Recently, online education technology company Gaotu (NYSE: GOTU) announced its unaudited performance for the fourth quarter and full year of 2023, which not only increased revenue without profit, but also saw a significant increase in marketing expenses.
The company's total revenue in the fourth quarter was 761 million yuan, a year-on-year increase of 20.9%; The net loss was 119.6 million yuan, while the net profit for the same period last year was 70.61 million yuan, a significant decrease of 269% year-on-year, turning from profit to loss.
In the fiscal year 2023, its revenue was 2.961 billion yuan, a year-on-year increase of 18.5%; The net profit also turned from profit to loss, a decrease of 155% from a profit of 13.17 million yuan in the same period last year, resulting in a loss of 7.3 million yuan.
The revenue growth of Gaotu is driven by strong market demand and cash revenue growth. The financial report shows that its interest income and realized investment gains were 107.1 million yuan, a year-on-year increase of 68%.
The losses are due to significant marketing expenses and the company is recruiting teachers to prepare for the winter vacation peak season, but these teachers have not yet reached their full capacity level in the fourth quarter, which has affected profit margins and gross profit margins.
The CFO of the company, Shen Nan, stated that the new business in the non disciplinary coaching field grew rapidly in the fourth quarter. Throughout 2023, both traditional and new businesses achieved a year-on-year growth of nearly 50%. In response to changes in market environment and user demand, the company quickly integrated resources.
In the fourth quarter, Gaotu's main business cost reached 228 million yuan, a year-on-year increase of 42.9%, and its gross profit was 533.3 million yuan, a year-on-year increase of 13.4%. The gross profit margin has decreased from 74.7% in the same period last year to 70.1%. In the fiscal year 2023, the company's main operating cost was 790 million yuan, an increase of 12.7% year-on-year, and both gross profit and gross profit margin achieved an increase.
"The increase in main business costs is due to the increase in teacher labor and textbook costs, while the decrease in equity incentive costs partially offset the increase in labor and textbook costs," the company explained.
In terms of expenditure, Gaotu has ended cost reduction and increased efficiency, and has started the rhythm of "soaring ahead". Its sales expenses for the fiscal year 2023 were 1.5012 billion yuan, a year-on-year increase of 27%; The research and development expenses were 462 million yuan, a year-on-year increase of 4%; Management expenses increased by 23% year-on-year from 290.3 million yuan in the same period last year.
Shen Nan stated at the financial report that the increase in marketing expenses comes from the demand for students during winter vacation, as well as new channels, including business expansion in the short video and live streaming fields.
After the "double reduction", Gaotu has transformed towards vocational education, quality education, studying abroad, skill training, and other directions, including postgraduate entrance exams, civil service exams, medical and financial examinations, adult English, and study abroad applications. The financial report did not disclose the specific business revenue situation.
At the telephone financial report meeting, Chen Xiangdong, the founder of the company, said that in 2023, the retention rate of students in the company's traditional learning services will increase significantly, and at the same time, the company is also vigorously expanding Tiktok channels and offline businesses. At present, Gaotu has set up campuses in Beijing, Zhengzhou, Shenyang, Wuhan and other cities for postgraduate entrance exams, and Gaotu study abroad has landed in cities such as Beijing, Wuhan, and Changsha.
According to Shen Nan, Gaotu's learning services contributed over 95% of its net revenue in the fourth quarter, with over 70% of its total revenue coming from non disciplinary training and other traditional learning services, a year-on-year increase of 35%. The non disciplinary training business is growing in triple digits every year.
College students and adult vocational education will rebound in 2023. "In this field, we will prioritize profit growth over revenue growth as our top priority strategy." Shen Nan stated that this business accounted for about 25% of the total revenue for this quarter, with a year-on-year growth of over 10%.
The revenue of overseas exam type businesses has increased by over 200%, the preparation business for graduate entrance exams has generated positive cash flow for two consecutive quarters, and the civil service exam business has achieved quarterly profits.
Gaotu pointed out that it is expected that by 2024, subject training businesses represented by high schools will achieve a three fold year-on-year growth.
As of December 31, last year, Gaotu's deferred income exceeded 120 million yuan, mainly from prepaid tuition fees. The total balance of cash and cash equivalents, restricted funds, short-term investments, long-term investments, and third-party payment platform withdrawals held by the company is 4.025 billion yuan.
According to Gaotu's forecast, the revenue for the first quarter of 2024 ranges from 908 million yuan to 928 million yuan, with a year-on-year increase of 28.4% to 31.2%.
The company has also been repurchasing shares. In November 2022, the board of directors of Gaotu approved a share buyback plan to repurchase up to $30 million worth of stocks over a three-year period ending on November 22, 2025. In November 2023, the company raised the total repurchase amount from $30 million to $80 million.
As of December 31, 2023, Gaotu has repurchased approximately 4.87 million American Depositary Shares for an amount of approximately $12.44 million. Among them, Chen Xiangdong has cumulatively increased his holdings of approximately 880000 American depositary shares.
On February 27th, Eastern Time, the stock price of Gaotu rose 30.64% to $7.76, with a total market value of $2.003 billion.