Hello, ladies and gentlemen. Thank you for standing by. And welcome to the Gau Tu Techedu Inc. Second Quarter 2026 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's remarks, there will be a question and answer session. Today's conference call is being recorded. I would now like to turn the conference over to your first speaker today, Ms. Catherine Chen. Head of Investor Relations. Please go ahead, Catherine.

Thank you. Good evening, everyone.

Thank you for joining Gautu's Second Quarter 2026 Earnings Conference Call.

My name is Catherine, and I'll help host the earnings call today. Gautu's earnings release for the quarter was distributed and is available on the company's IR website at ir.gautu.ca as well as through PR Newsletter Services. Joining the call with me tonight from Gautu Senior Management is Mr. Larry Chen, Gautu's Founder, Chairman, and Chief Executive Officer, Mr. Robin Luo, Gautu's Chief Operating Officer, Mr. Mike Xu, Gautu's Head of Strategy, and Ms. Weila Yao, Gautu's Senior Finance Director. Larry, business highlight and strategy, followed by Robin's overview of our operational performance, and we will finish with a detailed discussion of our financial performance by WELA. Following their prepared remarks, we'll open the floor to questions from analysts. Robin and Mike will address analyst questions during the QA session. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements made of the U.S. Guided Security and Litigation Reform Act of 1995. These forward-looking statements

are based on expectations as well as the current market and operating conditions.

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 cost the company's actual results, performance, or achievements to differ material statements. Further information regarding this and other risks is included in the company's public filing with the USFDC. The company obligations to update any forward-looking statements as required under applicable law. During today's call, management will also discuss certain non-GAAP measures for comparison purpose only for definition of non-GAAP financial and reconciliation of GAAP to non-GAAP financial results. please refer to our second quarter 2026 earnings release published earlier today. As a reminder, this conference is being recorded. In addition, our webcast of this conference call will be available on Galtu's IR website. It is now my pleasure to introduce our founder, chairman, and chief executive officer, Larry.

Good evening and good morning, everyone. Thank you for joining us on GoTo's second quarter 2026 earnings conference call. I would like to take this opportunity to thank each of you for your interest in and support for GoTo. Before I start, please be reminded that all financial figures discussed today are in RMB unless stated otherwise. This quarter, our sustained user-focused investment in educational products, learning services, and organizational capabilities are steadily translating into healthier unit economics and a more efficient operating system. Meanwhile, the AI capabilities we have been building are becoming more deeply embedded across business processes, driving tangible improvements in product experience, service efficiency, and organizational productivity. For GoTo, high-quality growth means more than skill alone. It's about establishing a solid foundation for sustainable growth. Building user trust through superior products and services Improving the quality of growth through stronger retention and word of mouth Enhancing profitability through more disciplined resource education And leveraging technology to extend the reach of high-caliber educational services Today, I'd like to share our thinking on three fronts. Our strategic priority, the role on the user value and the brand building, resource allocation, and AI capability development. First, we have always placed the user value at the heart of our sustainable long-term development. Over the past 12 years, Gotu has built a comprehensive learning service ecosystem that supports learners at different stages of growth and integrates both online and offline offerings. We strive to provide premium products and services that fit every user's needs throughout their life and learning journey. The value of this system lies not only in the breadth of educational products it offers, but also in the deep insights it continuously provides us into users' evolving needs, insights that enable us to deliver high-quality services on an ongoing basis. As a digital native learning service provider, We capture data on learning behaviors, service touchpoints, and interactive feedback across multiple scenarios and convert this data into dynamic user insights that directly refine our product design, teaching services, and operational system. As products and services become more closely aligned with real needs, The learning experience naturally improves, which in turn strengthens user recognition, retention, word of mouth, and overall brand awareness. This organic momentum gave rise to three self-reinforcing flywheels, data, experience, and brand. that continuously compound and fill each other over time. We are beginning to see this virtuous cycle take hold. Many students who studied with GoTo in their early years have now returned to GoTo, either as a student or as an employee. Their return reflects the lasting trust built through genuine learning experiences. and informs the ongoing iteration of our teaching and service systems. It also reinforces our conviction that educational service is inherently a long-term endeavor built on being chosen, trusted, and proven over time. Second, we remain committed to driving profitable growth. concentrated our resources on businesses with stronger user value propositions and clearer operational returns. Our innovation and exploration over the past few years have deepened our understanding of the needs of different user groups and how products mature and scale while sharpening our criteria for business prioritization.

