GOTU

Hello, ladies and gentlemen. Thank you for standing by, and welcome to the Gaotu Techedu Inc. fourth quarter and fiscal year 2025 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. 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.

Thank you, operator. Good evening, everyone. Thank you for joining Gaotu Techedu Inc.’s fourth quarter and fiscal year 2025 earnings conference call. My name is Catherine Chen, and I will host the earnings call today. Gaotu Techedu Inc.’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. Joining the call with me tonight from Gaotu Techedu Inc. senior management is Mr. Larry Chen, Gaotu Techedu Inc.’s Founder, Chairman, and Chief Executive Officer, and Ms. Shannon Shen, Gaotu Techedu Inc.’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 from analysts. Before we begin, I would 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.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 definitions of non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial results, please refer to our fourth quarter and fiscal year 2025 earnings release published earlier today. As a reminder, this conference is being recorded. In addition, a live and archived webcast of this conference call will be available on Gaotu Techedu Inc.’s IR website. It is now my pleasure to introduce our Founder, Chairman, and Chief Executive Officer, Larry Chen. Larry,

Good evening and good morning, everyone. Thank you for joining us on Gaotu Techedu Inc.’s fourth quarter and fiscal year 2025 earnings conference call. I would like to take this opportunity to express my gratitude to each of you for your interest and support for Gaotu Techedu Inc. Before I start, I would like to remind everyone that all financial figures today are in RMB unless stated otherwise. 2025 marks a year of exceptional resilience for Gaotu Techedu Inc. We delivered high-quality operating performance and met a rapidly evolving environment. If I were to summarize this year's achievements in one word, it would be refinement, representing not just a sharpening of our teaching quality but a systematic elevation of our operational granularity. Throughout the year, we not only exceeded our growth targets but, more importantly, reinforced our organizational foundation, strengthening our core capabilities while continuing to scale rapidly. As we enter 2026, our approach to growth continues to evolve and mature. We are intentionally refining the way we grow, prioritizing profitable growth with the advancement of AI capabilities at the core of our operations—“all with AI, all with AI.” This is how we are driving improvements in business health, operational efficiency, and long-term viability. Our fourth quarter performance represents an early validation of this strategic focus at the operational level. In the fourth quarter, we maintained steady top-line expansion while realizing meaningful operating leverage. Revenue increased by 21.4% year over year to RMB 1.7 billion, and the bottom line improved by 38%, driven by continued efficiency gains. Over the full year of 2025, revenue grew by 35% to RMB 100 million, exceeding our initial expectations at the beginning of 2025. Net operating cash inflow reached RMB 416 million, a net increase of RMB 158 million year over year, reflecting continued improvement in operational quality and efficiency. After excluding the impact of share repurchases, our cash position increased by RMB 221 million year over year, providing strong support for our ongoing investments in products, technology, talent, and sustained long-term growth. We remain firmly committed to enhancing long-term shareholder value, and under our aggregated share repurchase authorization, we have repurchased a total of RMB 670 million of shares, representing 12.8% of our total outstanding shares, including RMB 343 million in buybacks in 2025. As our business fundamentals continue to strengthen, we are well positioned to balance long-term strategic investments with a stable, predictable shareholder return framework. Through consistent and prudent capital allocation, we seek to build durable value, enabling investors who grow alongside Gaotu Techedu Inc. to benefit from both our capital returns and the intrinsic value we generate. Most encouragingly, our operational gains are increasingly translating into tangible financial performance. We are shaping a more resilient, sustainable, and profitable business model—a virtuous growth flywheel—anchored in healthy unit economics, driven by strong operational excellence, and steered by our unwavering commitment to long-term user value. Guided by this framework, in 2026 we will focus on advancing strategic priorities across five fronts. First, in catapulting growth pace, profitability will remain a core strategic priority. Over the past year, we have comprehensively optimized our cost structure, resource