Earnings Call Transcript
Gaotu Techedu Inc. (GOTU)
Earnings Call Transcript - GOTU Q1 2020
Operator, Operator
Ladies and gentlemen, thank you for standing by, and welcome to the GSX Techedu Inc. First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded on Wednesday, May 6th, 2020. I would now like to hand the conference over to your first speaker today, Ms. Sandy Qin, IR senior manager of GSX. Thank you. Please go ahead.
Sandy Qin, IR Senior Manager
Thank you, operator. Hello, everyone, and thank you for joining us today. GSX earnings release was distributed earlier today and is available on the company's IR website. On the call with me today are Mr. Larry Chen, GSX Founder, Chairman, and Chief Executive Officer; and Ms. Shannon Shen, Chief Financial Officer. Larry will give a general overview, and then, Shannon will discuss the financials. Following the prepared remarks, Larry and Shannon will be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that 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. Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the SEC. The company does not undertake any obligation to update any forward-looking statements, except as required by the applicable law. It is now my pleasure to introduce Larry. Larry, please go ahead.
Larry Chen, CEO
Thank you, Sandy. Good evening and good morning to you all. Thank you all for joining us for our first quarter 2020 earnings call. First and foremost, on behalf of GSX Techedu, I would like to extend our sincere condolences to the students, parents, and the families affected by the COVID-19 outbreak. I would like to send our utmost gratitude and respect to the medical staff, teachers, public officials, and people from all industries who have united in the fight against the epidemic and kept our society running during the global health crisis. For the first quarter of 2020, we have achieved another period of solid and rapid growth, including the seventh consecutive quarter of GAAP profitability and the eighth consecutive quarter of non-GAAP profitability. During the pandemic, I'm proud to say that we have shouldered our social responsibility and tried our best to contribute within the scope of our capabilities as a young company. Firstly, during the COVID-19 period, we have donated RMB20 million worth of courses to students in Wuhan. Those courses didn't contribute any revenues, but they share the same instructors, tutors, technologies, operations across courses, and learning experiences with our regular winter semester courses. Secondly, we took 49 of our best teachers and launched free courses covering all subjects and all grades. We invested in promoting and attracting traffic to those free courses. Our proprietary live broadcasting technology, which has been functioning well for over five years, strongly supported the smooth delivery of the free courses. Meanwhile, to host the massive number of new students and ensure the high-quality delivery of the courses, we have deployed three independent live broadcasting support systems, upgraded our service setting by three times, boosted our server capability by three times, and increased our bandwidth capabilities by four times, et cetera. Thirdly, our video live broadcasting services tool supported over 134,000 newly joined educational institutions and professionals to transfer offline courses to online. To better support those investments, we invested significantly in our servers and cloud infrastructure. The total costs and expenses incurred by the above-mentioned services, including compensation for instructors and tutors, technology support, and marketing expenses were close to several tens of millions of RMB. Despite the extra cash spending as previously mentioned, our net operating cash flow for the first quarter still reached RMB118 million, significantly higher than RMB65 million for the same period in 2019. Most inspiringly, both our revenues and gross billings are over 4.5 times that of the same period last year. And as I have always stressed, cash is a vital field to propel the growth of our company, and operating cash flow is an essential indicator to measure the operating efficiency of a company. In the first quarter of 2020, despite all of our money-consuming charitable activities, we were still able to generate positive net operating cash flow as we have consistently done over the past quarters. We believe all that is primarily due to our extremely high operating efficiency. Our selling expenses for the first quarter of 2020 were RMB757 million, which was 7.6 times that of last year. Paid enrollments were 774,000 for the fourth quarter, which was 4.1 times of the same quarter last year. As a pure online education service provider, our fiscal year may change the calendar year. As such, the most important retention students for our K-12 business happen in the second and fourth quarters. So, the number of paid enrollments tends to be much higher than the first and third quarters. However, in the first and the third