Ladies and gentlemen, thank you for standing by and welcome to the Gaotu Techedu Inc. First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note today's event is being recorded on Monday, June 6, 2022. I would now like to hand the conference over to your first speaker today, Ms. Sherry Liu, IR Manager of Gaotu. Thank you and please go ahead.

Thank you very much, operator. Good evening, everyone, and thank you for joining us on our first quarter 2022 earnings conference call. Gaotu's first quarter earnings release was published earlier today and is available on the company's IR website at ir.gaotu.cn. On the call with me tonight are Mr. Larry Chen, Gaotu's Founder, Chairman, and Chief Executive Officer; and Ms. Shannon Shen, Gaotu's Chief Financial Officer. Larry will give a general business overview for the quarter and then Shannon will discuss the financials. Following their prepared remarks, Larry and Shannon will be available for the Q&A session. I will translate for Larry. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements as defined in 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 these and other risks is included in the company's 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. 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. It is now my pleasure to introduce Larry. Larry, please go ahead.

Thank you, Sherry. Good evening, and good morning everyone. Thank you for joining us on our 2022 first quarter earnings conference call on this special day, which happened to be Gaotu's third year listing anniversary. Before I start, I would like to remind everyone that all financial information that I mention later is based on RMB unless otherwise noted. In the first quarter of 2022, our business continued to maintain a healthy and sustainable development and we can remain profitable for two consecutive quarters since we began our business restructuring. In this quarter, our net revenues were RMB724.6 million, and our gross billings were RMB318.1 million to present the basis of comparison. If we only look at our comparable businesses, which are professional education for college students and adult, vocational education, STEAM education and digital educational products. The net revenues of our comparable business sales increased over 200% year-over-year and their gross billings increased approximately 42% year-over-year. Moreover, gross billings of comparable businesses have shown quarter-over-quarter growth for three consecutive quarters. Our gross margin this quarter was 70.6% slightly higher than that of the same period of last year. Our net income and non-GAAP net income were RMB53.7 million and RMB92.5 million, respectively, indicating that we have achieved effective growth. Furthermore, our capital positive -- our capital position remains strong. As of March 31, 2025 -- and '22, we had a total of approximately RMB3.2 million -- sorry, RMB3.2 billion in terms of cash, cash equivalents, restricted cash and short-term investments on our balance sheet. Since we initiated our business restructuring and organizational adjustments in the third quarter of last year, our operations have been centered upon three key effects, focusing on the core businesses, enhancing product quality and improving operational efficiency. I will now briefly talk about our progress…

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 first quarter of 2022. Please note that all the financial data that I mentioned later is based on RMB unless otherwise noted. Following our strategy of effective growth, we are pleased to be able to continue to profit in this challenging environment with a net income margin of 7.4% and a non-GAAP net income margin of 12.8% and during this quarter. As most of our new businesses are still in the earliest development phases, we will compare our financial performance on a quarter-over-quarter basis. Alongside with year-over-year comparisons to better present the development of our new strategic businesses. Our focus this year remains on four core businesses. Professional education for college students and adults, vocational education, STEAM education and digital education products. On April 20, 2022, China's top legislature passed the mandate vocational education law of the People's Republic of China as the 34 section of the 13th National People's Congress. The law has taken effect since May 1, 2022. It has confirmed for the first time that vocational education is of equal importance as general education, and it advocates for a higher public acceptance of vocational education. We believe that under the strong support of government policy, vocational education will have a better future with higher market demand. We sincerely hope that by providing the best service and the best education quality. We will be able to establish Gaotu as a reputable brand in the vocational and professional education market. Now I will go through our key financials in more detail. In the first quarter of 2022, our net revenues decreased 43.1% quarter-over-quarter and 62.7% year-over-year to RMB724.6 million. To provide a consistent basis…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Mark Li with Citi. Please go ahead.

Hi, management. Thank you for this presentation. This is Mark Li from Citi. May I ask a question on your Q2 guidance. I noticed your Q2 guidance of RMB438 million to RMB468 million revenue. May I know a rough breakdown for the revenue, especially for the four core segments that we may sustain going forward? Thank you.

Thanks, Mark. So regarding the second quarter guidance, we haven't provided the details and break down that into the four core session. And as everyone has been noticed that on our earnings release, we have combined other business, and we didn't kind of like separate them into like the four core different segments. And because majority of our new businesses are still at early stage, and we want the business to become more stable before we can provide a process guidance and separate them into different segments. So right now, we will recommend you to look at the company as a whole and see how the revenue is trending.

Got it. May I follow-up quickly, if could you just maybe comment on the momentum for these four segments, let's say, into the Q2. Any qualitative comment could be helpful?

Yes. So this is kind of like our second quarter after the transformation of our new business, and we are still making gratifying progresses. Although we have higher expectations of ourselves. And as I mentioned earlier, the revenue of our new businesses, if we make an apple-to-apple comparison, has exceeded 200% growth, both on a year-over-year basis and a quarter-over-quarter basis. And also the gross billing has increased by more than 60% year-over-year, laying the foundation for our future development. While maintaining the high growth, we have also managed to profit retain a non-GAAP margin of 12.8%, that proves that we have the ability to balance the rapid growth and profitability. So in terms of various of categories, like our team education of finance-related examination training or civil servant examination training and like the preparations we provide for post-graduate college entrance exams, these have all achieved considerable growth from previous quarter-end. We also foresee these sectors to grow over high double-digit percent on a quarter-over-quarter basis. And we believe these businesses will continue to become our growth engines in the future, Mark.

Got it. Very helpful. Thank you.

Thanks.

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Sherry Liu for any closing remarks.

Thank you, operator, and thank you everyone for joining the call today. If you have any further questions, please don't hesitate to contact the company's Investor Relations department via e-mail at ir.gaotu.cn directly. You're also welcome to subscribe to our news alert and quarterly investor newsletters on the company's IR website. Thank you very much again for your time. Have a great night.

Thanks.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day or evening. Thank you.