For businesses that have demonstrated strong user satisfaction,

and Xiaofei Chen. We seek to unlock greater operating leverage by strengthening their products, allocating greater China resources and providing stronger organizational support to drive higher quality growth. For businesses still in their early stages, we prudently and dynamically optimized resource allocation, concentrating our investment on areas featuring the strongest return potential. Our operating performance in the first half of the year demonstrates that this strategy is beginning to deliver results in our online business High retention rates and improved operation efficiency contributed to ongoing improvements in unit economics. Meanwhile, our offline business spanning diverse scenarios including dream center, boot camps, and offline learning centers delivered high double-digit year-over-year revenue growth in the first half of this year with steady gains in its operating quality and business fundamentals. More importantly, the synergies between our online and offline businesses continue to strengthen. The brand equity and huge trust with cultivated online support offline expansion. In turn, our differentiated offline service experience reinforces brand awareness and user engagement. Measurable learning outcomes remain the clear proof of the value we deliver as we expand our business footprint and build operational resilience. They also underscore The effectiveness of our teaching and service capabilities across diverse scenarios. Since the beginning of 2026, our traditional online business has helped over 200 students gain admission to the top two domestic universities. Building on years of accumulated service expertise, our offline overseas study business has assisted nearly 700 students secure offers from the world's top 50 universities. These tangible achievements stem from our relentless pursuit of quality and long-term commitment to our mission. Our high-quality course and service delivery have always been central to earning user trust, and brand reputation. And they remain the cornerstone of our business's sustainable, healthy development. Third, moving on to long-term capability development, AI is emerging as a critical productivity driver for go to the future. As a digital native education company, We're already seeing AI generate tangible value across several key areas of our business. In curriculum development, AI is helping us restructure the content development workflow, improving efficiency by five to eight times in certain scenarios, while significantly lowering the cost of producing personalized content. In course delivery and tutoring services, AI-powered assistance and quality control now cover thousands of key checkpoints across the service workflow. For instance, automated assignment grading has substantially reduced repetitive work. enabling our tutors to devote more time and energy to high-quality guidance and personalized services. AI is also sharpening our user insights. By analyzing learning behaviors and interactive data, we can identify user profiles and shift in demand more promptly. and deliver more precise learning support at critical milestones, enhancing students' learning experience, boosting engagement, and improving user retention. On the user-facing side, we continue to refine our fly teacher model, providing more efficient synergies among instructors, tutors, and AI capabilities. to provide users with more seamless and personalized learning support, which drives the product's stickiness and depth of use. As we embedded AI more deeply across our business, it is poised to be a key driver in elevating Go to the product quality and operating efficiency. We remain committed to balancing sustainable growth Disciplined Capital Education, and our long-term mission of creating value for both shareholders and the society. Guided by this principle, as of August 26, 2026, we had repurchased a total of nearly 36.5 million ADSs for 741.8 million RMB. Going forward, We will continue to advance our shared repurchase program while preserving the financial strength and flexibility needed to support long-term growth. We will also continue to fulfill our responsibilities as a corporate citizen by making quality educational resources more widely accessible. Looking ahead, we will remain deeply focused on users' long-term growth, leveraging advanced technology to elevate our service capabilities and operating efficiency while navigating market cycles through disciplined operations. At GoTo, we believe the value of education compounds over time through every meaningful and effective service we deliver. As we continue to integrate AI capabilities across teaching service delivery and operations, GoTo will forge a more resilient business foundation and drive stronger operational performance, creating superior learning experiences for our long-standing users and generating sustainable value for shareholders who have placed their trust in Gotu. Thank you very much, everyone. This concludes my prepared remarks. I will now pass the call over to our CEO, Robin, to walk you through the quarter's operational performance.

Thank you, Larry, and thank you, everyone, for joining our call today. Let me take you through our operating performance and business update for the second quarter of 2026. Please note that all financial data are in RNB terms unless otherwise stated. Guided by a focus on profitable growth, we continue to upgrade our educational products and services and strengthen our teacher development system, expanding user base and delivering long-term user values. Net revenues for the quarter increased by 20.2% year-over-year to nearly 1.7 billion, while grossing billing grew by 19.4% to approximately 2.7 billion, reflecting our ability to effectively capture user demand. As enrollment grew and operating efficiency improved, we unlocked greater operating leverage. Adjusted operating loss and adjusted net loss narrowed significantly by 38.5% and 37.6% year-over-year, respectively. And operating expenses as a percentage of net revenues declined by 7.5%. The improvement in our operating expense ratio was primarily driven by continued optimization throughout the end-to-end user acquisition funnel and the efficiency gains across our middle and back office operations. In user acquisition, we remain focused on enhancing unit economics, dynamically optimizing are optimizing our channel mix and resource allocation. They are leveraging AI capabilities to sharpen operational execution and improve conversion efficiency. During the quarter, selling expenses grew at a slower pace than gross billions. At the same time, the integration of AI and other digital tools into our business processes continue to improve middle and back office operating efficiency, driving our cost structure.

