GSX Techedu Inc. (GSX) Q4 2020 Earnings Call Transcript

GSX Techedu Inc. (GOTU 7.55%)
Q4 2020 Earnings Call
Mar 05, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the GSX Techedu Inc. fourth-quarter and fiscal year 2020 earnings conference call. [Operator instructions] Please note, this event is being recorded on March 3, 2021. 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 -- Investor Relations, Senior Manager

Thank you, Sarah. Hello, everyone, and thank you for joining us today. GSX earnings release was distributed earlier and is available on the accompanying 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.

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 in the applicable law. As a reminder, this conference is being recorded. In addition, a live and archived webcast of this conference call will be available on the GSX investor relations website at gsx.investorroom.com. You are also welcome to subscribe to our quarterly investor newsletters through the same website.

It is now my pleasure to introduce Larry. Larry, please go ahead.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

Thank you, Sandy. Good evening and good morning to you all. Thank you for joining us today on our fourth quarter and full-year 2020 earnings call. As you know, net operating cash flow is an essential indicator to measure the operating efficiency of an online education company.

In the fourth quarter, we achieved a net operating cash inflow of RMB 636 million. And in the full year 2020, our net operating cash flow remained positive and RMB 603 million. In December 2020, we saw the first fully completed private placement raised in USD 870 million. As of December 31st, our cash and cash equivalents short-term investments and long-term investments totaled RMB 8.22 million, a significant increase from RMB 2.74 million at the end of 2019.

In the fourth quarter, our selling expenses totaled RMB 1,798 million, a 307% year-over-year increase. Deducting RMB 472 million in employee compensation and the may -- miscellaneous expenses and RMB 59 million in branding activities take us to traffic acquisition and expenses of RMB 1,267 million since our gross billings for the fourth quarter were RMB 3.15 million. The corresponding ROI capital revenue superior position in the industry. Further, our selling expenses in the fourth quarter decreased by RMB 257 million, or 2.25% from the third quarter.

We moderately controlled our traffic acquisition expenses because we firmly believe that good education takes time and this should be full of care and love. Premium, respectable, and sustainable education is about trust cited raised to expand by the truth embrace great teachers, high-quality courses, caring services, effective learning results, and excellent reputation. I have always been reminding my team that when we saw the check and take capital injections into our industry. The massive marketing campaign that followed and the irrational raised by some players to skill they have been as they as at any cost.

We should always keep calm and stay true to our original mission, which is to focus on making education better through technology, focus on recruiting and training the best instructors, focus on providing the best and the most caring education, focus on offering the most satisfying services to each student and each parent, and focus on pursuing greatest goal regardless of hardship. With our long-term and sustainable view in 2021, we will continue to expand our recruiting and training of star instructors; expand our efforts on content, product, and technology development; maintain an effective growth strategy on a lifetime value basis; optimize our regional efficiency and effectiveness, and further improve our organizational capabilities and efficiency. We are confident that we will continue to excel in terms of operating efficiency in 2021. Now, I am proud to call over our CFO, Shannon, to walk you through our financial and operational details.

Shannon Shen -- Chief Financial Officer

Thanks, Larry. And thanks to everyone for joining the call. Now, I will walk you through our operating and financial results and conclude with how we do it at the coming quarter. Please note, our financial data is on RMB terms.

In 2020, we comprehensively upgraded our products in terms of our instructor and tutor teams, content development, and technology, as we remained firmly committed to improving the learning experience and effectiveness of our students. Firstly, over the past year, more than 100 top-notch instructors join us many of whom have considerable years of -- of experience. For the junior and senior high school segments, we have established a strong model and decent reputation by building up a team of industry-leading instructors. Meanwhile, in 2020 we've further invested in cultivating our own instructors, candidates who are young and have high potential.

Many of them graduated from renowned universities including Beijing University, Tsinghua University, Howard University, Columbia University, and Oxford University, etc. We have also established [Inaudible] to train new instructors. Many of our new instructors who graduated in July 2020, after over a half year of training, have grown into instructors favored by students and parents a lot. Some of whom have attracted over 10,000 regularly priced courses enrollment.