quarters, a majority of the enrollments are first-time paid enrollments. So, if we take LTV into consideration, one new enrollment in the first quarter or third quarter will bring several actual paid enrollments in the following quarters. That's why we always underline organizational capability and operational efficiency, which are the key factors to bring us an outstanding ROI and push us to meticulously plan our investments with a long-term perspective. This quarter, we expanded our investments in customer acquisition and technology development just as we did in the prior quarter. In the first quarter, we observed that the gross billings from our primary school segment, which has a larger customer lifetime value, achieved the fastest growth among all segments. This gives us a healthier student structure and benefits our long-term development. Some investors might ask, is the high ROI sustainable? As I have mentioned on the prior earnings conference call and the investor conference call, our robust growth of revenues enables us to invest more money on our customer acquisition this year than in 2019. The cost to obtain external traffic tends to be the same for all companies eventually. However, after the student traffic flows in, the divergent quality of instructors, tutors, services, operations, and technologies for different online education providers ends up widening the gap between different players. If a company incrementally outperformed the industry average by 3% at every facet of the business, two years later, its ultimate retention rate will be significantly higher. Since we are growing at quite a fast speed, we spend money on marketing now, but it might take us longer to see the full benefit from the lifetime value of the paid enrollments. The net profit margin might fluctuate between quarters due to seasonality, but we strongly believe that we can remain profitable for the full year of 2020, speaking to our profitable growth strategy. Apart from strategically expanding marketing expenses to secure new customers, we remain committed to investing in talent, technologies, efficiencies, content, and brands. We are extremely proud to have the highly efficient organization we've built up today. It's rooted in our belief, faith, mission, vision, values, and culture. The external scrutiny, to some extent, pushes us to review everything ourselves, and we view those as positive feedback advocates for our core value of integrity. Since the first day of our founding, we have regarded integrity as our core value. We are honest not only to our investors, but also to our students, parents, and every employee of the company. Throughout the company, we value integrity and hold a zero-tolerance policy toward any behavior that goes against our value. We believe that only honest people deserve to work with honest people. Only by having complete trust with each other can we build a loving, enduring, and devoted team, and that integrity is a key code in uniting the entire team. We treat integrity as our core value so that we only choose honest people as our workmates; so that we deliver real, high-quality education services to the students and parents as we promised; so that we are absolutely honest, transparent, devoted, and dedicated as a company; so that we gain solid trust from investors who believe in our value and culture and deeply understand our exponential growth. Now, I will hand the call over to Shannon, our CFO, who will walk you through the details of our financial and operating performance.
Shannon Shen, CFO
Thanks, Larry, and thank you everyone for joining the call. The first quarter of 2020 is unusual. During this period, we witnessed a public health crisis, radical changes in all industries, and a profound evolution that the Internet brought to our lives and the unprecedented volatility across the capital market. Living through this period, we could review ourselves better to quickly adapt to external changes and firmly remain focused on our values. Now, I will walk you through our operations and financial results, as well as provide guidance for the next quarter. Please be reminded that all the financial data mentioned are in RMB terms unless otherwise noted. Despite the severe challenges brought by COVID-19, we have achieved a remarkable result in the first quarter. Net revenue increased by 382% year-over-year to RMB1.298 billion. This is our sixth consecutive quarter with revenue growth of more than 350%. Our K-12 revenue growth rose 448% year-over-year. In fact, our K-12 revenue growth has exceeded 400% each quarter since we went public. During the pandemic, we offered free classes for nearly three weeks, which intercepted our routine enrollment recruitment process for regular courses. Nevertheless, we still achieved RMB1.374 billion in gross billings, a 358% growth year-over-year. Our GAAP net income of RMB148 million and non-GAAP net income of RMB191 million are both over four times higher than the same period last year and approached the historical