Good day ladies and gentlemen, thank you for standing by, and welcome to the Gaotu Techedu Inc., Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sherry Liu, IR Manager of Gaotu. Please go ahead.

Thank you very much, operator. Good evening, ladies and gentlemen, and thank you all for joining us tonight for Gaotu's third quarter 2020 earnings conference call. Gaotu's third quarter earnings release was published earlier today and is available on the Company's IR website at ir.gaotu.ca. On the call with me tonight are Mr. Larry Chen, Gauto's Founder, Chairman and Chief Executive Officer; and Ms. Shannon Shen, Gauto's Chief Financial Officer. Larry will give the general business overview for the quarter, and Shannon will discuss the financials in more detail. 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 we file 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 will involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict, 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 Gaotu's third quarter 2022 earnings conference call. I would like to take this opportunity to convey my gratitude for your continued interest [indiscernible] and the education industry. 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 2022 sort of gradually deepening our understanding of customer needs, we have been actively exploring new business models and expanding their naming. Undeniably, business transformation is a very challenging process, as we have overcome numerous causes. Thanks to our outstanding operational skills and the extensive educational experience we have accumulated in the past 80 years, we have united and more powerful organizations with a deep passion for education. At some time, our capital and kind of reserves will remain strong. These assets have given us a strong edge, when confronting and knowing external risks. We're confident that as long as we remain patient and persevere, while remaining true to our original aspirations, we will eventually achieve a significant breakthrough in our business and evolve into a greater organization. In this quarter, we divided our business into two categories. One is renewal services and the other is educational content and digitalized learning products. The new strategic directions within our learning services include educational services for college students and adults, overseas study related services, non-academic tutoring services and others. With our new businesses continuance their steady development supports the restructuring, we are glad to report that during the quarter, our net revenue the increased 12.7% quarter-over-quarter to RMB606.2 million and our net loss has significantly narrowed year-over-year. As we are still in the process of business transformation, the gradual and the stable increase of our…

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 third quarter of 2022. Please note that all financial data that I mentioned later is based on RMB unless otherwise noted. As we continued to explore new businesses post restructuring against the backdrop of external challenges and uncertainties, we are pleased to report that our business sustained its continuous and healthy growth as we expected, driven by our deepening and understanding of the new vertical markets, relentless efforts to optimize our operational efficiency and a constant investment in teaching quality. During the third, quarter, net revenues increased 12.7% quarter-over-quarter to RMB606.2 million. Gross billings more than doubled compared to that of last year, with a sharp year-over-year increase of 101.3% and a slight quarter-over-quarter a decrease of 0.8% to RMB607 million. This solid performance well in part due to favorable seasonality was driven by the decent progress of our businesses, which consists of learning services as well as educational content and digitalized learning products. Using learning services, our new business mainly includes educational services for college students and adults. Overseas that is related to services, non-academic tutoring services and others. Now, I will elaborate their progress we made in each of these business lines during the quarter. First, learning services, which accounted for about 90% of net revenues in the quarter, it's still the biggest contributor of our revenues. Of the 90%, approximately 30% of the net revenues were contributed by educational services for college students and adults. School holidays are typically high demand seasons for our businesses related to college students and students from junior to high school, including our post graduate entrance exam preparation business, and overseas study related services as the holiday…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Mark Li of Citi. Please go ahead.

Hi management, congratulations on the result and thanks for the share repurchase and the increase efforts. This is Mark Li from Citi. My I ask for our non-academic education. Could you share about our recent key development and perhaps outlook for the next year?

Thanks Mark. Thanks for your question. Our non-academic tutoring services is one of the new businesses we focus on after our restructure, and this business line is still in the process of optimizing our course products and gradually winning recognition among students and parents. So, after the double deduction policy, the students have more spare time during their weekends and holidays, which had spurred a huge demand for academic tutoring services especially among first and second tier cities. So, we currently offer a variety of non-academic tutoring services including programming, chess, international chess, humanity and also science courses exactly that our students were online education and interaction. These courses are very constructive in sparking children's interest and intellectual curiosity. Our non-academic courses could enhance students' learning skills and at some level can indirectly improve students' performance back in school. So it has one the trust and support among parents. And also the non-academic tutoring services follow a progressive and systematic curriculum design. This sector exhibits seasonality as well. Our course retention normally happened in second quarter and the first fourth quarter. So in the second and fourth quarter, usually has a large increase in the gross settings. We just finished the Q4 retention in November, and the retention rate was as high as 78%, which actually exceeded our expectation and also inspired us. And also the ASP for non-academic tutoring services is a proportionate to the market demand. So, it unit economics is more healthy with a high gross profit margin and as you may have noticed that our gross profit margin also increased this quarter. So based on what we see now, the development of this sector matches our expectations as this sector is still in the early development stage. We will disclose more information on enrollments and revenues as it matures. So going forward, we'll continue to focus on optimizing the products and enhancing our learning experience and continuously improving our course curriculum. So for as the expectations, we're more preferred to provide a more short-term instruction. So, we do so see like the gross billings in a first quarter to increase meaningfully and also we'll be having a sizable positive net operating cash flow in the fourth quarter, and that majority was contributed by our academic education, learning service and others that may serve the students from junior school to high school. Hope that addresses all your questions. Thanks Mark.

Thank you, Shannon. I have a quick follow up. You mentioned about increasing gross billing and positive cash flow in Q4. May I know for our profitability, is it likely to see also better margin or perhaps like up or even performance in the Q4? Thank you.

Yes. So, we'll foresee Q4 we will be profitable. So, the net profit margins will be higher than breakeven, maybe still in a rank of a single digit, but it should be a meaningful net profit margins. Thanks.

This concludes our question-and-answer session. I would like to turn the conference back over to Sherry Liu for closing remarks.

Thank you very much, operator. And thank you everyone for joining the call today. If you have any further questions, please don't hesitate to contact our Investor Relations department or management via email at ir@gaotu.cn directly. You're 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 day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.