Thank you, sir. Good evening, everyone. Thank you for joining the second quarter 2025 earnings conference call. My name is Catherine Chen, and I will 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, Gaotu'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 would 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 this 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 statements, 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 reconciliation of GAAP to non-GAAP financial results, please refer to our second 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.

Good evening and good morning, everyone. Thank you for joining us on Gaotu's second quarter of fiscal year 2025 earnings conference call. I would like to take this opportunity to express my gratitude to each of you for your interest in and support of Gaotu. Before I start, I would like to remind everyone that all financial figures discussed today are quoted in RMB unless stated otherwise. Over the past quarter, we maintained solid growth momentum in our core business while harnessing the power of AI to enhance our service models, bolster product innovation, and strengthen our organizational capabilities. Together, these efforts are shaping a clear growth trajectory and sustainable competitive advantages. Upholding our user-centric approach, we consistently upgraded our educational products, improved teaching quality, and refined service delivery. Our strategic prioritization and efficient resource allocation have significantly increased per capita productivity. As we progress through 2025, we are steadily enriching our scale of reaching efficiency and user satisfaction, underscoring the resilience and disciplined execution driving our business's high-quality growth. In the second quarter, our revenue increased by 37.6% year over year to nearly RMB 1.4 billion, with gross billings up by 36.2% to approximately RMB 2.3 billion. Thanks to our refined operational execution and improved organizational efficiency, we narrowed our net loss by 50.5% year over year on a non-GAAP basis. We achieved a net operating cash inflow of RMB 588.8 million this quarter, an increase of RMB 202.6 million from the same period last year. These results reflect our ability to sustain solid growth momentum while strengthening operational quality and sharpening our competitive edge. Now I would like to elaborate on this quarter's operating highlights on four fronts. First and foremost, we are deepening our investment in AI, advancing our Always strategy to upgrade both our teaching models and technology infrastructure. These efforts aim to empower personalized learning at scale and create long-term value. Innovation is part of our DNA and has been a core growth driver since day one, preparing our consistent exploration and the development of emerging technologies, particularly forward-looking AI initiatives. We believe AI-driven education solutions can make personalized, adaptive learning scalable, allowing every learner to enjoy a more efficient, individualized, and high-quality learning experience. Guided by this strategic vision, we have reshaped our previous dual teacher model into an advanced tri-teacher model, integrating instructors, tutors, and AI companions. This new model deeply embeds AI throughout the teaching and the course content development process, transforming how education is delivered. For instructors, AI offers data-driven feedback and pedagogical insight to enhance teaching precision and course quality. For tutors, AI tracks individual student progress and pinpoints knowledge gaps, increasing teachers' efficiency and enabling them to deliver more professional personalized learning solutions. For curriculum developers, AI accelerates analysis of learning pathways, optimizing course design and content innovation. We continue to increase our investment in AI, centering technology for innovation and our engine bolstered by a strong talent base and a robust ecosystem. More specifically, we will further advance AI innovations in educational use cases, cultivate cross-disciplinary teams between both education and AI experts, and integrate our content base and partner resources to create a highly efficient, effective, and sustainable AI-empowered learning paradigm. This strategy will also lay the groundwork for high-quality long-term growth and reinforce our commitment to delivering lasting value. While preparing educational innovation, we are also embedding AI technology across our entire corporate operations and management processes as our core engine for boosting organizational productivity. By streamlining procedures and unlocking data-driven insights, we are maximizing operational efficiency and enhancing strategic decision-making. Furthermore, AI empowers every Gaotu employee to transcend the boundaries, fostering both professional growth and personal fulfillment. Together, we are building long-term market advantages and a more dynamic organization positioned for sustainable growth. Second, with our user-centric approach firmly in mind, we continue to explore new products and develop innovative models to meet a wide range of learning scenarios and individual needs. We have successfully introduced a series of novel products such as the Gaotu Reading App, The Legend of Gao Xiaotu, and Maodo Love Learning, all designed to spark interest in learning, enhance the learning experience, and boost student engagement. Through ongoing exploration and market validation, we continually strive to find the optimal product market fit, driving expansion across our business. We also launched our AI flash learning model, which uses advanced algorithms to break down knowledge into granular units connected by dynamic knowledge breadth. This approach enables scenario-based, bite-sized, and interactive learning that may improve efficiency and create more flexible personalized learning experiences. Third, we remain laser-focused on building a lifelong learning services platform that is accessible and enjoyable for all. Our comprehensive product portfolio spans non-academic tutoring services, traditional learning services, educational services for college students and adults, and overseas study programs both online and offline. We also offer students a selection of large classes, small classes, and one-on-one sessions for maximum flexibility. Our broad user coverage and robust product matrix comprehensively address diverse learning needs, strengthening Gaotu's brand awareness and reputation through word-of-mouth referrals while also driving cross-category conversions. By consistently amplifying user engagement and long-term educational value, we are steadily building an enduring competitive moat in the education industry. Fourth, we remain committed to fulfilling our social responsibilities, aligning long-term shareholder value with a broader societal impact. To enhance shareholder returns as of August 25, 2025, we have allocated a total of nearly RMB 557 million to repurchase approximately 25 million ADS, a strong testament to our persistent focus on the long-term competence in creating shareholder value. Moreover, through the Gaotu Foundation, we have partnered with top-tier universities to establish career dream bases for college students, a one-stop career support system encompassing curated internship opportunities, employment grants, career mentorship programs, and professional development workshops. This end-to-end career accelerator not only empowers young talent but also demonstrates our commitment to creating both commercial and social value with a focus on healthy growth at the heart of everything we do. I remain confident in Gaotu's future trajectory. Our diverse educational product portfolio, rapidly evolving AI technology capabilities, solid financial foundation, and highly cohesive and effective team position us for continued innovation and success. Our goal is to deliver a best-in-class learning experience to our users while creating long-term shareholder value and advancing both our social impact and commercial success. Thank you very much, everyone. This concludes my prepared remarks. I will now pass the call over to our CFO, Shannon Shen, to walk you through this quarter's financial and operational details.