allocation, and operating processes to fortify our business model and reinforce its economic foundation. Throughout 2025, our core business delivered stable profitability, validating the strategic direction we set in the prior period. Meanwhile, our strategic initiatives have progressed well and are steadily emerging as new growth engines. While near-term revenue trends may not fully capture our underlying momentum, we assess performance based on the quality, structure, and sustainability of our growth, which are the pillars of lasting value creation. Second, in product development, we remain relentlessly user-centric, driving continuous innovation in educational products and learning services. The essence is that they help learners make real progress rather than merely completing course delivery. We will continue deepening our understanding of users' real learning needs and pathways, systematically embedding these insights into curriculum design, teaching methods, and service experiences. We firmly believe that truly valuable growth stems from superior learning outcomes, higher user satisfaction, and stronger brand trust. Third, with respect to technology, we are integrating innovation across our business, operations, and organization, making it a structural driver for enhancing operational efficiency and the user experience. Technology must enable teaching effectiveness, service excellence, and operational precedence. In teaching scenarios, we are proactively combining high-quality instructor resources with AI-powered tools to make learning more engaging and effective. On the operations side, we are leveraging technology and data analysis to optimize resource allocation and enable more informed, data-driven decision-making. At the organizational level, we are fostering more seamless collaborations through technology, empowering our team to focus on high-impact initiatives that drive meaningful value creation. Fourth, in terms of the talent strategy, we continue to reinforce our competitive moat built around high-caliber educators. Educators are our most valuable assets and central to sustaining our long-term competitive advantage. We will keep refining our tighter selection, development, and incentive mechanisms, building a robust pipeline of educators and fostering an environment that supports educators’ professional growth and long-term careers. A stable, high-caliber teaching team is a cornerstone for successfully scaling product innovation and technology upgrades. Fifth, to enhance our business portfolio, we are architecting a comprehensive lifelong learning service platform. Personal development is an ongoing journey, and learning needs at different stages are inherently connected rather than isolated. Through systematic integration of product formats and delivery models, we ensure learners have access to tailored solutions within Gaotu Techedu Inc.’s ecosystem during every critical developmental stage. By cultivating deep connections with users, we further strengthen our cross-business synergies and extend the user lifecycle, significantly enhancing our operating model's resilience and long-term return potential. After nearly a decade of development and achievement, Gaotu Techedu Inc. will celebrate its twelfth anniversary in February 2026. Standing at this important milestone, we feel immense pride and a strong sense of responsibility. Through an ever-deepening understanding of our users, we have cultivated a core leadership team with a strong sense of ownership and long-term vision, assembled an outstanding, well-trained talent pool, distilled a set of cultural principles that shape our direction, and most importantly, earned the valuable trust of tens of millions of students and parents. Since day one, Gaotu Techedu Inc.’s original aspiration has remained unchanged: to build a truly exceptional technology education enterprise—one where every team member can achieve both material and spiritual productivity, where every student enjoys exceptional learning experiences and accelerated personal growth, and where we accompany learners on a lifelong journey of progress while contributing enduring value to the development of the education industry and society. Looking ahead, we will remain committed to disciplined, prudent management, strictly control risk, and continue to strengthen our organizational and cultural foundation. Through unwavering strategic focus and powerful execution, I firmly believe that as long as we uphold long-termism, insist on value creation, and remain true to the essence of education, Gaotu Techedu Inc. will advance steadily, generating lasting value for our shareholders, employees, users, and society at large. Thank you very much, everyone. This concludes my prepared remarks. I will now turn the call over to our CFO, Shannon Shen, to walk you through this quarter's financial and operational details.

