GSX Announces Financial Results for the Fourth Quarter and Fiscal Year of 2019

- Quarterly Results:
Net Revenues up by 412.9% Year-Over-Year
Net Income up by 658.7% Year-Over-Year
Non-GAAP net income up by 616.7% Year-Over-Year
Cash, cash equivalents, short-term and long-term investments totaled up by 1,056.7% Year-Over- Year

- Fiscal Year Results:
Net Revenues up by 432.3%
Net Income up by 1,050.3%
Non-GAAP net income up by 1,020.7%

BEIJING, Feb. 18, 2020 /PRNewswire/ -- GSX Techedu Inc. (NYSE: GSX) ("GSX" or the "Company"), a leading online K-12 large-class after-school tutoring service provider in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2019.

Fourth Quarter 2019 Highlights([1])

    --  Net revenues increased 412.9% year-over-year to RMB935.0 million.
    --  Gross billings([2]) increased 396.3% year-over-year to RMB1,578.6
        million.
    --  Income from operations increased 604.2% year-over-year to RMB167.6
        million, from RMB23.8 million in the same period of 2018.
    --  Non-GAAP income from operations increased 572.2% year-over-year to
        RMB190.9 million, from RMB28.4 million in the same period of 2018.
    --  Net income increased 658.7% year-over-year to RMB174.5 million, from
        RMB23.0 million in the same period of 2018.
    --  Non-GAAP net income increased 616.7% year-over-year to RMB197.8 million,
        from RMB27.6 million in the same period of 2018.
    --  Cash and cash equivalents, short-term investments and long-term
        investments totaled RMB2,735.7 million as of December 31,2019, compared
        to RMB236.5 million as of December 31, 2018.
    --  Total enrollments increased 290.2% year-over-year to 1,120,000.

Fiscal Year 2019 Highlights([1])

    --  Net revenues increased 432.3% year-over-year to RMB2,114.9 million.
    --  Gross billings([2]) increased 412.6% year-over-year to RMB3,358.2
        million.
    --  Income from operations increased 1,023.4% year-over-year to RMB215.7
        million, from RMB19.2 million in the fiscal year of 2018.
    --  Non-GAAP income from operations increased 999.6% year-over-year to
        RMB276.0 million, from RMB25.1 million in the fiscal year of 2018.
    --  Net income increased 1,050.3% year-over-year to RMB226.6 million, from
        RMB19.7 million in the fiscal year of 2018.
    --  Non-GAAP net income increased 1,020.7% year-over-year to RMB286.9
        million, from RMB25.6 million in the fiscal year of 2018.
    --  Total enrollments increased 257.6% year-over-year to 2,743,000.


             [1]      For a reconciliation of non-
              GAAP numbers, please see the table
              captioned "Reconciliations of non-
              GAAP measures to the most comparable
              GAAP measures" at the end of this
              press release. Non-GAAP gross
              profit, non-GAAP income from
              operations and non-GAAP net income
              exclude share-based compensation
              expenses.


             [2]     Gross billings is a non-GAAP
              financial measure, which is defined
              as the total amount of cash received
              for the sale of course offerings in
              such period, net of the total amount
              of refunds in such period. See "About
              Non-GAAP Financial Measures" and
              "Reconciliations of non-GAAP
              measures to the most comparable GAAP
              measures" elsewhere in this press
              release.


             
              
                Financial and Operating Data - Fourth Quarter and Fiscal Year of 2019


                    
              (In thousands of RMB, except for student enrollments and percentages)




                                                                            
              Three Months Ended December 31,



                                                                                  2018                         2019    
     Pct. Change

                                                                                                                                   ---


     Net revenues                                                             182,265                      935,027               412.9%



     Gross billings                                                           318,115                    1,578,642               396.3%



     Income from operations                                                    23,773                      167,596               604.2%



     Non-GAAP income from operations                                           28,406                      190,911               572.2%



     Net income                                                                22,974                      174,463               658.7%



     Non-GAAP net income                                                       27,607                      197,778               616.7%



     Total enrollments                                                        287,000                    1,120,000               290.2%


