GOTU

Hello, ladies and gentlemen. Thank you for standing by, and welcome to the Gaotu Techedu Inc. first quarter 2026 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's first quarter 2026 earnings conference call. My name's Catherine. I'll help host the earnings call today. Gaotu'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 Senior Management is Mr. Larry Chen, Gaotu's Founder, Chairman, and Chief Executive Officer, Mr. Bin Luo, Gaotu's Chief Operating Officer, Mr. Mike Xu, Gaotu's Head of Strategy, and Ms. Willa Yao, Gaotu Senior Finance Director. Larry will first begin with the quarter's business highlights and strategies, followed by Bin's overview of our operational performance. We will finish with a detailed discussion of our financial performance by Willa. Following their prepared remarks, we'll open the floor to questions from analysts.

Robin and Mike will address analyst questions during the Q&A session. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements made under the safe harbor provision 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. 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 obligations 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 a definition of non-GAAP financial measure and reconciliation of GAAP to non-GAAP financial results, please refer to our 2026 earnings release published earlier today. As a reminder, this conference is being recorded. In addition, a live and archive webcast of this conference call will be available on Gaotu's IR website. It is now my pleasure to introduce our Founder, Chairman, and Chief Executive Officer, Larry. Larry, it's yours.

Good evening and good morning, everyone. Thank Thank you for joining us on Gaotu's first quarter 2026 earnings conference call. I would like to take this opportunity to thank each of you for your interest and support for Gaotu. Before I start, please be reminded that all financial figures discussed today are in RMB, unless stated otherwise. The first quarter of 2026 marks another important step in strengthening Gaotu's operational quality and long-term capabilities under our profitable growth strategy. Revenue grew by 13.2% year-over-year to approximately RMB 1.7 billion, with non-GAAP operating profits and net profit reaching RMB 13.8 million and RMB 41.4 million respectively. After excluding the impact of share repurchases, our cash position increased by RMB 69.7 million year-over-year, providing strong support for our ongoing investment in products, technology and talent to drive sustainable long-term growth.

The value of education is not limited to short-term outcomes, but rather compounds over time through sustained engagement, consistent effort, and incremental progress. The same is true in business. What drives long-term resilience through cycles is not scale alone, but the organizational capabilities, product strength, and user trust built over time. With this in mind, while we remain focused on delivering near-term results, we are equally committed to advancing user value, organizational efficiency, and operational resilience across our business fundamentals. Next, I would like to walk you through our strategic priorities and key developments this quarter across five areas. First, profitable growth is moving beyond periodic results toward a more stable, sustainable operational capability. In recent quarters, we have continued to optimize our operating structure, focusing on balancing business health, operating efficiency, and long-term returns.

Our mature online business has built robust, scalable capabilities across operations, teaching services, user engagement, and organizational collaboration, and continued to demonstrate resilient profitability this quarter. As we navigate a dynamic marketing environment in 2026, we will maintain our disciplined operating approach, improving resource allocation efficiency and execution precision, so that growth is built on an increasingly healthy and sustainable foundation. Based on our current business momentum and operating performance, we remain confident in delivering continued improvement in operational quality throughout the year. Second, AI is evolving from a mere productivity tool into a key fundamental capability powering Gaotu's scalable growth and organizational transformation. In recent period, we have progressively integrated AI across a curriculum development, content creation, operational collaboration, and learning services.

Within our curriculum development system, for example, AI is enhancing our question banks and knowledge graphs, supporting teaching and formative assessment, and assisting teachers and curriculum teams with repetitive standardized tasks. Before that, we are weaving AI into our business workflows, operational processes, and organizational systems to serve as core infrastructure for operational decision-making across functional collaboration. On the user side, we continue to explore a spectrum of AI-powered product formats tailored to diverse learning needs, including learning tools, AI-enhanced one-on-one tutoring scenarios, and AI-integrated online large class courses. As AI becomes more deeply embedded in our core business, we are establishing a skill with AI framework that allows our best teachers, curriculum expertise, and proven service models to scale with greater efficiency, enhancing user experience while unlocking organizational and operational leverage.