Secondly, we constantly left to develop and upgrade our educational content and the product. Compared with the end of 2019, our course content development team expanded over four times, bringing rich and localized content specialty. We have achieved progress in standardizing our curriculum in 2020 and have established curricula of different difficulty levels across our primary school and high school courses. In 2021, we will continue to work on refining our curricula.

We develop our course content and our lecture training jointly to streamline our course deli -- delivery process. This practice ensures the scientific nature of our course in the syllabus. The specialization of our instructors and the standardization of our quality control. Lastly, technology plays a wider role in improving our in-class experience.

Our extreme streaming media system and our air sound iCall detection system leverage artificial intelligence to automatically adjust system settings to adapt to different networking environments and hardware situations. Achieving an optimal effect for the in-class multiplayer working into action scenarios. Moreover, we have developed a retro 3D science laboratory side that stimulates the environment for physics and chemistry experiments for junior and senior high school students and teachers. The constant upgrades of our educational products have effectively translated into our improved retention rate and provided a solid driver for our long-term healthy and sustainable development.

Despite a challenging environment, we closed our fiscal year 2020 with exceptional business and financial performance. During the fourth quarter, as we set all-time record for revenues, growth billings, and paid enrollments, we are pleased to see that the pandemic situation is improving and we are filled with the way our teams continue to focus and executive throughout this period of elevated uncertainty. Moving on, I will briefly recap the financials for the fiscal year 2020. Our net revenues continue to grow, reaching RMB 7.1 billion, representing a 237% increase from RMB 2.1 billion in 2019.

This revenue grows to be more than 3.5 times up to prior a year's figures for the past three consecutive years. Gross billings. The leading indicator for net revenues was RMB 9 billion, increasing by 168% year over year, from RMB 3.4 billion last year. Paid enrollments increased to RMB 5,871 for fiscal year 2020, or 2.68 times that of the fiscal year 2019.

For 2020, we achieved net operating cash inflow of RMB 603 million, compared to RMB 1,285 million in 2019. Removing the effect caused by the extra cash repaid over RMB 105 million for the independent investigation, our net operating cash inflow would be higher. That demonstrates our exceptional operating efficiency aimed in the intense competition. Furthermore, in the second quarter of 2020, we have repurchased approximately RMB 1.1 million ADF for approximately RMB 283 million.

Despite such cash outlay, we have ample cash reserves as our cash short-term investments and long-term investments reaching approximately RMB 8.2 billion as of December 31, 2020. Next, then we go through the key financials for the fourth quarter of 2020 in detail. Revenue increased 137% year over year to RMB 2.2 billion, driven by continuously expanding student numbers sent to our enhanced teaching quality and brand recognition. Our gross billings increased by 99% year over year to RMB 3.1 billion, mainly due to an increase in paid enrollment from the summer and the high-level retention in the fall.

Paid enrollments which refer to enrollments priced at or above CNY 99 increased to a record high of RMB 2.28 million for the quarter and two times that of the same period in 2019. Let's break down our revenue streams by business line. Net revenue from our K-12 courses increased by 156% year over year to RMB 1.98 billion and accounted for 89% of net revenues, and will continue to be our main source of revenue going forward. Gross billings contributed by K-12 courses rose by 110% year over year to RMB 2.92 billion.

Paid course enrollments for K-12 grew by 113% year over year to RMB 2.14 billion. Average enrollments per class were 2,600 in the fourth quarter in 2020, compared to 2,800 in the third quarter. Quarter over quarter, the numbers slip lately because we offered shorter-term courses with small class sizes to cater to various students needs. Average enrollments per class this quarter increase significantly from around 1,700 in the same quarter of 2019.

Net revenues from our foreign language, professional, interest courses, and other services grew to RMB 236 million and accounted for 11% of net revenue. Gross billings contributed by foreign language, professional, interests courses, and other services reached RMB 224 million. Paid course enrollments for foreign language, professional, and interest courses reached 136,000. Leveraging our know-how with online live large class education, we will further expand into this large industry segment.