                                      
             Fiscal Year Ended December 31,



                                           2018                         2019   
     Pct. Change




     Net revenues                      397,306                    2,114,855              432.3%



     Gross billings                    655,128                    3,358,152              412.6%



     Income from operations             19,154                      215,734            1,023.4%



     Non-GAAP income from operations    25,071                      275,971              999.6%



     Net income                         19,650                      226,630            1,050.3%



     Non-GAAP net income                25,567                      286,867            1,020.7%



     Total enrollments                 767,000                    2,743,000              257.6%

Larry Xiangdong Chen, GSX's founder, Chairman and CEO, commented, "As you can see from the stellar performance, GSX came a long way in the fourth quarter of 2019 by many measures. We take great pride in seeing our revenues and gross billings growth occupying leading position in the online education industry. From the beginning, we have been offering our customers compelling value by focusing on online live large class business. We extremely focus on delivering teaching quality, strengthening organizational capability, improving operational efficiency, as well as attracting intelligent, education-loved and dedicated talents. As 2020 unfolds, we continue to be committed to hiring and retaining top-notch teachers and talented professionals, investing significantly into technology and content development, and spending wisely in high ROI channels to expand and leverage our customer base, as we move to establish an enduring brand. We will continue our growth with emphasis on effectiveness and profitability strategy as we have been doing over the past three years."

Shannon Shen, CFO of GSX, added, "Net revenue, gross billings and net income all hit record highs during the quarter. Net revenue surged 412.9% year-over-year to RMB935.0 million during the quarter which propelled full year net revenue to RMB2.11 billion. Gross billings for the year reached RMB3.36 billion while net income was RMB226.6 million and non-GAAP net income was amounted to RMB286.9 million. Revenues from our core K-12 large online live classes maintained lightspeed growth, increasing 468% year-over-year during the quarter driven by paid enrollments which increased 410% year-over-year. These phenomenal results during the quarter are a direct result of our augmented organizational capabilities, effective execution of our corporate strategy, and improving operational efficiency. Going forward, we will continue to enhance the quality of our courses and services and leverage technology to optimize operational efficiency in order to generate long-term sustainable growth healthy."

Financial Results for the Fourth Quarter of 2019

Net Revenues

Net revenues reached RMB935.0 million, a 412.9% increase from RMB182.3 million in the fourth quarter of 2018. The increase was mainly driven by the growth in paid course enrollments for K-12 courses.

Cost of revenues

Cost of revenues rose 238.5% to RMB196.0 million from RMB57.9 million in the fourth quarter of 2018. The increase was mainly due to the increase in compensation for instructors and tutors, learning materials and other operating related expenses.

Gross Profit

Gross profit increased 494.5% to RMB739.0 million from RMB124.3 million in the fourth quarter of 2018. Gross profit margin increased to 79.0% from 68.2% in the same period of 2018, primarily as a result of economies of scale.

Non-GAAP gross profit increased 498.6% to RMB745.3 million from RMB124.5 million in the same period of 2018. Non-GAAP gross profit margin increased to 79.7% from 68.3% in the same period of 2018.

Operating Expenses

Operating expenses were RMB571.4 million, increased from RMB100.6 million in the fourth quarter of 2018.

Selling expenses increased to RMB442.0 million from RMB58.2 million in the fourth quarter of 2018. The increase was primarily a result of higher marketing expenses to expand the customer base and enhance the brand, as well as an increase in compensation to sales and marketing staff.

Research and development expenses increased 215.1% to RMB83.5 million, from RMB26.5 million in the fourth quarter of 2018. The increase was primarily due to an increase in the number of course professionals, educational content professionals and technology development personnel, as well as an increase in compensation for such staff.

General and administrative expenses increased 191.1% to RMB46.0 million from RMB15.8 million in the fourth quarter of 2018. The increase in general and administrative expenses was mainly due to an increase in the number of general and administrative personnel and an increase in compensation paid to general and administrative staff.