Third, user needs and learning experience remain the fundamental drivers behind our continuous product and service integration, and guide our efforts to strengthen talent development initiatives. On the teaching services front, we continue to optimize our feedback mechanisms and service framework. Take our online large class as an example. By deepening collaboration across instructors, tutors, and curriculum teams, we have formed a weekly feedback loop that captures student pain points, progress variations, and classroom feedbacks in real time. These learning insights flow directly back into course iteration, and service support, keeping content closely aligned with students' actual learning pace. At the same time, we continue to reinforce our talent pipeline. This spring, we expanded our campus recruitment and early career talent development efforts with campus engagement across prestigious domestic and international universities, including Oxford, Cambridge, Tsinghua, and Peking University.

By attracting individuals who are genuinely passionate about education and demonstrate the motivation and potential to grow with us, we are building a strong talent foundation to support our long-term capabilities in product innovation, teaching excellence, and organizational development. Our offline service offerings are progressing in line with expectations and are increasingly demonstrating their value in enhancing user engagement, building brand equity, and driving long-term value creation. For example, our offline educational services for college students now span seven cities, where we have developed durable service and engagement capabilities centered around college students' evolving needs. Our Zhengzhou Dream Center has spent the past year validating an integrated service model that brings together learning, daily life services, and personal development, achieving notably high utilization rates in the process. These enriched service touchpoints. We have also driven meaningful improvements in user satisfaction and brand awareness.

We plan to extend this model to Wuhan in 2026. We will further expand our offline presence across all business segments, sharpening our service delivery capabilities to better align with these cohorts' diverse learning stages, growth objectives, and service needs. This will comprehensively elevate the learning experience, deepen user trust, and enhance brand value throughout the user's lifelong learning journey. Fifth, we believe long-term value goes beyond financial results. It's equally reflected in our ability to create lasting social impact for all our shareholders and society. Through efficient, disciplined capital allocation, we remain committed to sharing the benefits of the company's long-term development with our shareholders. As of June 1st, 2026, we had repurchased a total of 33.1 million ADSs for approximately RMB 704 million. We continue to invest in initiatives that broaden access to quality education.

For example, Gaotu Foundation, the My AI Science Class project, has reached 33 rural schools across seven provinces and empowered more than 23,000 teachers. We plan to expand its coverage, hold regular on-site classes in Baise, and improve the accessibility of educational resources in underserved regions. We believe technology should not only improve efficiency, but also help bridge regional gaps in high-quality educational resources and create broader social value. Enduring success comes from unwavering commitment, and future momentum begins with the steps we take today. Looking ahead, we will continue to advance with focus and resolve, leveraging technology and innovation to expand the boundaries of education and further strengthening our business foundations through disciplined execution. We are fully confident in our capability to accompany and support students throughout their growth journey, creating sustainable long-term value for our users and our shareholders. Thank you very much, everyone.

This concludes my prepared remarks. I will now pass the call over to our COO, Robin, to walk you through the quarter's operational performance.

Thank you, Larry, and thanks to everyone for joining our call today. I'm Robin. I will now walk you through our operating performance and business updates for the first quarter of 2026. Please note that all financial data are in RMB terms unless otherwise stated. Building on the progress we made over the past year in enhancing operational quality and organizational efficiency, we continue to advance our profitable growth strategy as we enter 2026. Notably, we achieved first quarter profitability for the second consecutive year, reflecting the resilience of our mature business as well as our continued improvement in organizational execution and resource allocation. R&D and G&A expenses as a percentage of revenue declined by 0.7 percentage points year-over-year, demonstrating ongoing gains in management efficiency and organizational collaboration.

Deferred revenue totaled nearly RMB 1.8— up 24.1% year-over-year, providing clear visibility into revenue recognition in the coming quarters and laying a solid foundation for the steady execution for our full year business plan. The education subject to seasonal patterns closely aligned with students' learning cycles and course schedules. This year, the later timing of Chinese New Year shifted the delivery mix session and the spring classes across quarters. Our resource deployment is also calibrated to these enrollment windows and the business cycles. We believe that evaluating the company's performance over the first half of the year as a more complete operating cycle offers a clearer picture of our underlying trends. Looking at our current execution progress, our profitability and operational efficiency continue to . As we further optimize our product mix, organizational collaboration, and resource allocation efficiency, we remain optimistic about our full-year operating performance.