Specifically, R&D and the Gen A expenses as a percentage by 3.5 percentage points year over year.

The enhancement in operational quality is also reflected in our cash flow performance and balance sheet strength. During the quarter, net operating cash inflow increased by 46.3% year-over-year to $861.2 million. As of June 30, 2026, our cash reserves, including cash and cash equivalents, restricted Short-term and long-term investments totaled nearly $4.0 billion. Excluding the impact of share buybacks, our cash reserves increased by $354.6 million year-over-year. Deferred revenue reached $2.6 billion, representing 18.9% year-over-year growth. The operational achievements are not the result of any single initiative, but rather the compounding effect of our ongoing focus on organizational capabilities and operational excellence. Next, let me turn to our business progress by segment. 95% of net revenues. Our two core segments, non-academical Tutoring services and traditional learning services generated over 85% of total revenues. Our new initiatives focus on online and offline non-academic tutoring services. During the quarter, this segment's revenue increased by over 30% year-over-year, accountable for over 40% of total revenues. while gross billions grew by over 20% year-over-year, contributing over 45% of total gross billions. Within this sector, my business remains profitable this quarter, with continued improvement in gross quality as well as operating stability.

On the service front, we integrated the AI platform to further refine the service granularity

significantly enhancing the responsiveness, personalization, and the depth of our tutor support services. This contributed to a meaningful year-over-year increase of over 5% points in the retention rate for the online business moments in the spring season, further reinforcing user trust and the brand loyalty. On the product side, we focused on curriculum to the developmental needs and learning patterns of younger learners while broadening our product offerings. These efforts have helped create a healthier and more balanced user experience for sustainable long-term growth. Our traditional business continues to deliver solid growth during the quarter, with growth feelings increasing by over 15% are accounting for over 40% of total gross billing, while revenue contribution exceeded 40%. During the summer enrollment, we placed a greater emphasis on acquisition quality and conversion efficiency by refining our marketing content, dynamically optimizing our acquisition channels and reallocating resources toward higher ROI channels. Meanwhile, Average AI capabilities to enhance lead allocation and conversion management throughout the user acquisition process. This quarter, the contribution from private traffic and word-of-mouth referrals further increased year over year, driving steady improvements in channel mix and overall acquisition efficiency. To better meet the concentrated demand during the summer enrollment period, We also enhanced our comprehensive training mentor talent development system for promotional course tutors, shortly ramp up for new hires and improving new tutor productivity by more than 20% year over year. In addition, since 2025, we have continued to enrich the talent pipeline and the service delivery system for our online are all one-on-one tutoring business. These accumulated investments have increasingly translated into tangible operating outcomes this quarter, driving year-over-year growth of more than 55% in gross buildings from new enrollments for this business. Stronger talent reserves and the service capabilities enable us to capture large-scale user demand while maintaining consistently high standards of teaching and service delivery. Another key component of our learning services is educational services for college students and adults, where revenue grew by more than 15% year over year, accounting for over 10% of total revenues. Demand for college students is both strong and varied. As such, we continue to explore service scenarios spanning the full development arc from academic study to career development and strengthen the cross-business synergy between our college learning programs and our civil service exam preparation offerings. On the user front, we've updated our service to better address students' needs across different stages of development, elevating user lifetime value. Operationally, we have connected lead management and resource sharing across the two businesses, improving the utilization of offline classrooms and other operational resources. This has enhanced both organizational Agility and Profitability. As synergies like this gradually materialize, our service capabilities around college students are strengthening, driving stronger growth momentum. This quarter, for the college learning programs and the civil service exam preparation businesses combined, both revenue and growth buildings grew by over 40% year over year, while operational cash flow improved substantially. In our offline operations, our two dream centers in Zhengzhou and Wuhan reached full capacity as of the second quarter, proving our centralized learning center model can be replicated and scaled. Supported by strong existing market demand and our accumulated operational experience, we see further room to expand this model's service and the Geographic Reach. Going forward, we will take a prudent approach to expansion, setting its pace based on actual demand and operational efficiency. Looking ahead, we will remain focused on advancing our core strategic priorities with a disciplined approach to resource allocation. While maintaining a premium user experience and high-quality services, We will pursue healthier and more efficient growth across all business segments to drive sustained profitability. With that, I will now turn the call over to our Senior Finance Director, Willa, who will walk you through our financial data.