Moving over to selected financial metrics summary. Our cost of revenues increased by 215% year over year to RMB 616 million. The year-over-year growth was mainly due to increase in compensation for instructors and tutors, learning materials, rental expenses, as well as server and labor costs. GAAP gross profit margin decreased to 72% down from 79% in the same period of 2019.

Non-GAAP gross profit margin which excludes share-based compensation decreased to 73% down from 80% in the same period of 2019. The decrease was primarily due to an increase in the number of instructors and tutors to enhance our service level and the personal life experience led our student receives, as well as an increase in compensation for such staff. Selling expenses increased to about RMB 1.798 billion, up from RMB 442 million in the fourth quarter of 2019. Within that, expenses for traffic acquisition will approximately RMB 1,000 million and RMB 1.267 billion.

Expenses for branding activities were approximately RMB 59 million and the remaining expenses cover labor, servers, bandwidth, etc. The selling expenses jumped by 13% from the third quarter, which is our first sequential decline in sales expenses First of all, that attributes to the integration of our K-12 operation into the Gaotu brand which continues to bring synergies and actually efficiency. Going forward, we will focus our K-12 branding practices around the Gaotu brand, which will save unnecessary cost in branding activities. Secondly, we have been exploring and expanding new and low-cost customer acquisition channels, including offline channels, short reviews, live streaming, etc.

By balancing our investment across different channels, we managed to control our customer acquisition costs in an access -- accessible range and achieved an effective growth on the lifetime value basis. We have always focused on our effective growth strategy and we will never pursue a meaningless scale expansion at the expense of losses. We have made a number of technology innovations around customer acquisition, including progresses on the intelligent traffic acquisition, sales leads grouping, traffic control, and student satisfaction. We have taken the lead to closely cooperate with major media providers of traffic channels on the premise of ensuring data security, leveraging the strong algorithm cap -- capabilities of both parties to effectively control our customer acquisition cost, and record better quality sales leads.

In the meantime, we have embedded in multitask learning, transfer learning, reinforcement learning technologies into our internal service flow to effectively improve the traffic quality and efficiency in matching tutors and students. Gradually, we have created a setup where we find customer acquisition, self-lead quality control, and the digital operating strategy on our marketing flow. Research and development expenses increased by 229% year over year to RMB 275 million. The increase was primarily due to an increase in the number of courses professionals and technology development personnel, as well as an increase in compensation for such staff.

G&A expenses increased by 373% to RMB 280 million, mainly due to an increase in G&A headcount and related compensation, as well as an increase in fees for investigation purpose. Non-GAAP net loss was RMB 564 million, compared to net income of RMB 198 million in the fourth quarter of 2019. GAAP net loss margin was minus 28%. As of December 31, 2020, we had RMB 355 million of cash and cash equivalents, RMB 7.3 billion of short-term investments, and RMB 531 million of long-term investments, combining to be RMB 8.2 billion.

That compares with a total of RMB 2.7 billion of cash and cash equivalents, short-term investments, and long-term investments as of December 31, 2019. As of December 31, 2020, our deferred revenue balance was RMB 2.73 billion. Deferred revenue primarily consists of the tuition collected in advance. Net operating cash flow for the fourth quarter of 2020 was RMB 636 million.

This demonstrates our strong organizational capability in balancing investments and returns. With that, I will now provide our business outlook. Before I start, I would like to highlight three factors influencing how we view the coming quarter's performance. Firstly, the Spring Festival of 2021 started more than two weeks later than in 2020, causing fewer weekends to daily work courses this quarter and so as the corresponding revenue.

Therefore, for an apple-to-apple comparison, we should add at least a 22% growth rate to the guidance we are providing. Secondly, this year's winter break is short. Parents and students do not have enough time to take both short-term promotional courses and winter semester regular courses. Instead, we co -- we focused our offering on the so spring semester sessions and expect the second-quarter growth to be higher.

