Gaotu Techedu Inc (GOTU)

Gaotu Techedu Inc. 20-F Financial Report Analysis

Report Date: 2025-04-30
Period Covered: Full Year 2024
Form Type: 20-F

1. Profit and Loss Summary

– Net loss for FY 2024: RMB 10,490 million (≈ –$1.437 billion) vs. net loss RMB 73 million in FY 2023.
– Gross profit rose to RMB 3,098 million (+43%) but was more than offset by a 85% jump in total operating expenses to RMB 4,280 million.
– Major cost drivers:
• Selling & marketing expenses up 97% to RMB 2,963 million
• R&D expense up 40% to RMB 648 million
• G&A expense up 88% to RMB 669 million

Reasons for the Loss

1. Strategic shift away from K-12 academic tutoring under China’s “double-reduction” policy;
2. Heavy reinvestment in new non-academic, adult, and offline learning centers;
3. Rapid expansion of teaching, R&D and support staff leading to a surge in payroll and marketing costs.

2. Debt & Liquidity

– On-balance-sheet debt: virtually zero.
– Operating lease liabilities (IFRS-style): RMB 492 million undiscounted over the next five years.
– Cash, short-term and long-term investments at year-end: RMB 1.32 billion.

Pros and Cons

| Pros | Cons | | — | — | | Strong cash position (> RMB 1.3 billion) | Net losses deepened under repricing of its entire operating model. | | Data-driven AI/tutor hybrid platform | Significant near-term drag from expansion into non-academic/adult verticals. | | Nationwide online + offline footprint | Regulatory policy has curtailed core K-12 offerings since 2021. |

3. Outlook & Key Considerations

Growth Drivers
• Non-academic and adult education services
• Digital learning tools and AI-powered personalization
• Continued rollout of offline learning centers in second- and third-tier cities

Risks
• Further regulatory tightening in private education
• Execution risk scaling newer business lines
• Profitability depends on cost discipline in marketing and teaching staff payroll

For FY 2024 net revenue of RMB 4,553.6 million:
• Learning Services: RMB 4,419.96 million (97.0%)
• Educational Content & Digitalized Products: RMB 83.93 million (1.8%)
• Software & Other: RMB 49.66 million (1.2%)

Gaotu Techedu is transitioning from K-12 academic tutoring into a broader multi-vertical education model. The pivot has been costly – marketing and payroll costs ballooned as management built out non-academic, adult and offline center capabilities. The strategy hinges on faster growth in higher-margin non-academic and adult education lines, and monetizing its AI-powered learning platform. Liquidity remains ample, but the company must demonstrate sustained revenue traction in the new segments and rein in marketing and instructor costs. If Gaotu can leverage its data-driven insights and brand recognition to cross-sell premium digital content and adult learning programs, it may return to profitability in 12–18 months. On the flip side, further education policy changes or failure to control expenses could extend the loss cycle. Overall, the business is reshaping its core; execution in this next phase will be critical to its financial turnaround and long-term health.