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 fourth quarter and fiscal year 2025. Please note that all financial data are in RMB terms unless otherwise stated. In 2025, we systematically optimized our product portfolio and channel mix, building constant improvements in our revenue quality. We remain firmly committed to advancing our deep integration strategy of AI plus education, substantially enhancing both our educational products and end-to-end operational efficiency. Through the systematic optimization of our product portfolio and channel structure, leveraging AI as our foundation, learning solutions as our core value, and AI-powered digitalization as our operational support. From a structural perspective, after years of focused investments and refinements, we have established a staged growth roadmap that provides great visibility into future development. Our core businesses delivered solid growth with higher enrollments, optimized unit economics, and ongoing profitability improvements, serving as the fundamental pillar supporting the company's profit expansion. At the same time, our strategic initiatives are gaining traction and demonstrating upward momentum, serving as new engines for our scale expansion and profitable growth. In 2026, we will sharpen our focus on user experience and learning outcomes, pivoting from scale-oriented growth toward a more efficiency-led model driven by both revenue scale expansion and operating efficiency gains. We have realized operating leverage for five consecutive quarters, continuously elevating our bottom line. In particular, on the user acquisition front, we leveraged AI-driven capabilities and a dynamic resource allocation mechanism to boost user acquisition efficiency. Measured as gross billings divided by selling expenses, user acquisition efficiency improved by 10.8% year over year in 2025. Turning to our fourth quarter performance, revenue grew by 21.4% year over year to RMB 1.7 billion. Operating expenses as a percentage of revenue declined by 4.1 percentage points year over year, contributing to a 20.9% reduction in our operating loss. As of December 31, 2025, our deferred revenue balance rose by 23% year over year to RMB 2.6 billion, providing solid visibility for our future revenue growth. Meanwhile, our cash, cash equivalents, restricted cash, short-term, and long-term investments totaled RMB 4.0 billion. With these robust cash reserves, we are well funded to deepen our organizational capabilities and improve shareholders' interests throughout 2026. Next, an overview of this quarter's gross progress by business segment. Learning services contributed over 95% of net revenues. Non-academic tutoring services and traditional learning services, as our core segments, contributed over 80% of our total revenues. Our new initiatives, focused on online and offline non-academic tutoring services, sustained strong growth momentum. In the fourth quarter, gross billings increased by over 30% year over year, while revenue grew by 45%. On a full-year basis, revenue rose by 9% year over year. Within this segment, as our online business benefited from expanding enrollments and enhanced product competitiveness, it demonstrated consistent margin expansion, attaining a mid-single-digit margin for the full year. Through ongoing educational content innovation and refined operations, we elevated both product value and the learning experience, driving the retention rate of existing students, which exceeded 75% this quarter. Meanwhile, we continued to step up investment in content development centered on cultivating learners' comprehensive capabilities and cloud competencies. Our latest offerings, including AI-related courses, have further enriched and refined our product and content portfolio, enabling us to more effectively address the evolving demands for holistic, long-term development. In the fourth quarter, our traditional business maintained stable growth in enrollments while continuing to enhance service quality and efficiency to boost ongoing operational gains. We comprehensively upgraded tutor service standards, deepening our focus on learning process management and learner engagement through clearly defined key procedures and measurable performance indicators, which further reinforced our systematic service delivery