Its respectable pricing is also a positive development ahead of a more active week which will feature four IPOs, including a couple prominent ones in CrowdStrike (CRWD) and Chewy (CHWY).
In terms of GSXs' deal, it generated about $208 mln in total gross proceeds which it intends to use to recruit teaching staff, to improve its technology, and for marketing purposes.
The lead underwriters on the deal were Credit Suisse and Deutsche Bank and shares are set to open for trading later this morning on the NYSE.
GSX is a technology-driven education company. Its core expertise is in online K-12 courses, and it is the third largest online K-12 large-class after-school tutoring service provider in China in terms of gross billings in 2018. Its K-12 courses cover all primary and secondary grades, and contributed over 73% and 75% of its total revenues in 2018 and for the three months ended March 31, 2019, respectively.
Its total enrollments increased from 79,632 in 2017 to 767,102 in 2018 and from 70,845 for the three months ended March 31, 2018 to 211,002 for the three months ended March 31, 2019. GSX adopted the online live large-class format to deliver its courses, which it believes is the most effective and scalable model to disseminate teaching resources in China.
To create a disciplined, effective, and engaging learning environment under the large-class format, GSX has adopted a dual-teacher system, staffing each class with an instructor and multiple tutors well trained in the relevant subjects or curriculum.
Its online K-12 large-class courses were priced at a significant premium compared to average online K-12 large-class courses in China in 2018, according to Frost & Sullivan. This is because the company believes its service is superior to the average education provider in China.
For the three months ended March 31, 2019, revenue surged by 474% to RMB46.9 mln. The growth was primarily driven by an increase in net revenues from its K-12 courses, and to a lesser extent, the increase in net revenues from its foreign language and professional and interest courses.
GSX's gross margin increased from 55.9% for the three months ended March 31, 2018 to 69.5% for the three months ended March 31, 2019, mainly as a result of the jump in revenue.
Total operating expenses increased by 375.0% to RMB30.4 mln as selling expenses surged by 616% to RMB13.9 mln. This significant increase was mainly driven by higher spending on branding and marketing activities, including expenses relating to online and mobile marketing.
As a result of the above, GSX generating operating income of RMB42.7 mln compared to an operating loss of RMB(4.2) mln in the year ago quarter.