Hello and welcome to Gaotu Techedu Third Quarter 2023 Earnings Conference Call. All participants’ will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note today’s event is being recorded. I’d now like to turn the conference over to Catherine Chen, Head of Investor Relations. Please go ahead.

Thank you, operator. Good evening, everyone. Thank you for joining Gaotu’s third quarter 2023 earnings conference call. My name is Catherine and I'll help host the earnings call today. Gaotu's earnings release for the quarter was distributed earlier, and is available on the company's IR website at ir.gaotu.cn, as well as through PR newswire services. Joining the call with me tonight from Gaotu's senior management is Mr. Larry Chen, GOTU's Founder, Chairman and Chief Executive Officer, and Ms. Shannon Shen, Gaotu's Chief Financial Officer. Larry will first provide the business highlights for the quarter, and then afterwards, Shannon will discuss our financial performance in more detail. Following their prepared remarks, we will open the floor to questions from analysts. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements made under the safe harbor provision of 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 public filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statement except as required under applicable law. During today's call, management will also discuss certain non-GAAP measures for comparison purposes only. For a definition of non-GAAP financial measures and reconciliations of GAAP to non-GAAP financial results, please refer to our third quarter earnings release published earlier today. 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 our Founder Larry. Larry, please.

Good evening and good morning, everyone. Thank you for joining us on Gaotu’s third quarter 2023 earnings conference call. I would like to take this opportunity to express my gratitude to all of you for your interest and support of Gaotu and the broader education industry. Before I start, I would like to remind everyone that all financial figures discussed today are quoted in RMB unless stated otherwise. Benefiting from the rising needs of students, our business continues to focus on the stages in students' life cycle, where their learning capability is at its strongest. And we aim to meet their learning needs and enhance learning efficiency by continuously enriching product offerings and delivery formats. After the first nine months of operation optimization and rapid iteration in 2023, we are currently focusing on defining clear development directions and tracking a well-defined path forward, dedicated to building up our core organizational competitiveness and continuously delving into new business initiatives. We will invest in areas that are strategically important for the company's success continue to refine products and services for non-academic tutoring services, traditional learning services, and educational services for college students and adults and build a resilient organization and a robust pool of talent. In the third quarter of 2023, our net revenue grew 30.2% year-over-year to RMB789.4 million and our gross billing reached RMB639.3 million, up 5.3% year-over-year. Despite a decline in profits due to seasonality and historical operational constraints in 2022, we remain confident in our growth prospects and profitability in the coming year, driven by our constantly improving talent poll, clearly defined growth [strategies] (ph) for each segment, and ample cash reserves. In the meantime, we also continued our shared repurchase program during the quarter, demonstrating our unwavering confidence in our growth prospects. I will now discuss 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 2023. Please note that all financial figures discussed today are quoted in RMB terms, unless otherwise stated. The company maintained growth momentum during the third quarter of 2023. Net revenues increased by 30.2% year-over-year to RMB789.4 million. Well, gross billings increased by 5.3% year-over-year to RMB639.3 million. We maintained a strong cash position, which was RMB180.6 million higher than that of the same time of last year. This highlights the ample resources we have to continue driving the development of our business. Educational services targeted the group of students from primary to high school demonstrate salient seasonality and the sub-quarter coincides with summer vacation making it the peak season of the year for online customer acquisition. Operations need to be aligned with school schedules to capitalize on a limited window of opportunity for acquiring new customers. Coordinating our efforts also allows us to benefit from economies of scale and maximize operational efficiency and ROI. During the period, we could allocate marketing expenses and tutors in line with market demand. As such, our selling expenses typically peak for the year during the third quarter, notably impacting our overall profitability. To align with school schedules, the second and the fourth quarters have been designated as our main customer retention seasons, during which gross billings are no further higher when compared to the first and the third quarters. Throughout this quarter's summer enrollment period, we observed a robust learning demand from students. This also puts a higher demand on our ability to adapt and [Indiscernible] operations in response. We plan to enhance the effectiveness and efficiency of our marketing efforts in the following three ways.…

Yes, thank you. At this time we will begin the question-and-answer session. [Operator Instructions] And the first question comes from Yiwen Zhang with China Renaissance.

Hey management, thanks for taking my question. So as we know, summer is a good time for student enrollment. So if we discuss more details of what was our strategy and give us an update on how does our enrollment perform during the summer? Thank you.

Thanks, Yiwen. Thanks for your question. So the financials of Q3 partially reflected the operations during the summer break. In terms of the revenue growth, we have maintained an overall growth rate of over 30%. Our revenues primarily consist of educational services, which is further divided into non-academic tutoring services and traditional learning services and learning services for college students and adults. So as for the learning services for college students and adults, like I mentioned in the last quarter and I mentioned in my prepared remarks, there is a strategic shift. The strategy has evolved from scale expansion to a sequential emphasizes on profitability. So under this strategic direction, we have gradually adjusted and phased out some unprofitable operational units. So the revenue from this segment grows lower in Q3, as compared to the same period of last year. And in last year, I mean, in the 2022 third quarter, learning services for college students and adults actually contributed to over 3% of our total revenue, which has somewhat influenced our revenue growth rate for the third quarter of 2023, and also this is the same dynamic in the fourth quarter of 2023. And that's why we see like our revenue guidance was around or less than 10%. And however, if we exclusively examine the income growth of our K-12-related business, which includes non-academic tutoring services and traditional learning services, it still maintains an over 40% year-over-year increase. We have observed strong demand from customers during the summer break. And the availability of high-qualified service providers, which is capable of delivering high-quality courses has been limited. As a result, our revenue has maintained a relatively high growth rate in Q3. In the third quarter, our gross billings, however, the growth rate was approximately 5%. The primary drivers were in…

Yes, that's very clear. Thank you.

Thanks.

Thank you. And this concludes the question-and-answer session. I would like to return the call to Catherine Chen for any closing comments.

Thank you, operator. Thank you, everyone, for joining the call today. If you have any further questions, please don't hesitate to contact our investor relations department via email at ir@gaotu.cn directly. You are 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 night.

Thank you. As mentioned, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.