Thirdly, we had a higher base of the gross billings and the revenues in the first quarter of 2020 affected by a sudden outbreak of COVID-19. As such, based on our current estimate, net revenue for the first quarter of 2021 are expected to be between RMB 1.816 billion and RMB 1.856 billion, representing an increase of 40% to 43% on a year-over-year basis. That concludes my prepared remarks. Operator, we are now ready to take questions.

Thanks.

Questions & Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator instructions] At this time, we will pause momentarily to assemble our roster. Our first question comes from Mark Li with Citi.

Please go ahead.

Mark Li -- Citi -- Analyst

Hi, management. Thank you very much for that presentation. I want to ask for the year of 2021. W -- do you have any full-year guidance in terms of revenue, gross margin, and loss margin and any more color? Thank you.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Thank you, Mark. We moderately review the traffic acquisition extensive for information flow channels in the fourth quarter of 2020 and the first quarter of 2021, so that might affect the gross for the first quarter. As you know that, this traf -- traffic acquisition through the information flow channel, if we solely rely on that to bring the scale extension of revenue, it's easy to just purely pursue the scale. However, if we are pursuing effective growth, that needs real organizational capabilities.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Secondly, you know, the spring semester for the first quarter of 2021 opens around two weeks later than the same period of 2020, that also negatively affected the first quarter's revenue recognition as Shannon mentioned. Thirdly, we are actively exploring innovative acquisition channels, including offline options, and we believe that will bring positive impact to our Q2 and Q3 growth.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Fourth, we continuously to raise the compensation for our tutors. We believe this will benefit service retention, as well as tutors, and also our students.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Fifth, for our adult business -- business segment, we have almost reviewed established the team. So we believe this segment will see a relatively high growth in the second half of 2021.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Undoubtedly, for just the information flow traffic acquisition channel in 2020, we do have seen the customer acquisition cost, it has been going up. If you compare the end of the year versus the beginning of the year, this play does includes the six. So as -- in some perspective, we -- if we just purely rely on the money sending in traffic acquisition channels of information flow channel to swing up the scale, it -- this does not work. It's not working.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Maybe some players are sacrificing their net profit margins to have a relatively high growth. But our strategy is to pursue those in a healthy effective growth.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

In summary, we are pretty -- we are pretty confident about our growth rate of full-year 2021. So we hope for 2021, the full-year growth rate is going to be in the range of 70% to 80%.

Shannon Shen -- Chief Financial Officer

Hello, Mark. And adding to Larry's point, I also want to provide more colors on our revenue guidance. As I mentioned in my prepared remarks, there are three factors that needs to be take into consideration when looking at our first-quarter revenue guidance. The first is the class scheduling.

Back to the first quarter in 2020, the -- the spring semester courses actually started in February 2 for middle school and high school students. And for primary school students, the spring semester started during the last week of February. For this year in 2021, the Chinese New Year was relatively late and the school actually started in the first week in March. So basically, we lost two whole weeks of revenue in the first quarter in 2021.

And consider the high school and middle school revenue still contributes a considerable amount to our revenue. The impact on our q-end revenue recognition should be higher than other companies, which primary school may take a lead position in the revenue recognition. So that's one thing I want to add to our revenue guidance. So consider this seasonal factor.

If we make a apple-to-apple comparison, the actual net revenue growth guidance for the first quarter should be higher than at least 62% to 65% on our -- our own our perspective. And second is in this quarter -- in -- in the first quarter, we changed the way we recruit our students because this winter vacation was too short to take both of the short-term prom -- promotional classes and the long term and formal winter semester courses for students and parents. Actually, the winter vacations started by the end of the second week in January. And based on our class scheduling, there were only two weeks left for us to recruit winter semester regular class students.

And -- and so that's how we changed our strategy. We, basically, we replaced the winter semester regular classes into the short-term promotional classes, then they directly recruit a student and have them sign up for our spring semester. That basically means the gross billings we collect in the first quarter, majority of them will add to our second quarter's revenue. And that's why we do expect our second-revenue growth rate to be higher than the first quarter.