high. This is our eighth consecutive quarter achieving non-GAAP profitability. In the past first quarter, a majority of our enrollments were first-time students on our platform. We recorded paid enrollments of 774,000. Paid enrollments rose by 307% year-over-year. Moreover, the paid enrollments contributed by the first-time students surged significantly compared with the fourth quarter of 2019 when recurring students contributed a larger proportion. During the COVID-19 outbreak, the initiatives we took to fulfill our social responsibility incurred actual costs and expenses that weighed down our operating profit margin. The negative impact on our operating profit margin was partially offset by a value-added tax exemption issued by the government that we recorded in other income. Excluding those impacts, the net income is still beyond expectations. Now, let's break down our operating and revenue streams by business lines. Net revenue from our K-12 courses mainly offered through two brands, Gaotu Ketang and Genshuixue, increased by 448% year-over-year to RMB1.12 billion and accounted for 86% of net revenues. Net revenue from the K-12 segment has continuously grown by over 400% year-over-year and we expect the proportion of K-12 revenue will continue to expand as our main source of revenue. Gross billings contributed by K-12 courses rose by 356% year-over-year to RMB1.09 billion. Paid course enrollments for K-12 increased by 315% year-over-year to 647,000. For the past several quarters, the gross billings of foreign language, professional, and interest courses have kept increasing either on a year-over-year or quarter-over-quarter basis. However, gross billings for the K-12 business show distinct seasonality. Typically, most retentions happen in the second and fourth quarters, while most new student recruitments happen in the first and third quarters. We may have a large student base right now, but existing students will contribute more to gross billings, which indicates the importance of retention for an education company. The continued growth of gross billings from new paid enrollments also explains why our revenue is consistently able to increase both on year-over-year and quarter-over-quarter levels. Within the K-12 segment, I wanted to highlight our primary school business. As Larry mentioned earlier, the growth rate of our primary school segment has been leading our K-12 segments and its gross billings have exceeded all the other K-12 segments in the first quarter of 2020. The achievement signals that we have obtained a considerable amount of new enrollments from primary school during the pandemic period and also testifies to our improvements in curriculums and interactive courseware. Average enrollments per class further increased from 1,700 in the fourth quarter of 2019 to around 2,000 in the first quarter of 2020. Net revenue from our foreign language, professional, and interest courses was up by 188% year-over-year to RMB174 million, and accounted for 13% of net revenues. Gross billings contributed by free language, professional, and interest courses were up by 412% year-over-year to RMB279 million. Paid course enrollments for foreign language, professional, and interest courses increased by 270% year-over-year to 127,000. This segment achieved the fastest gross billing year-over-year growth since the second quarter of 2019. Adults had plenty of time to take more courses during the pandemic, which brought a great opportunity for market growth. GAAP gross profit margin increased by 8.7% year-over-year to 78.2%. Non-GAAP gross profit margin, which excludes share-based compensation, increased by 9.5% year-over-year to 79.2%. This increase was mainly due to greater economies of scale as our average enrollments per class expanded from 980 in the first quarter of 2019 to around 2,000 in the first quarter of 2020. Meanwhile, through the average class size expanded from the fourth quarter of 2019, the gross profit margin slipped slightly quarter-over-quarter because we raised the compensation for tutors to attract the best talent. We always believe that education is about building emotional connections between people. As such, we think of our raised compensation for tutors as an investment that will vastly drive up our talent competitiveness, our organizational capabilities, and the satisfaction of our students and parents. Selling expenses increased to RMB757.2 million, up from RMB99.5 million in the first quarter of 2019. We recommend you to review our selling expenses and growing gross billing together from an ROI perspective. This quarter, impacted by actual selling expenses for free courses, our ROI, which is dividing gross billing by selling expenses, was below 2%. We view the free courses enrollments as pure traffic because those have lower engagement, lower stickiness, and lower conversion compared to our regular low-priced promotional courses. However, the free courses helped us to raise brand awareness, fulfill our social duties, and enhance