Beijing-based education and training institution Gaotu Group on Wednesday released its Q2 earnings report for the period ended June 30, 2021. In the second quarter, Gaotu earned 2.232 billion yuan ($346 million), a year-on-year increase of 35.3%. Its net losses totalled 918 million yuan, while its achievement in the same period last year was net profit of 18.6 million yuan.
Gaotu attributes the higher Q2 revenue to increasing K12 course fees from Q4 2020 to Q2 2021. During Q2 2021, the number of customers paying for K12 courses reached 1.563 million, a year-on-year increase of 4.5%. The revenue generated from online K12 courses was 2.091 billion yuan, up 51% year-on-year and accounting for 93.68% of the total revenue.
Affected by Chinese authorities’ recent introduction of the so-called “double reduction” approach to regulation of the country’s expensive private education industry, Gaotu has to change its business focus.
Larry Chen Xiangdong, Founder and CEO of Gaotu, said in the financial report that Gaotu has adjusted its organizational structure, transformed its focus to vocational and STEAM education instead and would further work on digital products and vocational education.
Shen Nan, CFO of Gaotu, further expressed that in exploring vocational education, the public service examination has maintained a high level. The number of paying users of financial certificates has increased fourfold year-on-year, Shen said, “In the future, we will focus on areas strongly supported by the government and create a multi-faceted interactive platform covering all education categories to achieve lifelong learning.”
During the reporting period, the total revenue of Gaotu’s K12 business was 141 million yuan, down 46.9% year-on-year. As of June 30, 2021, Gaotu held cash and cash equivalents, restricted funds, short-term investments and long-term investments totalling 5.487 billion yuan.
According to the financial report, Gaotu’s operating expenses increased from 1.45 billion yuan in the same period last year to 2.363 billion yuan. Among them, the sales cost was 1.641 billion yuan, compared with 1.209 billion yuan in the same period last year. Finally, R&D expenses were 427 million yuan, up 204.9% year-on-year.
In the first half of 2021, Gaotu achieved revenue of 4.173 billion yuan, a year-on-year increase of 41.5%, and net loss of 2.345 billion yuan.