Next, our business progress by segments. Learning services contributed over 95% of net revenues. Non-academic tutoring services and traditional learning services as our core segments, generated over 85% of our total revenues. In our new initiatives focused on online and offline non-academic tutoring services, gross billings increased by over 20% year-over-year in the first quarter, contributing more than 35% of total gross billings, while revenue grew by over 15% year-over-year, accounting for near 40% of total revenues. As enrollment additional capabilities mature, the online business within this segment maintained the first quarter profitability for the second consecutive years, underscoring strong product-market fit and operational resilience. On the business front, we continue to advance our learning service systems and strengthen educational product innovation, leveraging AI capabilities to build diverse learning scenarios that spark students' interest, sharpen critical thinking, and develop practical skills.

We are also deepening our focus on localized curriculum development to make our teaching content more relevant and our services more tailored. By meeting user needs with greater precision, this effort collectively lays a solid foundation for enhanced learning outcomes and higher user retention. Our accounted for over 45% of total revenues and maintained a healthy growth trajectory during the first quarter. Our consistent investments in strengthening our teaching talent pipeline and upgrading our service system are gradually translating into tangible operating results. In particular, our one-on-one tutoring business recorded year-over-year growth of more than 20% in both revenue and gross billings, supported by professional capabilities, service engagement, and supply stability. For our AI is playing an important role in improving the efficiency and precision of personalized learning services.

We continue to strengthen our end-to-end tailored service model across key stages of the learning process, including learning assessment, study planning, progress tracking, and performance feedback. Our AI-powered learning analytics and data enable tutors to more efficiently consolidate and analyze users' learning data, identify individual knowledge gaps and learning more personalized plans. This not only makes our service delivery more effective, but also provides students and parents with clear progress milestones, and next step planning, further enhancing overall users' experience and service satisfaction. On the channel front, we continue to optimize our channel mix by favoring the higher quality acquisition channels, while from private traffic and word-of-mouth referrals. The resulting improvements in user quality, conversion efficiency, and the retention rates continue to strengthen the operation fundamentals of our traditional business.

Another key component of our learning services is educational services for college students and adults, while sustained its solid growth momentum this quarter. Gross billings grew over 15% year-over-year and contributed over 25% of total gross billings, with revenue accounting for 10% of total revenue. This performance reflects our continued focus on users' evolving needs, as well as ongoing optimization of product offerings, service management, and operational. Taking our educational services for college students as an example, building high-quality engagement throughout the user's learning journey has always been our key priority. We have structured framework to evaluate teacher-student engagement across interaction frequency, emotional connection, and professional academic support, improving the quality of tutor services and optimizing user experience.

At the same time, we are embedding AI capabilities more deeply in our daily operations to streamline, standardize the workflows, and enhance operational enabling teachers to dedicate more time to higher value activities, such as personalized learning plan and regular mentorship. This quarter, gross billings and revenues for our educational services for college students grew by more than 20% year-over-year, with operating cash flow also improving year-over-year. Our civil service exam preparation business also did year-over-year growth in both revenue and gross billings during the quarter, with our chapter productivity continuing to improve, reflecting ongoing enhancement in user value and operational efficiency. Across all, we are advancing towards the same goal, driving gains in both business scale and operational quality through sharper understanding of user needs, stronger products and service relevance, and more efficient organization, collaboration and resource allocation.

As we move towards this direction, we are our operational decisions and resource deployment, enabling each business to chart a healthier and more sustainable growth path at its respective stage of development. With that, I will now turn the call over to our Senior Finance Director, Willa, who will walk you through our financial data.

Thank you, Robin. I will now walk you through our financial data. Please note that all financial data are in RMB terms unless otherwise stated. Our cost of revenue this quarter was RMB 514.8 million. Gross profit increased 12.9% year-over-year to nearly RMB 1.2 billion, with a gross margin of 69.5%. Total operating expenses during the quarter increased 16.1% year-over-year to nearly RMB 1.2 billion. Breaking it down, selling expenses increased 19.0% year-over-year this quarter to RMB 844.1 million, accounting for 50.0% of net revenue. Research and development expenses increased 5.7% year-over-year to RMB 159.0 million, accounting for 9.4% of net revenues. General and administrative expenses increased 12.9% year-over-year to RMB 164.7 million, accounting for 9.7% of net revenues. Income from operations was RMB 6.9 million, and the operating income margin was 0.4%.

