On February 27, 2024, Gaotu (NYSE: GOTU) released its financial reports for the fourth quarter and full year of fiscal year 2023.
According to the financial report, as of December 31, 2023, Gaotu achieved a revenue of 761 million yuan (RMB) in the fourth quarter of 2023, a year-on-year increase of 20.9%; Cash income was 1.278 billion yuan, a year-on-year increase of 28.1%; The net loss was 119.6 million yuan, compared to a net profit of 70.61 million yuan in the same period last year.
In the fiscal year 2023, Gaotu's operating revenue was 2.9608 billion yuan, a year-on-year increase of 18.5%; The net cash inflow from operations for the whole year significantly increased year-on-year, with an increase of about 5.5 times compared to the previous year; The non US GAAP net profit was 51.06 million yuan, achieving a full year profit.
Gaotu is promoting stock repurchases, with a total of approximately 4.87 million American depositary shares repurchased as of December 31, 2023.
On February 26th Eastern Time, the stock price of Gaotu rose 8% to $5.94, with a market value of approximately $1.548 billion. It has grown by 64% since 2024.
Chen Xiangdong, Chairman and CEO of Gaotu, said, "In the past quarter, we have felt an increasing demand from users and students for high-quality teaching products and services. Our revenue for this quarter was 760 million yuan, a year-on-year increase of 20.9%, exceeding our expectations."
High growth of youth business
In the fourth quarter of 2023, Gaotu's operating revenue was 761 million yuan, a year-on-year increase of 20.9%, mainly due to the sustained year-on-year growth of cash revenue in 2023, which was fully and efficiently undertaken by the strong market demand.
Gaotu's business covers traditional high school training, K12 non disciplinary quality education, college and adult education, and overseas study related businesses.
Non disciplinary quality education and traditional businesses are the focus of Gaotu's business, contributing approximately 70% of total revenue in the third quarter of 2023 and achieving a year-on-year growth of over 40%.
Shen Nan, CFO of Gaotu Group, said, "In this quarter, cash revenue from major traditional businesses has accelerated, while new businesses focused on non disciplinary tutoring have also shown a high growth trend. In 2023, the combined traditional and new businesses reached nearly 50% year-on-year growth."
These two businesses are growing rapidly, on the one hand due to strong demand, and on the other hand, Gaotu has responded to the demand by increasing its products and teaching staff.
In terms of products, in addition to traditional online classes, Gaotu has added personalized learning products and services, such as one-on-one, to meet the comprehensive and diverse learning needs of learners at different stages.
Gaotu is further expanding and laying out its offline business. Taking the business of college students and adult education as an example, currently, Gaotu has set up campuses for postgraduate entrance exams in Beijing, Zhengzhou, Shenyang, Wuhan and other cities, and Gaotu Study Abroad has landed in cities such as Beijing, Wuhan, and Changsha.
In terms of teaching staff, Gaotu has added a main lecturer and a second lecturer. In the summer of 2023, facing the strong demand for summer vacation, Gaotu did not reach sufficient reserves of teacher manpower, resulting in a situation where the demand could not be fully accommodated, which had a certain impact on cash income. In the fourth quarter, we increased our teacher reserves or learned from the experiences and lessons of summer vacation.
Of course, this also raises costs. In this quarter, the main business cost of Gaotu was 227.7 million yuan, an increase of 42.9% year-on-year, mainly due to the increase in labor costs for the main and second lecturers, as well as textbook costs.
In the fourth quarter, Gaotu's cash revenue increased by 28.1% year-on-year to 1.28 billion yuan, showing an accelerating trend of growth, with a month on month growth of up to 99.9%.
Cash income will be recognized as revenue in the following quarters, which means that subsequent revenue growth will be guaranteed.
In 2023, Gaotu's cash revenue reached 3.339 billion yuan, a year-on-year increase of 31.7%.
"Our cash income growth rate is showing an accelerating trend, and we expect this trend to continue," said Chen Xiangdong.
High barrier self operated customer acquisition channels
In 2023, Gaotu will continue to explore both online and offline customer acquisition channels, and build higher barrier self operated customer acquisition channels through proactive layout.
Gao Tu CFO Shen Nan once introduced at the first quarter financial report that in exploring customer acquisition channels with higher barriers, the company has gradually shifted from purchasing traffic from external platforms to building its own channels, with a focus on acquiring customers through offline channels such as short video live streaming platforms and in school lectures.
Taking customer acquisition in the short and direct field as an example, Gaotu encourages renowned teachers to become experts in the live streaming field.
Private customer acquisition methods such as academic planning have also been explored within the industry. Within the scope of compliance, proactively acquire and operate private domain channels for K9 students, especially third grade students. By providing services such as academic planning and mental health, we aim to establish a reservoir for high school training services.
In the fourth quarter, Gaotu's operating expenses amounted to 7212 million yuan, a year-on-year increase of 49.1%, mainly due to the increase in labor costs and marketing activities. Among them, sales expenses increased by 60.7% from 289.8 million yuan in the same period last year to 465.7 million yuan.
The financial report predicts that the revenue for the first quarter of 2024 should be between 908 million yuan and 928 million yuan, with a year-on-year increase of 28.4% to 31.2%.
As of December 31, 2023, the total cash and cash equivalents, restricted funds, short-term investments, long-term investments, and third-party payment platform withdrawable balance held by Gaotu amounted to RMB 4.025 billion, an increase of approximately RMB 257 million compared to the same period last year.
In November 2023, with the approval of the board of directors, Gaotu raised the total repurchase amount of its share repurchase plan to $80 million, valid until November 22, 2025. Under this plan, as of December 31, 2023, the cumulative repurchase of approximately 4.87 million American depositary shares under the Gaotu Stock Repurchase Program amounted to approximately $12.44 million. Founder Chen Xiangdong increased his holdings of approximately 880000 American Depositary Shares throughout 2023.