capabilities. On the product front, we focused on optimizing our courses to better align with students' learning processes and proficiency levels, while strengthening our modular, needs-based content to enable more targeted and effective instruction. The parallel strengthening of our teaching services and educational products contributed to continued improvement in the overall learning experience at Gaotu Techedu Inc. The retention rate for new students also rose meaningfully year over year this quarter, reflecting stronger user stickiness. For the full year 2025, revenue from our traditional business grew nearly 15% year over year, driven by operational efficiency gains and enhanced organizational capabilities. Profitability for both online large classes and one-on-one tutoring improved year over year. Our ongoing refinement of product competitiveness and optimization of operational quality has laid a strong foundation supporting our traditional business’s sustainable growth. Another key component of our learning services is educational services for college students and adults, where gross billings grew over 15% year over year in the fourth quarter, contributing over 15% of total revenues. By prioritizing user needs, optimizing the product mix, and sharpening our refined management capabilities, this segment has entered a consecutive growth trajectory and achieved full-year profitability across its online offerings in 2025. In our educational services for college students, by leveraging deeper insights into students' life cycle, we have pivoted from selling standalone products to developing innovative stage-aligned solutions. These offerings are integrated with adaptive learning that can adjust based on real-time feedback and performance, effectively extending the user learning cycle. Meanwhile, we continued deepening the integration of online courses and AI technologies, fostering personalized learning support and planning capabilities, simultaneously improving both learning experience and outcomes. For the full year, our educational services for college students delivered mid-double-digit growth while reaching profitability at the business line level. Lastly, I will walk you through our financial data. Our cost of revenue this quarter was RMB 540.9 million. Gross profit increased 20.7% year over year to over RMB 1.1 billion, with a gross margin of 67.9%. Total operating expenses during the quarter increased 15% year over year to nearly RMB 1.3 billion. Breaking it down, selling expenses increased 20.3% year over year this quarter to RMB 885.3 million, accounting for 52.5% of net revenues. Research and development expenses increased 14% year over year to RMB 165.4 million, accounting for 1.8% of net revenues. General and administrative expenses decreased 2.1% year over year to RMB 211.8 million, accounting for 12.6% of net revenues. Loss from operations was RMB 118.0 million; operating loss margin was 7%. Net GAAP loss from operations was RMB 110.7 million, and non-GAAP operating loss margin was 6.6%. Net loss was RMB 84.2 million, and net loss margin was 5%. Non-GAAP net loss was RMB 76.8 million, and net GAAP net loss margin was 4.6%. Our net operating cash inflow increased 23.1% year over year to RMB 954.8 million. Now turning to our balance sheet. As of December 31, 2025, we held RMB 712.0 million in cash, cash equivalents, and restricted cash, along with RMB 2.7 billion in short-term investments and RMB 551.6 million in long-term investments. This comes to a total of nearly RMB 4.0 billion. As of December 31, 2025, our deferred revenue balance was around RMB 2.6 billion, primarily consisting of tuition received in advance. As of March 4, 2026, we have repurchased an aggregate of around 30.6 million ADSs on the open market for nearly RMB 670.0 million. Before I provide our business outlook for 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 revenue for the first quarter of 2026 is expected to be between RMB 1.578 billion and RMB 1.598 billion, representing an increase of 5.7% to 7% on a year-over-year basis. This single-digit increase rate is due to seasonality. We expect the increase rate to return to double digits in the second quarter in 2026. This concludes my prepared remarks. Operator, we are now ready for the Q&A section. Thank you everyone for listening.