Interest income and Realized gains from investment

Aggregation of interest income and realized gains from investments this quarter, solely representing the income received from cash, cash equivalents and short-term wealth management products, increased 488.2% to RMB10.0 million, from RMB1.7 million in the fourth quarter of 2018. This resulted from an increase to RMB1,547.4 million as of December 31, 2019 from RMB231.3 million as of December 31, 2018 of cash, cash equivalents and short-term investments.

As of December 31, 2019, 90% of the short-term investments with the amount of RMB1,473.5 million and 99% of the long-term investments with the amount of RMB1,188.3 million were classified as available-for-sale securities ("AFS"). According to ASC 320, AFS shall be measured subsequently at fair value of which any changes shall be recognized in other comprehensive income in the balance sheets until realized. As such, unrealized gains related to those investments amounted to RMB7.7 million as of December 31, 2019 were represented as part of "accumulated other comprehensive income" of balance sheets, which would be recorded into earnings in the statements of operations at the date when the Company realizes the gains.

Income from Operations

Income from operations was RMB167.6 million, compared with RMB23.8 million in the fourth quarter of 2018.

Non-GAAP income from operations increased to RMB190.9 million, from RMB28.4 million in the fourth quarter of 2018.

Net Income

Net income increased to RMB174.5 million, from RMB23.0 million in the fourth quarter of 2018.

Non-GAAP net income increased to RMB197.8 million, from RMB27.6 million in the fourth quarter of 2018.

Cash Flow

Net operating cash flow for the fourth quarter of 2019 was RMB738.8 million, a 394.5% increase from RMB149.4 million in the fourth quarter of 2018.

Basic and Diluted Net Income per ADS

Basic and diluted net income per ADS was RMB0.74 and RMB0.70, respectively, in the fourth quarter of 2019.

Cash and Cash Equivalents, Short-Term Investments and Long-Term Investments

As of December 31, 2019, the Company had RMB74.0 million of cash and cash equivalents, RMB1,473.5 million of short-term investments and RMB1,188.3 million of long-term investments, compared with RMB33.3 million of cash and cash equivalents, RMB198.0 million of short-term investments and RMB5.2 million of long-term investments as of December 31, 2018. The increase of the balance from December 31, 2018 was primarily due to the cash generated from Initial Public Offering, increase of net operating cash inflow, and efficient deployment of capital during 2019.

Deferred Revenue

As of December 31, 2019, the Company's deferred revenue balance was RMB1,337.6 million, an increase of 391.8% from RMB272.0 million as of December 31, 2018. Deferred revenue primarily consisted of tuition collected in advance.

Accumulated Other Comprehensive Income

As of December 31, 2019, the Company's accumulated other comprehensive income totaled RMB17.8 million, comprised RMB10.1 million of foreign currency translation adjustments and RMB7.7 million of unrealized gains on available-for-sale investments, compared with RMB0.9 million of foreign currency translation adjustments and RMB0.2 million of unrealized gains on available-for-sale investments as of December 31, 2018.

Financial Results for the Fiscal Year of 2019

Net Revenues

Net revenues reached RMB2,114.9 million, a 432.3% increase from RMB397.3 million in 2018. The increase was mainly driven by the growth in paid course enrollments for K-12 courses and a higher level of tuition fees that was charged to K-12 students.

Cost of revenues

Cost of revenues increased 275.3% to RMB535.9 million, from RMB142.8 million in 2018. The increase was mainly due to an increase in compensation for instructors and tutors, learning materials and other operating related expenses.

Gross Profit

Gross profit increased 520.1% to RMB1,578.9 million, from RMB254.6 million in 2018. Gross profit margin increased to 74.7%, from 64.1% in 2018, primarily as a result of economies of scale.

Non-GAAP gross profit increased by 526.1% to RMB1,595.4 million, from RMB254.8 million in 2018. Non-GAAP gross profit margin increased to 75.4%, from 64.1% in 2018.

Operating Expenses

Operating expenses were RMB1,363.2 million, an increase from RMB235.4 million in 2018.

Selling expenses increased to RMB1,040.9 million, from RMB121.5 million in 2018. The increase was primarily a result of an increase in marketing expenses to expand the customer base and for brand enhancement, as well as an increase in compensation for sales and marketing staff.