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 second quarter of fiscal year 2025. In this quarter, we remained focused on advancing our healthy growth strategy, creating solid, high-quality growth momentum. Net revenues reached nearly RMB 1.4 billion, exceeding the upper end of our guidance by 5.4%. Gross billings grew by 36.2% year over year, outpacing last quarter's growth rate by 14.4 percentage points. In addition to our top-line growth, the loss from operations and net loss narrowed by 48.9% and 49.7%, respectively, reflecting continued gains in operational efficiency and outstanding resource allocation. Deferred revenue increased by 38.9% year over year to about RMB 2.2 billion, providing a solid foundation for sustained future growth. We maintained our ample cash position with cash, cash equivalents, restricted cash, and short-term and long-term investments totaling over RMB 3.8 billion as of June 30, 2025. Excluding the impact of share buybacks, our cash position increased by RMB 1.1 billion compared to a year ago, supported by consistent investments in enhancing user experience, course and service quality, and organizational capabilities. The profitability and operational quality of our core established business continued to strengthen. In our ongoing efforts to boost operating leverage and efficiency, AI and other cutting-edge technologies are increasingly playing a crucial role in the refinement of operations, reducing operating expenses as a percentage of net revenue by 31.6 percentage points compared to the same period last year. To capitalize on the peak student demand during the summer period, we typically allocate key resources such as teacher recruitment, team training, and customer acquisition channels well in advance. Given the approximately three to six months gap between marketing investment and revenue recognition, we recommend using the ratio of gross billings to marketing investment as a more accurate indicator of customer acquisition efficiency for the online business. This quarter, we not only effectively captured and converted high student demand to drive gross billings growth but also achieved a 1.7% year over year reduction in selling expenses and an increase of 38.6% in selling expenses ROI, bringing ROI to its highest level over the past four years. Simultaneously, G&A expenses and R&D expenses decreased year over year for the second consecutive quarter as a percentage of net revenues. The ratio fell by 8.0 percentage points year over year this quarter, reflecting effective and growing economies of scale. Through process optimization and data-driven decision-making, we have further enhanced group overhead efficiency, laying a strong groundwork for sustained profitability improvements going forward. Next, an overview of this quarter's progress by business segment. Learning services contributed over 95% of net revenues. Breaking it down, over 85% of total revenues came from academic tutoring services and other traditional learning services, representing an increase of 50% year over year. Combined gross billings from these two segments grew by over 40% year over year. Our new initiatives focused on non-academic tutoring services in both online and offline settings delivered strong growth this quarter. Gross billings were up by over 100% year over year, while net revenues from this segment recorded three-digit growth, contributing nearly 40% of total revenues. This also marked the fifth consecutive quarter of this three-digit achievement. By further optimizing operational processes and teaching services quality, we boosted student retention rates for the spring semester with new enrollment student retention rates in a climbing trend year over year. In addition, we actively expanded into emerging traffic platforms and introduced innovative products to optimize our customer acquisition mechanisms, enhancing acquisition efficiency. Our traditional learning services maintained their healthy growth trajectory. While the early timing of the Spring Festival led to a year over year decline in the number of class sessions delivered this quarter, higher enrollment resulted in a 12.1% year over year increase in net revenues for the quarter, contributing to nearly 25% growth in total revenues for 2025. We remain focused on localizing our curricula to better align course content and services, a strategy that has already been validated by positive outcomes from user acquisition through service delivery. Building on this early success, we plan to duplicate this model across multiple cities and regions. According to primary statistics, the number of students from Gaotu's class of 2025 admitted to the top two universities in China reached 267, marking five consecutive years of growth. To date, 1,118 Gaotu students have been admitted to the top two leading universities, a strong testament to our competitiveness across educational products, teaching quality, and learning services. Additionally, our referral rate for the second quarter surged by 75% compared to a year ago. The other crucial component of our learning services is educational services for college students and adults. In the second quarter, this segment contributed over 10% of total revenues. Loss from operations from this segment significantly narrowed year over year with operating cash flow turning positive, demonstrating our strong strategic execution, effective resource planning, and increasing team productivity. The cost base from educational services for college students increased by more than 50% year over year, with operating cash flow growing over 4x. On top of ongoing improvements in our online products quality and operating efficiency, we steadily expanded our offline product portfolio and our online merge offline modules to cover a wider range of learning scenarios and means. It is worth noting that Gaotu Jing Center, our flagship offline service platform for college students, reached full enrollment capacity within just three months of its launch, affirming both our regional brand's influence and this business model's commercial viability. I will now present our financials in more detail. Our cost of revenue this quarter was RMB 472.8 million. Gross profit increased 31.6% year over year to RMB 915.5 million with a gross margin of 66%. The year over year decrease in gross margin was primarily due to changes in our product mix. Total operating expenses during the quarter decreased 0.2% year over year to approximately RMB 1.4 billion. Breaking it down, selling expenses decreased 1.7% year over year this quarter to RMB 828.9 million, accounting for 59.1% of net revenues. Research and development expenses decreased 8.6% year over year to approximately RMB 148.2 million, accounting for 10.7% of net revenues. General and administrative expenses increased 15.7% year over year to approximately RMB 190.4 million, accounting for 13.6% of net revenues. Loss from operations was RMB 241.9 million, and the operating loss margin was 17.4%. Non-GAAP operating net loss margin was 16.7%. Net loss was RMB 217.1 million and net loss margin was 15.5%. Non-GAAP net loss was RMB 206.8 million and non-GAAP net loss margin was 14.9%. Our net operating cash inflow was RMB 588.8 million. Now turning to our balance sheet. As of June 30, 2025, we held RMB 841.4 million in cash, cash equivalents, and restricted cash, along with RMB 2.6 billion in short-term investments and RMB 387.5 million in long-term investments. This comes to a total of over RMB 3.8 billion. As of August 26, 2025, we repurchased an aggregate of around 25 million ADS on the open market for approximately RMB 557 million. Before I provide our business outlook for the next quarter, please allow me to remind everyone that this contains forward-looking statements, which include risks and uncertainties that are beyond our control and could cause the actual results to differ materially from our predictions. Based on our current estimates, total net revenues for the third quarter of 2025 are expected to be between RMB 1.5 billion and RMB 1.578 billion, representing an increase of 28.9% to 30.6% on a year over year basis. This concludes my prepared remarks. Operator, we are now ready for the Q&A session.

