New York-listed Chinese online tutor GSX Techedu failed to profit in the third quarter despite logging staggering growth in revenue, as the company is being investigated by the U.S. Securities and Exchange Commission (SEC) over allegations from short sellers that it falsified its sales.
During the three months through September, GSX suffered a net loss of 932.5 million yuan ($137.3 million), compared with a net profit of 1.9 million yuan a year ago, according to its latest earnings report released Friday. The quarterly net loss could be largely attributed to marketing and sales expenses, which climbed to 2.06 billion yuan from 330.4 million yuan a year ago.
That contrasted sharply with a dramatic increase in the company’s net revenue, which rose 252.9% year-on-year to 1.97 billion yuan, largely driven by strong sales of its online K-12 courses, which jumped 282.7% year-on-year to 1.76 billion yuan.
The number of paid students enrolled in GSX’s courses grew 133.5% year-on-year in the third quarter to 1.26 million, approximately 91% of whom were customers buying its online K-12 courses, the financial report said.
The Beijing-based company predicted that its fourth-quarter net revenue will reach between 2.08 billion yuan and 2.12 billion yuan, representing a year-on-year increase of 122% to 126.3%.
GSX also said that it cannot predict the timing, outcome or consequence of the ongoing SEC probe, which it initially revealed in September.
The company’s stock dropped 11.83% at $62.91 in premarket trading on Friday.
Contact reporter Ding Yi (email@example.com)