Research and development expenses increased 186.4% to RMB212.2 million, from RMB74.1 million in 2018. The increase was primarily due to an increase in the number of course professionals, educational content professionals and technology development personnel, as well as an increase in compensation paid to such staff.

General and administrative expenses increased 176.6% to RMB110.1 million, from RMB39.8 million in 2018. The increase was mainly due to an increase in the number of general and administrative personnel and an increase in compensation paid to general and administrative staff.

Interest income and Realized gains from investment

Aggregation of interest income and realized gains from investments, solely representing the income received from cash, cash equivalents and short-term wealth management products, increased 822.7% to RMB20.3 million, from RMB2.2 million in 2018. The increase was primarily due to an increase in the cash generated and the efficient deployment of capital.

Income from Operations

Income from operations increased to RMB215.7 million, from RMB19.2 million in 2018.

Non-GAAP income from operations increased to RMB276.0 million, from RMB25.1 million in 2018.

Net Income

Net income increased to RMB226.6 million, from RMB19.7 million in 2018.

Non-GAAP net income increased to RMB286.9 million, from RMB25.6 million in 2018.

Cash Flow

Net operating cash flow increased by 431.3% to RMB1,285.1 million, from RMB241.9 million in 2018.

Basic and Diluted Net Income per ADS

Basic and diluted net income per ADS were RMB0.95 and RMB0.90 respectively, in 2019.

Share count

As of December 31, 2019, the Company had 159,097,050 ordinary shares outstanding.

Recent Developments

Follow-on Offering

In November 2019, the Company completed a registered follow-on public offering of secondary shares. The company did not receive any proceeds from the offering. Including the fully exercised greenshoe, the selling shareholders sold a total of 20,700,000 ADSs, representing 13,800,000 Class A ordinary shares.

Environmental, Social and Governance

Donation of Online Courses and Other Services

In January 2020, the Company announced a donation of RMB20 million worth of online courses to K-12 students in Wuhan, Hubei Province, the epicenter of the COVID-19 outbreak. We also launched free courses staffed with some of our best instructors, to ensure the education quality to K-12 students across the country. In addition, the Company opened its live broadcasting vendor services, Weishi, to assist offline education institutions in providing online courses to K12 students for free. The Company's offline business consulting courses service, Chengxi, also provided free courses to offline education institutions, guiding them in transferring course mode from offline to online.

Business Outlook

Based on the Company's current estimates, total net revenues for the first quarter of 2020 are expected to be between RMB1,086 million and RMB1,106 million, representing an increase of 303.4% to 310.8% on a year-over-year basis. These estimates reflect the Company's current expectations, which are subject to change.

Conference Call

The company will hold an earnings conference call on Tuesday, February 18, 2019, at 8:00 AM U.S. Eastern Time (9:00 PM on the same day, Beijing/Hong Kong Time). Dial-in details for the earnings conference call are as follows:

International: 1-412-317-6061
US: 1-888-317-6003
Hong Kong: 800-963976
Mainland China: 4001-206115
Passcode: 2285968

A telephone replay will be available two hours after the conclusion of the conference call through February 25, 2020. The dial-in details are:

International: 1-412-317-0088
US: 1-877-344-7529
Passcode: 10139164

Additionally, a live and archived webcast of this conference call will be available at http://gsx.investorroom.com/.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the outlook for the first quarter and fiscal year of 2020 and GSX's strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's ability to continue to attract students to enroll in its courses; the Company's ability to continue to recruit, train and retain qualified teachers; the Company's ability to improve the content of its existing course offerings and to develop new courses; the Company's ability to maintain and enhance its brand; the Company's ability to maintain and continue to improve its teaching results; and the Company's ability to compete effectively against its competitors. Further information regarding these and other risks is included in the Company's reports filed with, or furnished to the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and GSX undertakes no duty to update such information or any forward-looking statement, except as required under applicable law.

About GSX Techedu Inc.