non-GAAP income from operations was RMB 13.8 million, and the non-GAAP operating income margin was 0.8%. Net income was RMB 34.5 million and net income margin was 2.0%. non-GAAP net income was RMB 41.4 million, and the non-GAAP net income margin was 2.5%. Our net operating cash outflow increased 73.6% year-over-year to RMB 828.4 million. Now turning to our balance sheet. As of March 31st, 2026, we have RMB 691.2 million in cash equivalents and restricted cash, along with RMB 2.1 billion in short-term investments and RMB 501.4 million in long-term investments. This comes to a total of nearly RMB 3.3 billion. As of March 31st, 2026, our deferred revenue balance was around RMB 1.8 billion, primarily consisting of tuitions received in advance. As of June 1st, 2026, we had repurchased an aggregate of around 33.1 million ADSs on the open market for nearly RMB 704 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 second quarter of 2026 are expected to be between RMB 1,578 million and RMB 1,598 million, representing an increase of 13.6%-15.0% on a year-over-year basis. This concludes my prepared remarks. Operator, we are now ready for the Q&A session. Thank you everyone for listening.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. 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 Elsie Sheng with CLSA. Please go ahead.

Thank you, management, for taking my question and congratulations on the steady results. My question is about the offline business. We mentioned in our opening remarks that the offline business progress right now is in line with our expectation. Could you share more details on the latest update in terms of operation and also our plan for this year? I will translate to Chinese.[Non-English content]

Thank you, Elsie. This is Mike. I will take this question. Let me first start with how we think about our offline business. For Gaotu, offline is an important part of our long-term learning service strategy. It is not just another revenue stream. It can help us build deeper local trust, provide more direct service to student and parents, and create a meaningful second growth curve over time. Since we launched offline business, we have been build the capabilities needed to run it well. That includes a localized curriculum, local teams, experienced operating talents, and better data systems. The goal is straightforward. We want each city to have products that fit the local demands. We want our delivery quality to be consistent. As we enter 2026, we are starting to see these earlier investments translate into clearer operating results.

At the operating level, retention has been improving steadily, and some cities and products are already showing stronger competitiveness. Classroom utilization is also moving in the right direction. In cities where we have operated for a longer period of time, brand recognition and word of mouth are helping us scale more efficiently. In some markets, we are also seeing the brand equity from our online business to support our offline services. We also see user demand becoming more clear. Families with specific learning goals and high expectations for service quality are looking for strong teachers, localized products, and more attractive learning supports. This is Gaotu's long-term commitment to our teacher strategy and service excellence. Let's move to the summer enrollments. The offline business is progressing broadly in line with our expectation. As the enrollment is still going on, so we will provide further updates accordingly.

Based on the first five months, both gross billing and the revenue have been tracking with our expected range. We are seeing user demand and channel conversion gradually pick up. Based on the current progress, we expect offline billing and revenue to maintain relatively strong growth in the first half of the year. Going forward, we will continue to expand with discipline. We will closely look at each city, including user demand, classroom utilization, retention, teacher supply, and operating efficiency before we scale further. More importantly, we want offline growth to be built on a solid product quality, consistent service experience, and steady accumulation of local trust and reputation. That concludes my answer. Hope that can address your question, Elsie.

Yeah, thank you. It is very clear.

The next question comes from Yukun Zheng with CITIC. Please go ahead.

Good evening, management. Thank you for taking my question. My question is about the cost control. We noticed that the company has achieved great R&D expense control this quarter. Do we have an outlook on the cost control and efficiency over the coming quarter? I will translate myself. [Non-English content]

Okay. To answer the question, yes, we are enjoying operating leverage for almost six consecutive quarters. We are having this really disciplined approach regarding resource allocation, our customer acquisition efficiency, as well as the whole organizational operation. One thing is that AI is playing a more and more important role in our daily operations, where not just in the operation front, but also in the customer-facing side, including content creation, and also improving our teaching services, et cetera. By empowering our teachers and children to have these technologies, we are really increasing their productivity per capita, which you could see in our online business margin. For our non-academic tutoring services, we are enjoying, it's our second consecutive quarter of gaining profit in the first quarter. Also our high school tutoring sectors are also gaining profit in this quarter.

For the operational front, it really empowering all the employees. We are actually deploying AI tools and AI agents to all of our employees to increase their productivity and improve their working efficiencies. We expect the operating leverage continue to show in the upcoming quarter. Yeah. I hope that answers your question.

Thank you. It's very clear.

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

Yeah. Thank you everyone for joining our call tonight. If you have any further questions, please don't hesitate to contact our investor relations department or our management via email at [email protected] 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 night.

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

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.