Its net revenues were RMB1,940.3 million (US$3 billion), a 49.5% year-over-year increase. Gross profit increased 35.0% to RMB1,368.8 million from RMB1,014.3 million in the first quarter of 2020.
The increase in net revenues was mainly driven by the growth in paid course enrollments for K-12 courses in the fourth quarter of 2020, which was contributed by both first-time paid course enrollments and retention of existing students, according to the financial report.
The company offers K-12 courses covering all primary and secondary grades through the brand Gaotu K12, as well as foreign language, professional and admission courses through the brand Gaotu Professional, known as Gaotu Academy for the past month.
The report said that net revenues of online K-12 courses increased 62.2% year-over-year to RMB1,816.3 million; net revenues of Gaotu Professional decreased 30.1% year-over-year to RMB124 million.
Despite the growth in net revenues, the company also reported a widening net loss of RMB1,425.9 million, compared with net income of RMB148.0 million in the same period of 2020.
The first quarter has witnessed its cost of revenues rose by 101.7% to RMB571.5 million. GSX Techedu said the decrease is mainly due to the increased recruitment of instructors and tutors, the increase in compensation for attracting and retaining high quality teaching staff, as well as the increase in learning material cost and rental expenses.
Its operating expenses were RMB2,871.4 million, which increased from RMB922.4 million in the first quarter of 2020. Selling expenses increased to RMB2,288.7 million from RMB757.2 million in the first quarter of 2020. The increase was primarily a result of higher marketing expenses to expand user base and enhance our brands, and an increase in compensation to sales and marketing staff.
Larry Xiangdong Chen, the company's founder, Chairman and CEO, commented, "Since the end of last year, we have been reinforcing our efforts to control our selling expenses, while expanding our investments on teaching content, technology, and teaching talent.”
Based on the company's current estimates, total net revenues for the second quarter of 2021 are expected to be between RMB2,140 million and RMB2,158 million, representing an increase of 30% to 31% on a year-over-year basis.