This is all due to the seasonality. And the second reason is that because last year, the outbreak of the COVID-19 epidemic, we have we a fairly a larger base for both the first quarter and second quarter. So these three factors should be taken into consideration when look at our guidance. And as Larry just mentioned, the full-year guidance for 2021, especially for top-line, we expect a 30% to 80% revenue increase, then how do we come up with that number? So -- so that -- that's be -- because like even though Larry mentioned that we reduced some of the investment in the traffic acquisition or media social platforms, but we did deployed or explored new innovative ways to acquire more low-cost traffic.

For instance, like offline traffic or less genial short radio. So that will go out the cy -- the -- the potential order so that the -- the sales leads that can support our future growth this year with a lower customer acquisition cost. And also, as our absolute net revenue continue to increase compared to before, our net revenues growth rate will also show seasonality. And the industry just change very quickly and, in many cases, the change happens within one month or even one or two weeks.

So while we need to adapt quickly to these changes, we will also be more cautious by providing more short-term expectations, which are more foreseeable. Hope that addressed your questions. Thanks, Mark.

Mark Li -- Citi -- Analyst

Thank you, Larry and Shannon. Very helpful.

Operator

Our next question comes from Christine Cho with Goldman Sachs. Please go ahead.

Christine Cho -- Goldman Sachs -- Analyst

Hi. Thank you, Larry and Shannon. I just wanted to get an update on the regulatory landscape. So it seems like the traffic competition is stepping down, but also hearing some news about the -- some [Inaudible] regime tightening some requirements of the teachers' requirement, etc.

How do you see this evolving and how is this accepted in your guidance? Thank you.

Shannon Shen -- Chief Financial Officer

Thanks, Christine. Happy to address that. So in the past quarter, our sales and marketing expenses declined over -- around 13% quarter over quarter. We took this as a positive signal.

In 2021, we expect to spend less of our customer acquisition budget on traffic acquisition from those social media platforms and extend our investment more on some new and more inovative channels such as live streaming platforms or record [Inaudible], and I'm seeing on short radio channels and even offline channels. When we reviewing what do we have been doing in the past year in 2020, we spend or all the leading companies in this industry spend quite a lot of money on the social media platforms. And we acquired traffics. But we do -- our observation was the overlap ratio of parents signing up for multiple educational platforms is increasing, and we foresee like the conversion may face some difficulties in the near future.

And that's why in the second half of 2020, we started to explore new -- new channels. And for the traffic acquisition from all those social media platforms, it's still like the whole industry highly relies on the algorithm provided by the agencies or the social media platform. The high cost in reliance can now translate into core capabilities or competitive advantage. And that's why we want -- we want to explore new channels.

So we did make some breakthroughs like, for instance, our private traffic pool metrics on some leading short radio platforms has been at a top level of the industry, and that has always been our core competitiveness. And so although we achieved the per live streaming session is also leading in the industry. And this is what we are good at. We're more prepared on both operational side and on the technology side.

Actually, we -- when we observe the online business, no matter if e-commerce or other business, we do see the trend of that. At some level -- at some point, the traffic will -- will -- will turn from the public traffic into a private traffic metrics, and this is really what we are good about. And it actually came back to our comfort zone. And as you mentioned, since January, so government has taken a closer look at the marketing campaign of the online education industry.

And actually, we highly welcome and proactively embrace this change, and we firmly support the government's current and the following regulatory measure -- measures. We believe the policy will benefit the whole industry in the long run. For instance, firstly, the potential customer acquisition cost is likely to decline. And this is consistent with our -- our observation in January and February.

So in the past two months, the unit sales leads price that we acquired from social media platforms were much lower compared to November and December in 2020. And -- and -- and that's basically we are the last company to -- to join the campaign to sponsor TV programs or like other shows or do like bus station advertisement. From the bottom of our hearts, we really wanted to have a effective growth other than just bringing money. So -- so, if something just came out, we -- we will be delightful and I think it's good to our company because we are a operation-oriented company and we are not a traffic-oriented company.