Thank you, Robin. I will now walk you through our financial data. Please note that all financial data are in RMB. Our cost of revenue this quarter was $559.2 million. Gross profit increased 21.2% year-over-year to over $1.1 billion, with a gross margin of 66.5%. Total operating expenses during the quarter increased 8.8% year-over-year to nearly $1.3 billion. Breaking it down, selling expenses increased 11.2% year-over-year this quarter to 913.2 million, accounting for 54.7% of net revenues. Research and development expenses increased 4.5% year-over-year to 154.8 million, accounting for 9.3% of net revenues. General and administrative expenses increased 1.8% year-over-year to 192.6 million accounting for 11.5% of net revenues. Loss from operations was 149.8 million and the operating loss margin was 9.0%. Non-debt loss from operations was 143.0 million and non-GAAP operating loss margin was 8.6%. Net loss was 135.8 million and net loss margin was 8.1%. Net loss was 129.1 million and net loss margin was 7.7%. Our net operating cash inflow increased 46.3% year-over-year to $861.2 million. Now turning to our balance sheet, as of June 30, 2026, we have $929.6 million in cash, cash equivalents, and restricted cash, along with $2.4 billion in short-term investments. and 642.9 million in long-term investments. This comes to a total of nearly 4.0 billion. As of June the 30th, 2026, our deferred revenue balance was 2.6 billion, primarily consisting of tuition received in advance. As of August the 26th, 2026, we had repurchased an aggregate of nearly 36.7 million ADICs on the open market for 741.8 million RMB. 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 2026 are expected to be between 1,838 million and 1,858 million, representing an increase of 16.4% to 17.7% on a year-over-year basis. This concludes my prepared remarks. Operators are now ready for the Q&A session. Thank you, everyone, for listening.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. For the benefit of all participants on today's call, if you wish to ask your question to management in Chinese, please immediately repeat your question in English. For the sake of clarity and order, please ask one question at a time, management will respond, and then feel free to follow up with your next question. At this time, we will pause momentarily to assemble our roster. Our first question comes from Daisy Chen with Haitong International. Please go ahead.

感谢管理层接受的提问。 恭喜公司这个季度业绩表现稳健。 想请教一下管理层这个线下业务的一个进展, 就是目前的话咱们最新的运营情况如何。 同时也想说了解一下管理层对于近两三年的具体的扩张策略。 I'll translate myself. Thank you, management, for my question, and congratulations on the Sony results. My question is about the offline business. Could management share the latest operational progress of the offline segment? Can you explain more details about your offline expansion strategy for the next two or three years? such as the capacity expansion pace and your margin implemented roadmap. Thank you.

Okay, I'll take this question on mine. Thank you, Daisy, for your question. Sure, offline is becoming an important growth area for GAL2, but we are managing it with a very clear principle, that is, profitable growth comes before blind expansion.

In Q2 and during the summer season, offline continue to show encouraging momentum. We are seeing demand in active cities and some earlier entry locations are beginning to benefit from stronger local brand recognition and word of mouth.

That matters because offline education is very local. Once trust is built in city, acquisition,

gradually become healthy.

The current growth is mainly coming from aggressive footprint expansion. A large part of the improvement is coming from the operating quality, which is the better renewal rate and better classroom utilization, better staff productivity, et cetera. We are working to fill existing capacity more effectively improve course scheduling, strengthen teacher supply, which will lead to higher retention rate. These are the levers that matters for profitability. And at the same time, we are realistic about the offline model. In the early stage, investment is downloaded, so we need local team, teaching space, and local curriculum adoption. It takes time for a city to mature. So on expansion, our approach is selective. We will still consider new capacity while demand is clear and the local model is healthy. But footprint growth itself is not the main KPI. In some cities, the best use of resource is to fill existing classroom better. In some products, the priority is to strengthen teacher supply or improve conversion. And after some cycle, we will review performance carefully city by city, project by project. We will continue to allocate resource. where our project or city do not meet our profitability standard, we will optimize resource allocation or even eliminate projects and sites that we do not see potential to generate right economic returns. So the goal is to concentrate resource on profitable and promising sites and projects so offline can move towards meaningful profit contribution over time. So that concludes my answer. Hope that can address your question, Daisy.

Thank you, Daisy. Did you have a follow-up question?

No, thank you. That's perfect. Thank you.

Thank you. Again, if you have a question, please press star then 1. As there are no further questions now, I'd like to turn the call back over to Catherine Chen for closing remarks.

Thank you, everyone, for joining our call tonight. And if you have any further questions, please don't hesitate to contact our Investor Relations Department or our management via email at ir.gotu.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.

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