Thank you. We will now begin the question-and-answer session. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, 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. At this time, we will pause momentarily to assemble our roster. The first question comes from Crystal Li with CMS. Please go ahead.

Thank you. Congratulations on the strong results, and thank you for the opportunity to ask a question. I just want maybe more color on the development of your offline business, and maybe elaborate more on your future plan on this offline business? Thank you.

Thanks, Crystal, for your question. We launched the expansion of our offline learning centers back in 2023. First, from a strategic perspective, our offline business represents a clear second growth curve for us and one of the top strategic priorities at the group level. The integration of online and offline is a highly effective approach to enhancing learning efficiency and the overall learning experience, and also makes our product matrix more holistic. It is also a critical step in building our long-term competitive advantages. This initiative is led directly by our founder, with prioritization in resource allocation, decision-making efficiency, and cross-sector collaboration. By capturing a favorable window of strong user demand in 2023, we moved quickly to scale our footprint over the past three years. We have attracted outstanding industry professionals with expertise in local operations, educational product design, and teacher sourcing and cultivation, etc., building a professional team that is truly important for offline operations and that can effectively support scalable growth. This has already laid a very solid foundation for our offline businesses. In terms of the current progress and results, our offline business has achieved clear economies of scale. Since 2023, with continuous investment and operational refinement, our offline learning center network and revenue scale have grown steadily and regularly. Based on our current expansion pace and operating plan, we expect the overall scale—meaning the top line, the revenue—of our offline business to surpass that of several independently listed peers in the coming year. This is not just a simple increase in the number of learning centers. It also represents healthy growth driven by proven unit economics, strong brand reputation, and a well-developed supply chain for high-quality teachers. After nearly three years of market penetration, our brand has established solid credibility and influence among students in regional markets. User satisfaction and retention rates continue to improve, and our brand moat is gradually taking shape. Simply put, we have evolved from a pure online service provider to a fully integrated platform, and this is the fundamental and most definitive outcome of our transformation. That said, the offline business has relatively high barriers to entry, including those related to management effectiveness, organizational alignment, and also system processes, and most importantly, the supply of top-tier teachers. We still have some areas that we need to further optimize and integrate. We are systematically reviewing and refining, and continually building up a system to support the growth of this segment. Our upfront investments are focused on strengthening our network footprint, reputation, and operational capabilities, and we are committed to capturing greater long-term market space and value and progressing steadily towards sustainable profitability. We foresee that at the school level, we can achieve profitability this year, and next year we foresee our offline business to be profitable including the headquarter overhead. I hope that addresses your question, Crystal.

Thanks, Shannon. That is very helpful.

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

Thank you, operator, and thank you everyone for joining the call today. If you have any further questions, please do not hesitate to contact our Investor Relations department via email at [email protected] directly. You are also welcome to subscribe to our news alerts on the company's IR website at ir.gaotu.cn. Thank you very much again for your time. Have a great night.

This concludes today's conference call. Thank you.

Hello, ladies and gentlemen. Thank you for standing by, and welcome to the Gao2Tech edu Third Quarter twenty twenty five Earnings Conference Call. I At this time, all participants are in a listen only mode. There will be a question and answer session. Today's conference call is being recorded. 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. Thank you, operator. Good evening, everyone. Thank you for joining Gao2 Third Quarter twenty twenty five Earnings Conference Call. My name is Catherine. And I'll help host the earnings call today. Altus earnings release for the quarter was distributed earlier and is available on the company's IR website. At ir.ga2.cn. As well as through PR Newswire services. Joining the call with me tonight from Gao2 Senior Management is Mr. Larry Chen, Gautu's Founder Chairman and Chief Executive Officer and Ms. Shannon Shen, Altu's Chief Financial Officer. Larry will first provide the business highlights for the quarter and then afterwards 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 filing with the U. 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 purpose only. For definition of non GAAP financial measures, and reconciliation of GAAP to non GAAP financial results please refer to our third quarter earnings release published earlier today. As a reminder, this conference is being recorded. In addition, a live and archived webcast of this conference call will be available on Gaotu's IR website website. It is now my pleasure to introduce our Founder, Chairman and Chief Executive Officer, Larry. Larry, please.

Good evening and good morning everyone. Thank you for joining us on Gao2's third quarter of year twenty twenty five earnings conference call. I would like to take this opportunity express my gratitude to each of you for your interest in and support for Goutou. Before I start, I would like to remind everyone that all financial figures discussed today are in RMB. Unless stated otherwise. Our user centric approach continues to drive progress in our high quality growth strategy. As we continually enrich the product portfolio to support lenders of all ages across diverse studies scenarios we are deepening user insights strengthening the high quality teacher pipeline and comprehensively enhancing product quality delivery process and operational At the same time, the full stack integration of AI across our Q3 services and operations is driving measurable efficiency gains and smarter resource at kitchen. As our core capabilities expand, our differentiated value proposition is becoming increasingly evident and our trajectory toward the profitability is becoming more defined creating a robust foundation for scalable long term growth. In the third quarter, we delivered another solid set of financial results. Revenue grew by 30.7% year over year to nearly 1,600,000,000.0 while on a non GAAP basis both loss from operations and the net loss narrowed significantly by 64.6% and the 69.9% respectively. We're expecting sustained improvement in gross content and profitability. Excluding the impact of share repurchases, our cash position increased year over year strengthening the balance sheet and highlighting our disciplined financial management. We remain committed to creating long term shareholder value as of this quarter we have completed the full amount of the initial share repurchase program approved in November 2022. And expanded to $80,000,000 in 2023. Meanwhile, the new $100,000,000 program approved by our Board in May had already commenced We will continue to will continue to execute as a share repurchase program in a prudent and disciplined manner while ship carding operational and financial health. Further reinforcing our commitment to enhancing shareholder value. Now, I'd like to elaborate on our progress this quarter by reviewing our strategic priorities and key developments across five fronts. First, we are solidifying our strategic edge by extending the coverage across the full learner journey and diversifying our service scenarios. Through sustained investment and refinement, we have built a cohesive product and service ecosystem