the public perception of online education. As the majority of this quarter's paid enrollments are first-time students, we need to wait longer to see the lifetime value effect on improving ROI. The new enrollments we acquired this quarter will push up our gross billings in the second quarter. Despite the impact of the free courses, we believe that our ROI in the first quarter continued to lead the sector. Research and development expenses increased by 227% year-over-year to RMB99.4 million. This increase was primarily due to an increase in the number of content professionals and technology development personnel, as well as an increase in compensation for such staff. Going forward, we will continue to expand investments in R&D to further upgrade operating efficiency, which should bring additional leverage. Interest income and realized gains from investments were RMB12.6 million in the first quarter of 2020, up by 1,046% year-over-year, representing the interest we received from matured cash and cash equivalents, short and long-term investments. To utilize our capital in an efficient way, we continued to invest in wealth management products with low risk and high liquidity. In Q1 2020, except for interest income and realized gains from investments, which amounted to RMB12.6 million, our short-term investments also brought accrued interest income which was recognized in accumulated other comprehensive income on the balance sheet. All the aforementioned combined indicates an annual return of approximately 4%. The yield level was in line with the market average and demonstrates our strong capability of treasury management. In terms of our long-term investment with Citibank, it is offshore and 100% principal protected if held to maturity. Following the accounting standard, we record the fair value change based on an independent third-party report on a monthly basis. The return related to the Citibank notes has no impact on the income statement until it reaches maturity. As of March 31st, affected by the extended volatility in the capital market, the mark-to-market loss on the structured note was $6.6 million. By the end of April, according to the valuation report we have received, the mark-to-market loss for the second note has decreased to $3.3 million. The structured note is redeemable three months after purchase. Since we have held the investment for over three months, we could redeem the product anytime. We have redeemed part of the above-mentioned products at par in April and will continue to redeem the rest when yield hits a suitable level to support our stock repurchase fund. Other income increased to RMB61.9 million from RMB503,000 in the first quarter of 2019. This increase was primarily due to the value-added tax exemption issued by the government, partially offset by related costs during the COVID-19 outbreak, which amounted to RMB53.2 million, as well as, a government grant of RMB8.2 million received in the first quarter of 2020. GAAP net income was RMB148 million. Non-GAAP net income increased by 406% year-over-year to RMB190.7 million in the first quarter from RMB37.7 million one year ago. The additional costs and expenses from the pandemic dragged down the operating profit margin but were partially offset by the government tax exemption benefits, leading to our still decent net profit margin. As of March 31st, 2020, we had RMB565.2 million in cash and cash equivalents, RMB1.003 billion in short-term investments, and RMB1.169 billion in long-term investments. Part of our short-term investments matured during the first quarter, and to mitigate the interest rate risk in the uncertain market, we held this part of assets in cash and did not invest in new wealth management products as of the quarter end. In the future, we will invest in suitable products that meet our liquidity and yield needs. As of March 31st, 2020, our prepaid expenses and other current assets include prepayment for traffic acquisition, textbook materials, rental costs, and tuition fees we stored on platforms, including WeChat and AliPay, that have not been transferred to our bank account. As we scale up, the balance of prepaid expenses and other current assets will increase accordingly. As of March 31st, 2020, our deferred revenue balance was RMB1.34 billion. Deferred revenue mainly consists of tuition collected in advance. The deferred tax liability balance was RMB73 million by the end of the first quarter. The similar amount increased the balance of PPE and land use rights in the non-current assets as well. The deferred tax liability is caused by the temporary difference between accounting basis and tax basis for purchasing the Zhengzhou property. The remaining useful life for Zhengzhou property was 37 years, and the balance of PPE, land use rights, and deferred tax liability will gradually decrease at the same amount in the following 37 years and basically has no impact on P&L. As of March 31st, 2020, our non-current other payables totaled RMB221 million, which are payable