GSX Techedu Inc. is a technology-driven education company and leading online K-12 large-class after-school tutoring service provider in China. GSX offers K-12 courses covering all primary and secondary grades as well as foreign language, professional and interest courses. GSX adopts an online live large-class format to deliver its courses, which the Company believes is the most effective and scalable model to disseminate scarce high-quality teaching resources to aspiring students in China. Big data analytics permeates each aspect of the Company's business and facilitates the application of the latest technology to improve teaching delivery, student learning experience, and operational efficiency.

About Non-GAAP Financial Measures

The Company uses gross billings, non-GAAP gross profit, non-GAAP income from operations and non-GAAP net income, each a non-GAAP financial measure, in evaluating its operating results and for financial and operational decision-making purposes.

The Company defines gross billings for a specific period as the total amount of cash received for the sale of course offerings in such period, net of the total amount of refunds in such period. The Company's management uses gross billings as a performance measurement because the Company generally bills its students for the entire course fee at the time of sale of its course offerings and recognizes revenue proportionally as the classes are delivered over a period typically ranging from 1 to 6 months. For some courses, the Company continues to provide students with 12 months to 36 months access to the pre-recorded audio-video courses after the online live courses are delivered. The Company believes that gross billings provides valuable insight into the sales of its course packages and the performance of its business. As gross billings has material limitations as an analytical metrics and may not be calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies.

Non-GAAP gross profit, non-GAAP income from operations and non-GAAP net income exclude share-based compensation expenses, and such adjustment has no impacts on income tax. GSX believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective. GSX believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to GSX's historical performance. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation charges that have been and will continue to be for the foreseeable future a significant recurring expense in the Company's business.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Exchange Rate

The Company's business is primarily conducted in China and the significant majority of revenues generated are denominated in Renminbi ("RMB"). This announcement contains currency conversions of RMB amounts into U.S. dollars ("USD") solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to USD are made at a rate of RMB 6.9618 to USD1.00, the effective noon buying rate for December 31, 2019 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into USD at that rate on December 31, 2019, or at any other rate.

For further information, please contact:

GSX Techedu Inc.
Ms. Sandy Qin, CFA
E-mail: ir@genshuixue.com

Christensen
In China
Mr. Christian Arnell
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com
In US
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@christensenir.com


                                                                              
              
                GSX Techedu Inc.


                                                                      
      
                Unaudited condensed consolidated balance sheets


                                                              
         
       (In thousands of RMB and USD, except for share, per share and per ADS data)




                                                                                                          
              
                As of December 31, As of December 31,



                                                                                                                                                2018                2019    2019

                                                                                                                                                                           ---

                                                                                                                  
              
                RMB                RMB           USD



              
                ASSETS



              
                Current assets



                  Cash and cash equivalents                                                                                                  33,259              73,967  10,625



                  Short-term investments                                                                                                    197,991           1,473,452 211,648



                  Prepaid expenses and other current assets                                                                                  48,841             261,482  37,559



                  Amounts due from related parties                                                                                              710                          -



              
                Total current assets                                                                                             280,801           1,808,901 259,832

                                                                                                                                                                           ---




              
                Non-current assets



              
                    Operating lease right-of-use assets                                                                                             264,909  38,052



                  Property, equipment and software, net                                                                                      16,779              81,860  11,758



                  Intangible assets                                                                                                             237                 100      14



                  Long-term investments                                                                                                       5,221           1,188,286 170,687



                  Goodwill                                                                                                                      331                 331      48



                  Deferred tax assets                                                                                                        31,266              30,716   4,412



                  Rental deposit                                                                                                              3,508              18,719   2,689



                  Other non-current assets                                                                                                       60                 710     102



              
                Total ASSETS                                                                                                     338,203           3,394,532 487,594

                                                                                                                                                                           ===




              
                LIABILITIES





              
                Current liabilities



              Accrued expenses and other current liabilities                                                                                 57,244             228,753  32,858
      (including accrued expenses and other
      current liabilities of the consolidated VIE
      without recourse to the Group of
      RMB51,445 and RMB188,975 as of
      December 31, 2018 and December 31, 2019,
      respectively)



              Deferred revenue, current portion of the                                                                                      263,330           1,331,962 191,324
      consolidated VIE without recourse to the
      Group