And -- and the second is like the measurement will increase the trust of the students and their parents toward online education campaigns. We really wanted the engagement between the parents and us and the students and us a peaceful without creating an -- anxiety. And talking about starting itself, I education also should not only help students to improve their academic performance. But more importantly, should further their academic capabilities, develop good learning habits.

And if we really have the capital, we really want to invest in upgrading our products other than send them, you know, sales and marketing. So, we regard these initiatives as positive factors. Thanks, I hope that addressed your questions.

Operator

Our next question comes from D.S. Kim with J.P. Morgan. Please go ahead.

D. S. Kim -- J.P. Morgan -- Analyst

Hi, Mr. Chen, Shannon, and Sandy. Good evening and thanks for taking my questions. I actually have a few follow-ups from the previous comments you've made.

And firstly on guidance first quarter, when you say 2Q revenue growth to be higher than the first quarter, are we comparing 2Q with like-for-like 65% growth or reported guidance of 45%? And I have a couple of follow-ups.

Shannon Shen -- Chief Financial Officer

Sure. When -- when I was talking about, I was talking about the revenue growth rate in the second quarter should be accelerated compared with the first-quarter revenue growth rate.

D. S. Kim -- J.P. Morgan -- Analyst

OK. OK. So, comparing with the 45% guidance, I -- I mean, the actual number which should be similar to guidance, OK. And then a --

Shannon Shen -- Chief Financial Officer

Right. Right.

D. S. Kim -- J.P. Morgan -- Analyst

Can I check -- thank you. May I check roughly how much growth building and enrollment growth would you expect for the first quarter? I think this may deflect underlying demands better than the revenue guidance. I -- I think this is very helpful.

Shannon Shen -- Chief Financial Officer

Thanks. Because we still have around one-third of the quarter left and like I just mentioned, environment and things just change quickly. And so, it's best we provide our top-line guidance as we always do. And for other operating metrics, we will be more cautious about guide -- guidance.

Maybe we can provide more details after the quarter-end. Thanks.

D. S. Kim -- J.P. Morgan -- Analyst

Thank you. Thank you. Final question is then, can I ask if you have seen any meaningful slowdown in the last month of the quarter like say in the past two to three weeks, or compared to the, you know, first couple of first quarter? The reason why I'm asking this is comparing with some of our peers like TAL, their series of dot-com guidance. It doesn't seem like slowing down as much as what we guide.

So, I was just wondering whether this is a different -- this is because of the difference between the fiscal year and i.e. TAL cuts of their guidance for the February, we include March. So, just wanted to, you know, double check whether you think that's enough guidance. Thank you.

That will be all for me.

Shannon Shen -- Chief Financial Officer

Thanks a lot. So, compared to TAL, I'm really not in a position to do the comparison because I -- I personally am not very sure about like the guidance behind of their business. Because we've all -- even though we are all, you know, large-class business, but the class scheduling can be different and the revenue attributed to different segments can be different. And so, that's why it's really hard to say without knowing all the details behind the -- the guidance.

But that -- for us, I mean, just compared to our business, can we have a higher revenue growth rate? I think the answer is yes, but the price will be -- may be exchanged for a larger scale of loss. But our operating philosophy is always we insist on effective growth and we need to make sure the unit -- the unit economics or the business model works in LTV side, at least the LTV side. So, we really pay close attention to our data, especially on our customer acquisition costs. We -- we need to make sure we are providing the best products to our students at the same time and our business actually works.

So -- so, that may have different reasons behind the -- the top-line growth. And also, when you compare -- compare the top-line growth, I also suggest you to take into consideration of the bottom line. See like the operating efficiency or maybe the operating margin level just to see how much was invested and how much was gained. I think that's a more comprehensive picture.