for the purchase of the Zhengzhou property. In this quarter, we incurred additional cash outflow for free courses and the expansion of operation centers in 11 cities outside of Beijing. Under such circumstances, we still achieved a net operating cash inflow of RMB118 million, up by 82% from RMB65 million in the first quarter of 2019. We also paid for capex expansion totaling RMB106 million. Going forward, we will discuss the most frequently asked topics as well to enhance efficiency and transparency. Please note the topics we discuss might change along with market conditions. First, about our cash balance. Our RMB-denominated cash and cash equivalents and short-term and long-term investments are jointly held by nine onshore entities. The USD-denominated assets are mainly held by our offshore entity in the Cayman Islands, and our cash and cash equivalents are mainly held at the following banks. Our cash savings total RMB20.9 million at China Merchant Bank; RMB6,101,000 at China Construction Bank; RMB494,000 at Bank of Beijing; RMB195.7 million at Industrial Bank; and $48.2 million at Citibank. Our short-term and long-term wealth management investments consist of: $150 million from Citibank, RMB507 million from China Merchant Bank, and RMB633 million from Industrial Bank. Secondly, regarding related party transactions. In the first quarter of 2020, we did not have any transactions with any related parties. As for the related party, we paid RMB327,000 in the first quarter of 2020 for its service, and the payment amounts for 0.025% of our first-quarter net revenues. Certainly, at download numbers, we would like to reiterate that the new download numbers for Gaotu Ketang and Genshuixue apps combined have been among the top after-school tutoring centers in China since the second half of 2019, according to QuestMobile. In the first quarter of 2020, many apps attracted more traffic for free courses, but we believe downloads for free courses do not represent the performance of regular-priced courses. Please do not compare us with unrelated platform apps, picture-taking apps, and other irrelevant apps, which is extremely unprofessional. Firstly, in 2019, Gaotu Ketang contributed 69.34% of our K-12 revenue, nearly 70%. Since the start of last year, we have accumulated RMB4.733 billion in gross billings, maintained positive net operating cash flow, and consistently realized profitability. We have no complex investments, no significant related party transactions, maintain a constant high ROI level, and have no loans, no mortgages, and low liabilities at the end of the first quarter of 2020. We have a diversified management team with clean professional backgrounds. Furthermore, Larry has never sold his shares in the company but focuses only on one core business. Our revenue and net income are all attributed to each employee's full dedication to serving students and parents to their satisfaction. Today, we also announced a two-year stock buyback program amounting to $150 million, which reflects the board and management team's firm confidence in our long-term development. With that, I will now provide our business outlook. Our revenue guidelines for the first quarter are between RMB1.526 billion and RMB1.556 billion, representing an increase of 331% to 340% on a year-over-year basis. These estimates reflect the company's current expectations, which are subject to change. That concludes my prepared remarks.
Operator, Operator
We'll now begin the question-and-answer session. The first question is from Alex Xie from Credit Suisse. Please go ahead.
Alex Xie, Analyst
Hi management. Thank you for taking my questions and congratulations on a very strong set of results. My first question is about our sales and marketing spending. I think since the start of this year, we have observed much more branding campaigns by all online education companies. So, I would like to know what's the percentage of brand spending in GSX sales and marketing expenses and what's the plan for the future? This is my first question. Secondly, I would like to ask about the referral of existing customers for new customers. Is there any related motivation mechanism or data to share with us, such as the referral rates? And then thirdly, I think management has mentioned the tutors are one of the most important segments of our services and you have increased the compensation for the tutors. I read some news that you plan to hire more than 10,000 tutors this year. Would you please comment on that plan? And what's your expected retention of your existing tutors? Thank you.
Larry Chen, CEO
Is there any related motivation mechanism or data to share with us, such as the referral rates? Additionally, management has mentioned that tutors are one of the most important segments of our services, and you have increased their compensation. I read some news that you plan to hire more than 10,000 tutors this year. Can you please comment on that plan? What is your expected retention rate for your existing tutors? Thank you.