              Current portion of operating lease liabilities of                                                                                                 59,982   8,616
      the consolidated VIE without recourse to the
      Group



              Income tax payable of the consolidated VIE                                                                                                        16,093   2,312
      without recourse to the Group



              Amounts due to related parties (including                                                                                      35,338                 460      66
      amounts due to related parties of the
      consolidated VIE without recourse to the
      Group of RMB960 and RMB460 as of
      December 31, 2018 and December 31, 2019,
      respectively)



              
                Total Current liabilities                                                                                        355,912           1,637,250 235,176

                                                                                                                                                                           ---


                                                                             
              
                GSX Techedu Inc.


                                                                      
      
                Unaudited condensed consolidated balance sheets


                                                                  
     
       (In thousands of RMB and USD, except for share, per share and per ADS data)




                                                                                                                             
              
               As of December 31,                       As of 
     December
                                                                                                                                                                                                     31,

                                                                                                                                                                                                          ---

                                                                                                                                    2018                                     2019       2019

                                                                                                                                                                                       ---

                                                                                                             
              
                RMB             
              
                RMB       USD



              
                Non-current liabilities



              Deferred revenue, non-current portion of the                                                                        8,711                                    5,674        815
      consolidated VIE without recourse to the
      Group



              Non-current portion of operating lease liabilities                                                                                                        194,228     27,899
      of the consolidated VIE without recourse to the
      Group



              Deferred tax liabilities of the consolidated VIE                                                                       59                                       25          4
      without recourse to the Group



              
                TOTAL LIABILITIES                                                                                    364,682                                1,837,177    263,894






              
                MEZZANINE EQUITY



              Series A convertible redeemable preferred shares                                                                  466,060






              
                SHAREHOLDERS' (DEFICIT) EQUITY



              Ordinary shares                                                                                                        60                                      106         15



              Treasury stock, at cost                                                                                                                                  (86,739)  (12,459)



              Additional paid-in capital                                                                                                                              1,899,059    272,783



              Accumulated other comprehensive income                                                                              1,166                                   17,829      2,561



              Accumulated deficit                                                                                             (493,765)                               (272,900)  (39,200)



              
                TOTAL SHAREHOLDERS' (DEFICIT) EQUITY                                                               (492,539)                               1,557,355    223,700






              
                TOTAL LIABILITIES, MEZZANINE EQUITY                                                                  338,203                                3,394,532    487,594
    AND TOTAL SHAREHOLDERS' (DEFICIT)
    EQUITY


                                                                             
              
                GSX Techedu Inc.


                                                         
              
                Unaudited condensed consolidated statements of operations


                                                
              
                (In thousands of RMB and USD, except for share, per share and per ADS data)




                                                                                                                                                    For the three months ended December 31,



                                                                                                                                               2018                                     2019            2019

                                                                                                                                                                                                       ---

                                                                                                                        
              
                RMB             
              
                RMB  
     
           USD



              
                Net Revenues                                                                                                    182,265                                  935,027         134,308



              Cost of revenues                                                                                                            (57,938)                               (195,987)       (28,152)



              
                Gross profit                                                                                                    124,327                                  739,040         106,156

                                                                                                                                                                                                       ---


              
                Operating expenses



              Selling expenses                                                                                                            (58,189)                               (441,987)       (63,487)



              Research and development expenses                                                                                           (26,547)                                (83,499)       (11,994)



              General and administrative expenses                                                                                         (15,818)                                (45,958)        (6,601)



              
                Total operating expenses                                                                                      (100,554)                               (571,444)       (82,082)

                                                                                                                                                                                                       ---


              
                Income from operations                                                                                           23,773                                  167,596          24,074

                                                                                                                                                                                                       ---


              Interest income                                                                                                                1,664                                    1,938             278



              Realized gains from investments                                                                                                                                        8,027           1,153



              Other income                                                                                                                     100                                    4,162             598



              
                Income before provision for income tax and                                                                       25,537                                  181,723          26,103
      income from equity method investments

                                                                                                                                                                                                       ---


              Income tax expenses                                                                                                          (3,122)                                 (7,871)        (1,131)



