overcome the pandemic soon and all stay safe and healthy. Thank you very much. Now, I will pass this call over to our CFO, Shannon, and walk you through our financial and operational details.