Sandy Qin, IR Senior Manager
Thank you for your questions. The sales and marketing expenses are tied to our gross billings, which will be recognized as revenue in the next three to six months. Sales and marketing expenses have increased to over seven times that of the same period last year. We have also noticed a significant year-over-year increase in gross billings. In the first quarter, our gross billings reached RMB1.37 billion. According to capital market insights, this is among the highest for all online live large-class education course providers. Particularly for K-12 students, we expect to see increased gross billings and revenues in the second and third quarters. Our ongoing belief is to serve every student and parent to their satisfaction, which helps build strong brand awareness. We attribute our current results to this belief and strategy. Even though we offered free courses this quarter and donated some regular courses, which impacted our gross billings and increased costs, we are still experiencing rapid growth in our net profit.
Larry Chen, CEO
We serve every parent to their satisfaction. That sense is to build great brand awareness. We believe that by sticking to this belief and strategy, we achieve the numbers you see today. Even though we provided free courses this quarter and donated some regular courses, those efforts weighed down our gross billings and increased costs and expenses, but we are still seeing our net profit grow very fast.
Sandy Qin, IR Senior Manager
So, after COVID-19 broke out, many parents chose to stay at home. This provides a great opportunity for us and we are very glad to see that in the first quarter, our sales and marketing brought us remarkable performance. In the first quarter, when you check the paid enrollments, a majority of them are first-time users. And we believe this value will provide security for the revenues of Q2 and Q3, helping us achieve an ideal performance in the following quarters.
Larry Chen, CEO
After COVID-19 broke out, many parents chose to stay at home. This provides a great opportunity for us and we are very glad to see that in the first quarter, our sales and marketing brought us remarkable performance. In the first quarter, when you check the paid enrollments, a majority of them are first-time users. And we believe this value will provide security for the revenues of Q2 and Q3, helping us achieve an ideal performance in the following quarters.
Sandy Qin, IR Senior Manager
As we accumulate more and more students at GSX and as we increase our brand awareness, we notice many new enrollments come from word-of-mouth referrals. But as of now, we cannot publicize this data because the market does not have a unified method of calculation.
Larry Chen, CEO
Many of them are first-time users. We believe this value will secure our revenues for Q2 and Q3, helping us achieve strong performance in the upcoming quarters. As we continue to attract more students at GSX and raise our brand awareness, we see a significant number of new enrollments stemming from word-of-mouth referrals. However, at this time, we cannot make this data public as the market lacks a standardized method for calculation.
Sandy Qin, IR Senior Manager
Regarding your mention of planning to recruit 10,000 tutors, we make this plan based on our current part growing fee. In Q1, as you can see, our revenue and gross billings are still growing near 400% year-over-year. We believe only by providing the best service and the better results, it is necessary for us to attract the most suitable and best-performing tutors. That is why we are executing this plan as we had planned. And I appreciate your way of mentioning the retention rate of tutors because in the education industry, we care about two types of growth: the growth of students and the growth of our tutors. The key metric we value for the growth of students is the retention rate, and for tutors, that's the same, and we are proud to say that our retention rate of tutors is actually leading the sector.
Nan Shen, CFO
We are focused on attracting the most suitable and high-performing tutors, which is why we are implementing our plan as intended. I also appreciate your mention of the retention rate for tutors. In the education industry, we prioritize two types of growth: the growth of students and the growth of our tutors. The key metric we consider for student growth is retention rate, and we apply the same measure for tutors. We are proud to report that our tutor retention rate is actually at the forefront of the industry.
Sandy Qin, IR Senior Manager
Since the capital market and many investors are concerned about customer acquisition and the competitive landscape this year, I want to add something. We have observed that many big names have also entered the online education sector this year. When we review these market conditions, we believe a common great opinion is it’s a little late to enter at this time.
Nan Shen, CFO
I am proud to say that our retention rate of tutors is actually leading the sector. Since the capital market and many investors are concerned about customer acquisition and the competitive landscape this year, I want to add something. We have observed that many big names have also entered the online education sector this year. When we review these market conditions, we believe a common great opinion is that it’s a little late to enter at this time.