              Income from equity method investments                                                                                            559                                      611              88



              
                Net income                                                                                                       22,974                                  174,463          25,060

                                                                                                                                                                                                       ---


              Less: Series A convertible redeemable preferred                                                                                9,732                                                       -
      shares redemption value accretion



              Less: Undistributed earnings allocated to the                                                                                  3,690                                                       -
      participating preferred shares



              
                Net income attributable to GSX Techedu Inc.'s                                                                     9,552                                  174,463          25,060
      ordinary shareholders

                                                                                                                                                                                                       ---


              
                Net income per ordinary share



              Basic                                                                                                                           0.10                                     1.10            0.16



              Diluted                                                                                                                         0.09                                     1.05            0.15

                                                                                                                                                                                                       ---


              
                Net income per ADS



              Basic                                                                                                                           0.07                                     0.74            0.11



              Diluted                                                                                                                         0.06                                     0.70            0.10

                                                                                                                                                                                                       ---


              
                Weighted average shares used in net income per
       share



              Basic                                                                                                                     92,224,998                              158,106,902     158,106,902



              Diluted                                                                                                                  111,949,277                              165,855,746     165,855,746

                                                                                                                                                                                                       ---






              Note: Three ADS represents two ordinary shares.


                                             
              
                GSX Techedu Inc.


                     
              
           Reconciliations of non-GAAP measures to the most comparable GAAP measures


                    
              
           (In thousands of RMB and USD, except for share, per share and per ADS data)




                                                                                                  For the three months ended December 31,



                                                                                            2018                                      2019    2019



                                                                                             RMB              
              
                RMB    USD



     Net revenue                                                                        182,265                                   935,027 134,308




     Add: VAT and surcharges                                                             12,025                                    61,075   8,773



     Add: ending deferred revenue                                                       272,041                                 1,337,636 192,139



     Add: ending refund liability                                                        11,167                                    54,567   7,838



     Less: beginning deferred revenue                                                   153,103                                   778,312 111,798



     Less: beginning refund liability                                                     6,280                                    31,351   4,503



     Gross billings (non-GAAP)                                                          318,115                                 1,578,642 226,757

                                                                                                                                             ===



                                                                    For the three months ended
                                                                           December 31,



                                                               2018                               2019    2019



                                                                RMB                               RMB    USD



              
                Gross profit                    124,327                            739,040 106,156



              Share-based compensation expense                 158                              6,263     900
    in cost of revenues




              
                Non-GAAP gross profit           124,485                            745,303 107,056






              
                Income from operations           23,773                            167,596  24,074



              Share-based compensation                       4,633                             23,315   3,349
    expenses



              
                Non-GAAP income from operations  28,406                            190,911  27,423






              
                Net income                       22,974                            174,463  25,060



              Share-based compensation expenses              4,633                             23,315   3,349



              
                Non-GAAP net income              27,607                            197,778  28,409


                                                                             
              
                GSX Techedu Inc.


                                                        
              
                Unaudited condensed consolidated statements of operations


                                               
              
                (In thousands of RMB and USD, except for share, per share and per ADS data)




                                                                                                                                                   For the twelve months ended December 31,



                                                                                                                                             2018                                      2019            2019

                                                                                                                                                                                                      ---

                                                                                                                      
              
                RMB              
              
                RMB  
     
           USD



              
                Net Revenues                                                                                                  397,306                                 2,114,855         303,780



              Cost of revenues                                                                                                         (142,753)                                (535,912)       (76,979)



              
                Gross profit                                                                                                  254,553                                 1,578,943         226,801

                                                                                                                                                                                                      ---


              
                Operating expenses



              Selling expenses                                                                                                         (121,518)                              (1,040,906)      (149,517)



              Research and development expenses                                                                                         (74,050)                                (212,197)       (30,480)



              General and administrative expenses                                                                                       (39,831)                                (110,106)       (15,816)



              
                Total operating expenses                                                                                    (235,399)                              (1,363,209)      (195,813)

                                                                                                                                                                                                      ---


              
                Income from operations                                                                                         19,154                                   215,734          30,988