Thank you. We will now begin the question and answer session. The first question comes from Elsie Chang with CLSA. Please go ahead.

Thank you, management, for taking my question and also congratulations on continuing to deliver strong growth. I have a question on the offline centers development because although right now the offline is a relatively small portion of our revenue, there is potential room to grow in the future. So I would like to know our latest update, especially on the offline business, and do you have any operating metrics or indicators to share like the ramp-up and the future growth target? Thank you.

Thanks, Elsie, for your question and for your interest in our offline new initiatives. Our offline business is experiencing strong momentum and has quickly become a new growth engine for us. In the second quarter, offline learning center revenue grew by more than 20% on a year over year basis and has already contributed over 5% of gross billings this quarter. The reason behind that is, first, on the customer side, we are leveraging the unique advantage of in-person interaction to build deeper trust with students and parents in a more direct way. By precisely matching localized and personalized learning needs and fostering high-frequency engagement, we are significantly strengthening our customer loyalty. Secondly, from the educational product perspective, leveraging the meticulously refined online content, there is no need for the offline learning centers to build up the content from scratch. The offline learning centers are able to extend vertically our localization and personalization, speed up iteration, and improve their content quality quickly. Third, on brand awareness and headquarter support, Gaotu has strong brand recognition, enhances customer trust, and attracts high-quality talent. We have the ability to provide critical faculty support for our online operations in their early stages. We are also integrating some online private traffic with offline channels to meet diverse student needs, and it is also a strong support for our offline business to grow at the beginning stage. In addition, our headquarters has been able to invest in digital infrastructure to improve the quality and efficiency of our offline operations. We already saw the trend that in certain cities, especially for those cities and regions we already entered after two to three years of operations, we are seeing a virtuous cycle where if we have strong teachers and high-quality new factories and companies there, they all drive positive word-of-mouth referrals and are able to lead to steadily improving retention rates. That is one of the reasons that in the second quarter, the growth gains in our offline learning initiative grew so fast. Lastly, a highly efficient and professional team was assembled in the past two years, providing a strong foundation for the advancement of our offline operations. Leaders in each city are highly sophisticated, senior in experience, innovative, and proactive. This gives us strong confidence in the scalability and sustainability of their business. The cities we already entered and the learning centers we already opened have all been performing well in the past quarter. Overall, our offline business is continuously validating this business model. At the same time, its development enriches our product mix and enables us to serve increasingly diverse learning needs of our students. This means if students have a demand for online learning, they can choose our online services. If a student wants a more personalized or in-person interaction, they can also choose an offline learning option. It enriches our product matrix. We look forward to the future where our offline business will bring more students and more customer satisfaction to the group. Thanks, Elsie. Hope that addressed your question.

