earning highlights

Gaotu Techedu (NYSE: GOTU) reported its Q3 2024 financial results, showing mixed performance. Net revenues increased 53.1% year-over-year to RMB1,208.3 million, while gross billings grew 67.2% to RMB1,069.2 million. However, the company's losses widened significantly, with net loss increasing to RMB471.3 million compared to RMB57.7 million in Q3 2023.

The company's gross profit margin decreased to 64.4% from 72.4% year-over-year. Operating expenses increased 89.1% to RMB1,268.6 million, primarily due to workforce expansion and higher marketing costs. As of September 30, 2024, Gaotu had RMB3,310.0 million in cash and investments. The company expects Q4 2024 revenues between RMB1,288-1,308 million, representing 69.2-71.9% year-over-year growth.

Net revenues were RMB1,208.3 million, increased by 53.1% from RMB789.4 million in the same period of 2023.Gross billings[2] were RMB1,069.2 million, increased by 67.2% from RMB639.3 million in the same period of 2023.Loss from operations was RMB490.1 million, compared with loss from operations of RMB99.5 million in the same period of 2023.Net loss was RMB471.3 million, compared with net loss of RMB57.7 million in the same period of 2023.Non-GAAP net loss was RMB457.2 million, compared with non-GAAP net loss of RMB41.7 million in the same period of 2023.Net operating cash outflow was RMB714.4 million, compared with net operating cash outflow of RMB209.9 million in the same period of 2023.

BEIJING, Dec. 4, 2024 /PRNewswire/ -- Gaotu Techedu Inc. (NYSE: GOTU) ("Gaotu" or the "Company"), a technology-driven education company and online large-class tutoring service provider in China, today announced its unaudited financial results for the third quarter ended September 30, 2024.

Financial Analyst negativeGross margin deterioration from 72.4% to 64.4%Operating expenses surged 89.1% due to workforce expansion and marketing costsCash position declined from RMB3,953.5 million to RMB3,310.0 million since December 2023Net operating cash outflow tripled to RMB714.4 million

This earnings report reveals significant concerns despite top-line growth. While net revenues increased by 53.1% to RMB1,208.3 million, the company's losses have expanded dramatically. The net loss widened by 717.3% to RMB471.3 million, with operating loss growing nearly 392.4%.

While revenue growth and gross billings show strong market demand, the aggressive spending on expansion is creating significant pressure on profitability. The company's shift from profitability in early 2023 to substantial losses raises questions about sustainable growth and cost management.

The Chinese education technology sector context is important for understanding these results. Despite regulatory challenges, Gaotu shows strong market penetration with gross billings up 67.2% and deferred revenue growing 89% year-over-year, indicating robust future revenue recognition potential.

However, the competitive landscape is driving up customer acquisition costs, reflected in the 104% increase in selling expenses to RMB885.8 million. The company's aggressive investment in growth, while expanding market share, comes at the cost of near-term profitability. The RMB120 million share buyback signals management's confidence, but investors should monitor the sustainability of this high-cost growth strategy.