D. S. Kim -- J.P. Morgan -- Analyst

Thank you. I agree and that's very, very helpful. Thank you. But may if I follow up on your point? Are you seeing a little faster drop-off or the slowdown in the latter half of the quarter versus first half? Or you don't see much difference in terms of the growth building, enrollment growth, and -- etc.

Shannon Shen -- Chief Financial Officer

With days, see -- yeah, yeah. That -- that's actually a really good question. And I think that refers to a bigger picture of the whole industry. From our observation, we do see like the overlap ratio between like -- like let's say, the -- the parents sign up for multiple online learning platforms like the ratio keeps rising.

So, that makes -- the parents need longer time to make the decision. But I think at least at this time, it's a really good thing. After a rapid growth for already-top players in the industry, it really comes to the area like we need to be really focused on our learning product and we care -- or they need to really care about the students like where they learn, whether the courses we provided really help them, and they can stay with us for a longer time. And as fierce as the competition, I think the highest requirement was made to the management team that to handle such a large organization.

At the same time, we need to keep taking initiatives to upgrade our products. In the long run, I think it's a good thing. And only the good companies and companies with higher operating -- operating efficiency can survive.

D. S. Kim -- J.P. Morgan -- Analyst

Thank you. Very helpful.

Shannon Shen -- Chief Financial Officer

Thanks.

Operator

Our next question comes from Alex Xie with Credit Suisse. Please go ahead.

Alex Xie -- Credit Suisse -- Analyst

Hi, management. Thank you for taking my questions. So, I would like to ask my questions in Chinese first and then translate them myself. [Foreign language] So, the first -- my first question will be about how do you set your revenue growth target, how do you balance the ROI and efficiency versus the growth rate and market share? And do you worry that the gap between your number of enrollments would widen a bit versus peers? Second question is about your TI team.

Would you please share with us and by the size of your TI team and how will you plan in 2021. And also, I'm glad to see the upgrades of your TI to this -- to the second -- secondary instructor program. So, if you can just share a bit more about how do you help them upgrade in -- in terms of quality and how do you measure whether that succeed? Thank you very much.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

So, when we are -- when we decide how -- how big the growth rate target should be, there is a dollar rate indicator, should always be effective growth aka the profitable growth based on lifetime value. And understand this, after quite a period after calculations, if we cannot reach this goal, we might not really reduce the spending on these channels to lead to a more sense -- scientific growth. We are also calculating between ROI efficiency and the -- the scale -- the balance between them. And right now, we are pretty satisfied with our status.

If we look at 2020, the revenues is over RMB 7.1 billion but our net loss is less than RMB 1.4 billion. So, if we compare our performance with some other qualifiers according to some investors think that seems to matter because they're spending $2 to get $1 revenue back. In 2020, in terms of balancing between the ROI and the -- the scale, we are doing a really great job. And in 2021, we are confident we do also a good job.

I obviously -- when we are doing the business, the core is not about competition, it's more about serve to -- to serve each of your customers, your students, your parents to their satisfaction, being well, help your employees to grow.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

So, as of the scale of 2021 for our tutor, as of now, we plan to further recruit over 10,000 tutors. And the core how we are valuing our tutors or we call them second instructors, there are two parts. Firstly, how can re -- redefine the recruiting model of -- the talents. Secondly -- secondly, we will expand the training for our secondary instructors.

Larry Chen -- Founder, Chairman, and Chief Executive Officer

[Foreign language]

Unknown speaker

Thank you. Thanks.

D. S. Kim -- J.P. Morgan -- Analyst

Thank you very much.

Operator

Our next question comes from Felix Liu with UBS. Please go ahead.

Felix Liu -- UBS -- Analyst

Hi. Good evening. Thank you very much for taking my question. You mentioned about, you know, FY '21 growth will be healthier.

So, may I just, you know, dig a little bit into the details. I -- I -- I know the standard GP margin in the fourth quarter decline Q-on-Q and you mentioned that teacher salary compensation increase was the reason. I -- I think definitely that is the right thing to do, but how should we think about the GP margin trend going forward in the next few quarters? You mentioned about the teach -- the increase in teaching assistants' headcount. A lot in that -- it -- it should be in -- rather to be in that -- the -- your revenue growth.