                                                                                                                                                                                                      ---


              Interest income                                                                                                              2,193                                     8,861           1,273



              Realized gains from investments                                                                                                                                      11,395           1,637



              Other income                                                                                                                    50                                     6,249             898



              
                Income before provision for income tax and                                                                     21,397                                   242,239          34,796
      income from equity method investments

                                                                                                                                                                                                      ---


              Income tax expenses                                                                                                        (2,616)                                 (16,957)        (2,435)



              Income from equity method investments                                                                                          869                                     1,348             194



              
                Net income                                                                                                     19,650                                   226,630          32,555

                                                                                                                                                                                                      ---


              Less: Series A convertible redeemable preferred                                                                             38,930                                    16,772           2,409
      shares redemption value accretion



              Less: Undistributed earnings allocated to the                                                                                                                        21,698           3,117
      participating preferred shares



              
                Net (loss) income attributable to GSX Techedu                                                                (19,280)                                  188,160          27,029
     Inc.'s ordinary shareholders

                                                                                                                                                                                                      ---


              
                Net (loss) income per ordinary share



              Basic                                                                                                                       (0.21)                                     1.42            0.20



              Diluted                                                                                                                     (0.21)                                     1.35            0.19

                                                                                                                                                                                                      ---


              
                Net (loss) income per ADS



              Basic                                                                                                                       (0.14)                                     0.95            0.13



              Diluted                                                                                                                     (0.14)                                     0.90            0.13

                                                                                                                                                                                                      ---


              
                Weighted average shares used in net 
                (loss)
       income per share



              Basic                                                                                                                   92,224,998                               132,400,941     132,400,941



              Diluted                                                                                                                 92,224,998                               139,477,898     139,477,898

                                                                                                                                                                                                      ---




              Note: Three ADS represents two ordinary shares.


                                                                    
              
                GSX Techedu Inc.


                                              
              
         Reconciliations of non-GAAP measures to the most comparable GAAP measures


                                             
              
         (In thousands of RMB and USD, except for share, per share and per ADS data)




                                                                                                                                         For the twelve months ended December 31
                                                                                                                                                                  ,



                                                                                                                                   2018                                      2019    2019



                                                                                                                                    RMB              
              
                RMB    USD



              Net revenue                                                                                                      397,306                                 2,114,855 303,780




              Add: VAT and surcharges                                                                                           26,202                                   134,302  19,291



              Add: ending deferred revenue                                                                                     272,041                                 1,337,636 192,139



              Add: ending refund liability                                                                                      11,167                                    54,567   7,838



              Less: beginning deferred revenue                                                                                  46,307                                   272,041  39,076



              Less: beginning refund liability                                                                                   2,475                                    11,167   1,604



              Less: deferred revenue from the acquisition of                                                                     2,806                                                -
      Shanghai Jinyou Education Technology Co., Ltd.



              Gross billings (non-GAAP)                                                                                        655,128                                 3,358,152 482,368

                                                                                                                                                                                    ===



                                                                                                                                         For the twelve months ended December 31,



                                                                                                                                   2018                                      2019    2019

                                                                                                                                                                                    ---

                                                                                                                                    RMB              
              
                RMB    USD



              
                Gross profit                                                                                        254,553                                 1,578,943 226,801



              Share-based compensation expense in cost of



              revenues                                                                                                             283                                    16,504   2,371

                                                                                                                                                                                    ---


              
                Non-GAAP gross profit                                                                               254,836                                 1,595,447 229,172

                                                                                                                                                                                    ===




              
                Income from operations                                                                               19,154                                   215,734  30,988



              Share-based compensation expenses                                                                                  5,917                                    60,237   8,653



              
                Non-GAAP income from operations                                                                      25,071                                   275,971  39,641

                                                                                                                                                                                    ===




              
                Net income                                                                                           19,650                                   226,630  32,555



              Share-based compensation expenses                                                                                  5,917                                    60,237   8,653



              
                Non-GAAP net income                                                                                  25,567                                   286,867  41,208

                                                                                                                                                                                    ===

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SOURCE GSX Techedu Inc.