Sandy Qin, IR Senior Manager
When comparing this first quarter with last year, our confidence to expand our investments in customer acquisitions is based on two reasons; number one, due to the COVID-19 outbreak, we determined that many students and parents were staying at home during Q1. We observed many of our operational metrics reached historical highs, such as student attention in class rates, the rate of completing courses, homework submission rates, feedback rates, and net promoter scores—all those metrics reached historical highs. We seized this opportunity to increase customer acquisition. Also, for Q1, after the new first-time users joined our platform, April will be the most critical month for us to do retention for this year. Because we monitored many of the operational metrics that are performing well, we are very confident that we will achieve a great retention rate in April, and based on that, we increased our sales and marketing spend.
Nan Shen, CFO
We took advantage of the high customer satisfaction metrics to boost customer acquisition. For the first quarter, with a new influx of first-time users on our platform, April is crucial for our retention efforts this year. Given our positive operational performance, we are confident in achieving a strong retention rate in April, which has led us to increase our sales and marketing investment.
Sandy Qin, IR Senior Manager
The second reason we have confidence in expanding our sales margin is that since last year, we have been continually upgrading our organizational capabilities and training our talent and professionals. We have trained and retained a lot of really great tutors, which have brought us rewards in the first quarter. Looking back to the first quarter of last year, we had a limited number of tutors, which did not support a large-scale sales and marketing investment because that would lead to waste. This year, because we have a really strong supply chain and talented professionals to support this large scale of sales and marketing, we made the decision. Right now, the sell-side consensus about our full-year revenue is around RMB6 billion. Based on our revenue of Q1 and our guidance for Q2, we can already reach around RMB2.8 billion or more in the first half of this year. Therefore, for the first quarter, the first-time users coming to our courses lay a solid foundation for our revenue growth not only in the first half but also in the second half of the year. Thank you.
Operator, Operator
The next question comes from Maggie Zheng from Haitong International. Please go ahead.
Maggie Zheng, Analyst
Thank you, management, for taking my questions. I have two questions. The first question is regarding the rescheduling of courses in the second and third quarters actually postponed by one month, which may allow for more time in the second quarter, but also a shortened summer holiday. So, will we have additional courses, say, in June? Additionally, how will we conduct courses for the summer? The second question is regarding the student breakdown. We know that currently, the primary students are contributing the largest portion of our enrollments. Could you share with us the enrollment and revenue breakdown for primary, secondary, and high school, as well as the margin difference between the three segments? Thank you.
Nan Shen, CFO
Thanks, Maggie. For your first question, we are pleased to see that essentially, all provinces have announced the schedule for kids to return to school, and everything is getting back to normal in China right now. As of now, we can see that Gaotu has been delayed to July, and it's most likely that Genshuixue will follow that schedule. Therefore, we have been adjusting our course schedule in the first half. For instance, courses for high school, in the past, we scheduled two times of classes for high school students, especially for the 12th grade, and now we can adjust it to one class each week to better align with the pace they are experiencing back at school. Additionally, we may add some more short-term courses to elevate their knowledge level before they take the test. We will also take actions to cater to students' preferences. We have noticed that the summer break is shortened to around six weeks based on the schedules we have observed. It starts in the middle of July and ends in late August. The good thing is that all the uncertainty has been removed, and the clarity is now very high. For online education companies, we have more flexibility and will adjust our course offerings according to specific market conditions. For instance, we will likely host more students at the same time, which also presents a challenge for online education companies, as that is a significant test for us regarding our organizational capability and our supply chain, as well as our capability to provide excellent service within a short timeframe. However, with all the flexibility we possess, we believe we can seize this opportunity, continue attracting students, and assist them in migrating from offline to online education. Thanks. Regarding your second question about the primary, middle, and high school segments, I mentioned in the prepared remarks that the revenue growth for primary school was still far above the overall growth rate for other segments. We firmly believe that the primary school segment is key due to its large student base, lower penetration rate, longer customer life, and broader market potential. Parents of this generation are more open to online education, which is why we always see the primary school segment holds strategic significance for our branding. In this quarter, for the first time, gross billing from the primary school sector ranked at the top of all K-12 segments. The concurrent students starting with us exceeded all other segments as well, indicating a continued commitment to improve our course development, instructor recruitment, and training for the primary school segment. Thank you.