spending

primary school through adult learning. This brings us a deep understanding of users' learning trajectories enabling us to deliver increasingly differentiated and personalized services at every stage and establish a unique user value proposition and brand equity. Building on this foundation, we continually iterate our service models in lockstep with user demand We began with online delivery. Gradually expanding our our offerings to include online emerging offline models, and offline board camps to meet the user demand for enhanced interactivity and immersive experiences. And have ultimately established offline learning centers. Our online model provides broad reach and leverages high caliber teaching resources and a flexible learning format to deliver efficient and highly accessible services. Meanwhile, our offline learning centers enhance localized support and personalized instruction naturally complementing our core online framework, notably for the first time in this quarter, the revenue contribution of offline learning services exceeded 10% of our total revenues. We believe our deeply integrated online offline model not only aligns with users' lifelong development, but also forms a resilient flexible and scalable service network. By harnessing the efficient scalability of online learning while incorporating the interactive and immersive value of offline education. Kaltu is poised to become a premium lifelong learning platform. Second, we are building a robust pipeline of high quality educators to strengthen our talent strategy. Exceptional educators are at the heart of our competitiveness. To attract the talent we have brought the long term strategic partnerships with thousands of leading domestic universities and continuously broaden our tenant pool through career mentoring program and other initiatives. Applications from our key target universities increased notably during this year's campus recruitment season. In terms of talent development, we have further enhanced our professional training team and integrated assessment competition and evaluation framework augmented by AI tools to systematically elevate employees, professional skills and foster their long term growth. We have also fine tuned our incentive system and organizational culture to enhance teachers' sense of belonging and job satisfaction. Together these efforts are cultivating a sustainable high quality tenant ecosystem and laid a solid foundation for our long term development. Third, both internally and externally, innovation and enhance efficiency. we are leveraging the power of AI to drive As a digital native education company, We are committed to integrating AI technology throughout our business operations.

Internally,

initiatives like AI Paxons encourage business units to identify efficiency improvement opportunities and develop AI driven solutions and agents creating a closed loop process from exploration to implementation. These efforts have improved operational efficiency and embedded AI into delay workflows. Boosting employee satisfaction and fostering creativity. Externally, we are partnering with local governments and leading universities to co establish educational AI, R and D centers and labs. The managing, the research, development and application of AI models in the education sector. These collaborations strengthen industry academic academia integration and help make learning more intelligent, personalized and effective. Fourth, we remain focused on strengthening execution. Improving organizational efficiency and the five profitable growth. This year, we continue to build our results driven culture and made profitable growth a core objective. In the budgeting process we we implemented an operational metric tracking system for each business line using measurable quality and efficiency indicators to ensure that the teams are reaching their goals. As a management level, we are execution to fuel growth. leveraging this driven decision making and the disciplined We believe that the future competition will be about more than product services organizational efficiency will also be key underpinned by an agile organizational framework and technology powered decision making systems we will boost our execution capabilities and drive high quality growth. Fifth, we remain committed to fulfilling our social responsibilities and creating long term value for all stakeholders. We firmly believe that the value of an educational company is not only in its commercial success, but also in its contributions to society. In the third quarter, Sao Tou Foundation partnered with several leading universities to launch the Rural Teacher Empowerment Program This initiative provides comprehensive training and practical courses to the teachers in Central And Western China, improving their teaching skills and promoting educational equity. In addition, we collaborated with Jingxin Medical a mental healthcare company So it's about healthcare plus education service model. Together, we launched an AI powered training lab that trains counselors in adolescent mental health through practical exercises and how the students on leave due to mental health changes reintegrate into school life. From a focus on operational efficiency to expanding our business boundaries and from a single point of breakthroughs to systematic growth