Yes, it is very clear and congratulations again. Thank you.

Your next question comes from Crystal Li with CMS. Please go ahead.

Okay. Thanks, Larry, Shannon, and Catherine. Congratulations on the strong results. I have two questions here. One is for the summer enrollment. Could you share more color on that and maybe the industry insight? And my second question is how should we look at the full year growth outlook given your strong first half and third quarter guidance? Thank you.

Thanks, Crystal. Summer is very important for the whole academic year. As the summer enrollment season draws to a close, I mean, it is almost closed by the end of this month, we are very glad to share that our overall performance has successfully exceeded expectations, and probably you can tell from the guidance we provided for the next quarter. The biggest contributor is the improvement of teaching quality. The retention rate, a core indicator that directly reflects customer recognition and product satisfaction, delivered an outstanding performance this summer. As I just mentioned in my prepared remarks, compared to both our own historical levels and industry average, retention has been continuously improved. What surprises us more is that we saw the new student retention rate keep improving, which also helped with our customer acquisition efficiencies. From the perspective of operational efficiencies, specifically, our ROI in the second quarter improved from 1.99% in the same period last year to 2.75% this year. This means an increase of 38.6%, reflecting our significant step-up in efficiency. As I just mentioned in my prepared remarks, the absolute number of our sales and marketing expenses actually decreased on a year over year basis, but our gross billings still show over 36% year on year increase. That suggests the positive trend will continue. We also have confidence in Q3 that our ROIs for sales and marketing will further improve on a year over year basis. Beyond the refinement of teaching quality, ROI gains also reflect our multiple prolonged efforts on customer acquisition, ongoing explorations of diversified channels, our long-term investment in referrals and private traffic, and systematic enhancement of organizational capabilities. Both of these efforts are inseparable from the deep empowerment of our AI technology. Our AI strategy is crystal clear, as Larry just mentioned, Always AI and Always AI. We have been patient and focused on the value chain of the whole customer journey. On the student side, we are able to build up a three-teacher model adding to the dual teacher model. We have a leading instructor, a supporting tutor, and an AI instructor. The three combined can deliver comprehensive full-cycle learning support. On the teacher support side, AI takes on repetitive tasks, freeing our teachers from those repetitive tasks so they can focus more on their core educational value like sparking curiosity and shaping characters of students. This, in turn, continuously enhances our teachers' professional well-being and personal satisfaction. Actually, in the summer and in the peak season, they can actually reduce their working hours in the peak season. That is a big step. On the operational side, AI is optimizing efficiency across the entire value chain. This includes faster customer service response through AI assistant interactions like automatic Q&As, more precise user profiling for targeted operations, and intelligent optimization of operational processes. All these initiatives not only drive cost reduction and efficiency gains but also provide a solid technology foundation for sustainable business growth. Leveraging all these efforts, we are able to lay a solid foundation for the whole year's growth. We set an initial goal at the beginning of this year to target around 30% year over year revenue growth. If we look at the total numbers we have gathered, our total revenue growth rate for the first half of this year stood at around 47.3%. The upper limit of the Q3 revenue guidance we just provided is 30.6%. From this perspective, our year over year revenue growth for the first nine months will exceed 40%, a figure that significantly surpasses the upper limit we set for the full year goal at the beginning of the year. Therefore, we will also accordingly raise our expectations for the same revenues. I hope that addresses your question, Crystal. Thanks.

Very clear.

As there are no further questions now, I would like to turn the call back over to the company for closing remarks.

Thank you, operator, and thank you, everyone, for joining the call today. If you have any further questions, please do not hesitate to contact our Investor Relations department or our management via email at [email protected] 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.

This concludes today's conference call. You may disconnect your line. Thank you.