Gaotu Techedu Inc.

Good day, ladies and gentlemen. Thank you for standing by. And welcome to the GAL2 Tech EDU Inc. Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Sherry Liu, IR Manager for GAL2. Please go ahead.

Thank you very much, Aubrey. Good evening, ladies and gentlemen, and thank you all for joining us tonight for GAL2's third quarter 2022 earnings conference call. GAL2's third quarter earnings release was published earlier today, and it's available on the company's IR website at ir.gal2.cn. On the call with me tonight are Mr. Larry Chen, Gautu's founder, chairman, and chief executive officer, and Ms. Shannon Shen, Gautu's chief financial officer. Larry will give a general business overview for the quarter, and then Shannon will discuss the financials in more detail. 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 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 statement. Further information regarding these and other is included in the company's filing 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. In addition, 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 GoTo's third quarter 2022 earnings conference call. I would like to take this opportunity to convey my gratitude for your continued interest in and support for us and the education industry. Before I start, I would like to remind everyone that all financial information, as I mentioned later, is based on RMB and is otherwise noted. In 2022, through gradually deepening our understanding of customer needs, we have been actively exploring new business models and expanding their limits. Undeniably, business transformation is a very challenging process as we have overcome numerous difficulties Thanks to our outstanding operational skills and the extensive educational experience we have accumulated in the past eight years, we have united a more powerful organization with a deep passion for education. At the same time, our capital and talent reserves remain strong. These assets have given us a strong edge when confronting unknown external risks. We are confident that as long as we remain patient and persevere, while remaining true to our original aspiration, we will eventually achieve significant breakthroughs on our businesses and evolve into a greater organization. In this quarter, we divided our business into two categories. One is learning services. and the other is educational content and digitalized learning products. The new strategic directions within our learning services include educational services for college students and adults, overseas study-related services, non-academic tutoring services, and others. With our new businesses continuing their steady development post-restructuring, we are glad to report that during the quarter, our net revenues increased 12.7% quarter-over-quarter to $606.2 million, and our net loss has significantly narrowed year-over-year. As we are still in the process of business transformation, The gradual and stable increase of our net revenue is solid evidence that these new businesses are growing continuously and sustainably, which boosts our confidence in our future and indicates that our strategic choices are right, our organization is resilient, and our operations are efficient. Due to differences in testing seasons, market demand, and the cost scheduling, our new business exhibits different seasonality patterns. Guided by the strategy of profitable growth, we expect the growth momentum of our business to continue, and we expect to see a sizable positive net operating cash flow in the next quarter. Amidst the complex macroeconomic environment, we firmly believe that it's essential to persistently seek progress and sharpen our skill while maintaining a steady pace of development. After a year of exploration, we have accumulated a fair amount of insight into our new businesses. We have made decent advances in this quarter, and we will continue to propel our long-term effective growth. Now, I will present the progress we made during the quarter from three aspects. First, we will continue to place a fundamental emphasis on good teachers. Good teachers are at the core of education and the service and the professionalism are the prerequisites for good teachers. Our recruitment efforts have always followed the principle that good teachers should not only be able to improve students' academic performances and learning capabilities, but should also serve as an inspiring role model and mentors who provide emotional support. Take our postgraduate entrance exam preparation business, for example. More than 50% of our tutors in this business line have graduate degrees, a high ratio relative to our peers, and we are aiming to further increase the ratio. In our opinion, teachers who have successfully passed the exam can be more compassionate to students who are going through the same experience. They can better understand the students' needs and therefore can offer more constructive service and achieve better results. During the quarter, our postgraduate entrance exam prep recorded a roughly 76% quarter-over-quarter increase in net revenues and an over 46% quarter-over-quarter increase in gross variance. which was partly driven by the good branding gradually established by our top-notch teaching talent and their high-quality services. Second, we will continue to focus on improving our operational efficiency. In the quarter, our growth margin reached 72.2%, higher than that of last quarter of the same period of last year. Our efficiency for customer acquisition also improved with our ROI for customer acquisition achieved quarter-over-quarter increase. Considering that, in terms of seasonality, the third quarter is the peak season for growing new enrollments. We see that the market opportunity to increase in size by slightly raising marketing expenses that result in small-scale losses. However, as our customer acquisition efficiency improves and our business expands, we expect to see higher brand exposure and a greater market share and ultimately more profitability in the mid to long term. Third, we will continue to fulfill our corporate social responsibilities as we strive for effective growth. During the quarter, we co-organized the third Go to Rural Education Support Program with the China Youth Development Foundation. Through the program, we provided financial subsidies and training courses to principals of rural primary schools to help improve their teaching quality, provide assistance for more needy children in these areas, and in this way, aid rural revitalization. Further, our board of directors today authorized a new share repurchase program under which we may repurchase up to $30 million worth of our EDS in three years. Our cash position remains strong as of September 30th. 2022, our cash, cash equivalents, restrictive cash, and short-term investments totaled approximately $3.3 billion. I also intend to purchase up to $20 million U.S. dollars worth of shares to demonstrate our management and weavering confidence in the future development of our company. Finally, I am very happy and proud to share with you that on October 19, 2022, we received a closing letter from the SEC regarding its investigation related to a number of short-term reports from approximately early to May 2020, and that we had previously disclosed in our annual report for the fiscal year of 20 and 21. In the letter, the SEC notified us that It had concluded its investigation into our company and that based on the information that it had as of the date of the letter, the SEC did not intend to recommend an enforcement action against us. Integrity is our core corporate value. As a public company, we are fully dedicated to value creation for shareholders. and have always ensured the timely and truthful disclosure of financial and operational information. Going forward, we will continue to stay true to our original aspiration to educate, continue to nurture parents for our society, and to continue to contribute to the educational development of China. Thank you very much for listening. I have concluded my prepared remarks. Now I will pass the call over to our CFO, Shannon, to walk you through our financial and operational details of the quarter.