Operator, Operator
The next question comes from Felix Liu from UBS. Please go ahead.
Felix Liu, Analyst
Good evening. Congratulations on a very strong quarter and big guidance. My first question is mainly on the teacher and teaching assistant side. I understand that you are much more prepared this time to capture the increased traffic from COVID-19 in your marketing activities. So, could you just share with us the updated teacher and teaching assistant headcount? Secondly, on the teacher regulation side, could you give an update about the licensing requirement for teachers and teaching assistants? Thirdly, I noticed that the ASP of your courses increased significantly this quarter, which is impressive. Could you help us understand the ASP trend going forward? Thank you.
Nan Shen, CFO
Thanks, Felix. I may not have enough time to address all your questions. So I will probably take the first one. Regarding the teachers and tutors headcount, currently, we've exceeded 10,000 employees. During the COVID-19 period, we encountered many opportunities to recruit talents that we could not have imagined in the past. One reason is that our company has become larger and more attractive, and the good job opportunities in the market are limited. That is why we seized this golden opportunity to recruit a considerable number of high-quality talents that we value. For teachers and tutors, as we mentioned, we raised compensation for tutors. Investors may have concerns about gross profit margin and whether raising the compensation level for tutors will lower the GP margin. However, in the long run, investing in people is always the best strategy. From our observation, after we raised compensation for our tutors, we could attract top tutor talent. Even those teachers who used to teach one-on-one or in small classes are now joining us as tutors. This, in turn, provides our students with a better learning experience. In the long run, this will help with a higher retention rate. This strategy is essential for us as we continue to attract the best talent. I apologize for the lengthy prepared remarks today, as we want to share everything we think you may have questions or interest in the future, even if you just saw our earnings and have not noticed some questions within a short notice. I would also like to take this opportunity to quickly discuss the disagreement we have with the recent short-seller report wherein a recorded phone interview transcript was sold. Brushing is illegal in China, and it is hard to imagine that a criminal would take the risk to engage in such acts without any apparent benefits. The content of the interview was completely different from our actual operations. For example, the recording claimed that brushing has stopped because of the epidemic. However, if you consider our growth in the first quarter and the expectation of continued fast growth in the second quarter, it makes little sense that brushing could impact ROI positively. We have already divided larger classes into several smaller classes, hosted by tutors to improve the learning experience, just as other companies do in the industry. You do not see other students in the small classes, and many things mentioned in the conversation make zero sense. We highly suspect the recording's veracity. If it turns out that this fabricated recording can be used as evidence, there will be no order in the capital market. We hope they can provide any piece of evidence such as names from our management involved in brushing or any contract or bank receipts demonstrating the use of ID for brushing activities. Upon receiving such evidence, we will present our official stance, complete with official seals and a full set of bank statements as proof. We've already provided all the banks we use. Please just choose one as reference. Given the fundamental impact, Gaotu's revenue from the comparisons made with companies operating completely different business models, we strongly feel that they understand very little about our operations. Therefore, we are open to inviting them to our office for a tour to introduce them to our business. We offer to reimburse all their travel costs. Ultimately, we hope our communication remains transparent and smooth, and we welcome constructive criticism that helps us to become a better company. Thank you.
Operator, Operator
This concludes the question-and-answer session. I would like to turn the conference back over to Ms. Sandy Qin for any closing remarks.
Sandy Qin, IR Senior Manager
Thank you, operator. Thank you everyone for joining the call today. If you have any further questions, please don't hesitate to contact us or the company directly. Please feel free to set up alerts on the company's IR website. Thank you very much.
Operator, Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.