So, does that mean, you know, we could potentially see higher teacher -- teaching assistant utilization and better GP margin? And also, on the sales and marketing side, you know, definitely, you know, happy to hear that yours is very good, you're spending less on social media. So, how should we think about that sales and marketing spending trends going forward in the next fiscal -- in -- in FY 2021? Thank you.

Shannon Shen -- Chief Financial Officer

Thanks, Felix. In this quarter, three main factors collectively led to our lower level of gross profit margin. First, for the autumn semester courses, we offered our students a second round of short-term courses. We call it [Foreign language] that started in November.

And that course is -- has a lower ASP and a shorter term, and also has a smaller class size which led to a lower level of gross profit margin. And the second reason is that as we communicated before, we position our tutors actually as secondary instructors for their ex -- ex -- ordinary services to our students. So, to better improve our students and employees' satisfaction and to further retain and develop -- develop our teaching talents, we do believe that a good teacher needs time to grow, so we need to be really patient. And we continued to increase our compensation to our tutors in the fourth quarter.

So, we believe our commitment to our secondary instructors will translate into a stronger organizational capability and future business growth. And like you just mentioned, we definitely think this is the right thing to do. And the last reason was we have taken initiatives to further decrease our students-to-tutor ratio, with the aim to provide more personalized services to better serve our students. For instance, in the primary school sector, we started to provide one for each student, three-course, small-class tutoring session that the tutor can actually see the faces of all the children and they can have a lot of the interactions before the -- the -- the formal session start.

And we received positive feedbacks from primary school students and parents. And also, for our middle school and high school, we provided one of each student a Q&A session after the class is over. And that's how we can group people use different locations that provide more localized and certification level -- different certification level of Q&A session to our students. All of these need more time and more commitment from our tutors and that's why we lowered the students-and-tutor ratio.

So, moving forward to 2021, we think our gross profit margin should be stable at around 70% from the whole-year perspective after the -- all the adjustments have been made. And still, compared to offline business model, this gross margin will still be higher if we just exclude the rental costs and gives room to -- to -- to be pro -- profitable. And also, the idea of structure for our P&L should be like we have a lower level of GP margin. And at the same time, we have a lower level of sales and marketing.

Because really, for an education company, people should be the most valuable asset. And regarding sales and marketing expenses. So, for us, because we foresee that in 2021, the difficulty level might be elevated to acquire traffic in some public or open social media platforms. And that's why we started to explore new innovative ways to acquire new customers.

And that really significantly -- that will lower our customer acquisition cost structurally. So, but as -- this one is just too early. And like I just said, things just change quickly in the industry. We may have a better position on talking about the whole year's sales and marketing budget.

Maybe when they plan -- we have with -- a -- a -- a more clarified plan for our summer campaign. And probably, we can talk about that topic by that time. Thanks, Felix.

Felix Liu -- UBS -- Analyst

OK. Got it. Very helpful. Thank you very much.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Sandy Qin for any closing remarks.

Sandy Qin -- Investor Relations, Senior Manager

OK. Thank you, operator. And thank you, everyone, for joining the call today. If you have any further questions, please don't hesitate to contact the company or contact us via email at genshuixue.com directory.

Please feel free to subscribe to our news alert on our company IR website. Thank you very much.

Operator

[Operator signoff]

Duration: 61 minutes

Call participants:

Sandy Qin -- Investor Relations, Senior Manager

Larry Chen -- Founder, Chairman, and Chief Executive Officer

Shannon Shen -- Chief Financial Officer

Mark Li -- Citi -- Analyst

Unknown speaker

Christine Cho -- Goldman Sachs -- Analyst

D. S. Kim -- J.P. Morgan -- Analyst

Alex Xie -- Credit Suisse -- Analyst

Felix Liu -- UBS -- Analyst

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