whereas

steadily shaping distinctive development path They go to has evolved into a technology driven and AI powered ad tech company centered on user needs providing end to end solutions across the full learning lifecycle. Thank you very much everyone. This concludes my prepared remarks. I will now pass the call over to our CFO, Chen and to walk you through the quarter's financial and operational details.

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 2025 Please note that all financial data are in RMB terms unless otherwise stated. In the third quarter, net revenues continued to grow and operating efficiency maintained a healthy trajectory. Demonstrating that our investments in resource allocation optimization Current efficiency While fully addressing user demand we achieved a 1.4% year over year decrease in marketing expenses. Improving customer acquisition efficiency by 12.8% R and D and G and A expenses as a percentage of net revenues declined 9.6 percentage points year over year. Reflecting a steady improvement in operating leverage. Enhanced operational performance also led to a substantial year over year decrease in operating net cash outflow of approximately 54,200,000.0 Our deferred revenue sustained healthy growth app 23.2% year over year to nearly 1,800,000,000.0 providing strong visibility into revenue recognition in future quarters. In shaping our growth strategy, we constantly prioritize healthy unit economics setting specific operational goals for each business segment based on its stage of development. For our mature businesses with clear and well defined commercial models, We focus on sustainable steady growth while expanding margins through skilled service delivery enabling incremental growth to follow through to the bottom line. Our businesses still in the early growth stage we emphasize refining educational products strengthening our instructor and tutor development system, and cultivating brand mindshare to deliver user experiences that drive long term enhancement in retention referrals and willingness to pay Ultimately, this strategy ensures every investment yields measurable returns wider in the form of profitability business resilience or long term user value. We remain committed to building organizational capabilities through distinct line quality improvements positioning operating efficiency rather than a focus on speed alone to get the pace and scale of our growth. quarter's progress Next, an overview of this by business segment. Learning services contributed over 95% of net revenues Traditional learning services and non academic learning services as our core segments. Contributing more than 80% of our total revenues and recorded over 55 percentage year over year growth. Revenue from our new initiatives focused on non academic tutoring services in both online and offline settings. Increased by around 60% year over year. This quarter. The online segment for traditional learning services and non academic learning services. Is on track to achieve a double digit profit margin for the full year of 2025. Supported by increased user enrollment and enhanced operational capabilities. On the curriculum side, we constantly explore genuine user needs through high quality educational products One standout example is our programming courses which delivered impressive results in the National Youth Innovation Competition further solidifying our product reputation and user trust. Our traditional learning services maintained a healthy growth trajectory with revenue increasing by 15% year over year in the third quarter. On the product front, we continued to advance our localized course development and service systems to enhance teaching delivery flexibility and adaptability. Regarding user acquisition, we focused on optimizing operational processes and addressing real user needs. Achieving steady improvements in gross billings performance At the same time, a more mature and stronger team and AI powered traffic operations boosted our customer acquisition efficiency by nearly 20% year over year. Providing stronger support for healthy business growth Another key component of our learning services is educational services for college students and adults. Which contributed more than 15% of total revenue in the third quarter. This segment has returned to a positive growth trajectory following our strategic adjustments achieving double digit year over year growth in both revenues and gross billings. Alongside quarterly profitability. Within this segment, our educational services for college students leverage intelligent student learning profile management to enable clear and more precise learning path learning. We also accelerate the development of a high calibrated teaching team. These efforts further expanded our service capabilities boosted user satisfaction and promoted brand awareness In this quarter, revenues from educational services for college students increased by nearly 50% and net profit delivered high double digit growth year over year. Lastly, I will walk you through our financial data Our cost of revenue this quarter was 5 and $35,500,000 Gross profit increased 34% year over year to over 1,000,000,000 with a gross margin of 66.1% Total operating expenses during the quarter decreased 7% year over year to approximately $1,200,000,000 Breaking it down, quarter. selling expenses decreased 1.4% year over year this To 873,400,000.0 accounting for 55.3% of net revenues. Research and development expenses decreased 13.9% year over year to 152,900,000.0 accounting for 10.3% of net revenues. General and administrative expenses decreased 3% year over year to 185,200,000.0 accounting for 11.7% of net revenues. Loss from operations was 178,000,000 and operating loss margin was 11.3%. Net GAAP loss from operations was 168,600,000.0 and non GAAP operating loss margin was 10.7%. Net loss was $147,100,000 and net loss margin was 9.3%. Non GAAP net loss was 137,700,000.0 and non GAAP net loss margin was 8.7%. Our net operating cash outflow was 660,200,000.0 narrowed by 7.6%. Year over year. Now turning to our balance sheet. As of 09/30/2025, we held $444,000,000 in cash cash equivalents and restricted cash. Along with nearly $2,100,000,000 in short term investments and $500,400,000 in long term investments. This comes to a total of over $3,000,000,000 As of 09/30/2025, our deferred revenue balance was around 1,800,000,000.0 primarily consisting of tuition received in the month. As of November 25, 2025, we have repurchased an aggregate of around 27,500,000.0 ADS on the open market or nearly RMB619 million. 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 revenue for the 2025 are expected to be between 2,628 million dollars and $1,648,000,000 representing an increase of 17.2% to 18.7% on a year over year basis. This concludes my prepared remarks Operator, we are now ready for the Q and A section. Thank you everyone for listening. Thank you. We will now begin the question and answer session. If you wish to ask your question to management in Chinese, For the sake of clarity and order, please ask one question at a time. Management will respond The first question today comes from Crystal Li with CMS. Please go ahead. Thanks, management, for taking my questions. Congratulations on strong results. And could you give us some color on your 2026 top line growth and your expectations on each and each business line? And in terms of the bottom line, how's your plan? Maybe could you share more about your plan to balance your growth and loss reduction? Thank you. Thanks, Crystal for your question. So looking back at 2024 and 2025, our revenue grew 53.8% year over year in 2024. And based on our latest guidance, we expect close to 35% year over year growth of our top line in 2025 So over the past two years, our revenue actually more than doubled We've achieved relatively strong line expansion in the past two years. So behind this growth is the steady increase in the number of students and parents we serve. The continued strengthening of our product portfolio and also the growing influence of our brand. As of today, our offerings cover the key needs of users with strong learning demand and learning motivation. And also from a product perspective, the integration of our online and offline solutions along with the use of AI to enhance the user experience in our courses. Is progressing steadily and continuously improving. As our skill expense, are seeing sustained operating leverage which adds a solid foundation for achieving full profitability at our target scale. So 2026, we expect our growth trajectory to become more balanced with profitability as the major focus. Guiding the execution of our overall strategy. So which means 2026 profitability will play the most important role So based on our expected gross billings in 2025, in Q4, together with our operating plans and upcoming initiatives we anticipate approximately 15% year over year revenue growth in 2026 We also expect to see further improvements in our operating cash flows with ongoing efforts aimed at moving the company toward sustainable net profitability in 2026. Hope that address your question. Thanks. Thanks, Shannon. This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. Thank you everyone for joining us for today. If you have any further questions, please don't hesitate to contact our Investor Relations department or our management via emailir. Baotu. Cn directly. You are also welcome to subscribe to our news alert on the company's IR website website. Thank you very much again for your time. Have a great night. The conference has now concluded. Thank you for attending today's presentation.