GSX Techedu Inc. was incorporated under the laws of the Cayman Islands in August 2014 and the name changed to Gaotu Techedu Inc. (the “Company” or the “Parent Company”) in June 2021. The Company, its subsidiaries, the consolidated variable interest entities and variable interest entities’ subsidiaries (collectively the “Group”) are currently engaged in the business of providing learning services and educational content and digitalized learning products in the People’s Republic of China(“PRC”).

Beijing BaiJiaHuLian Technology Co., Ltd was founded in June 2014, as a limited liability company in the PRC, and the name changed to Beijing BaiJia Technology Co., Ltd in September 2020 and then changed to Gaotu Education Technology Group Co., Ltd (“Beijing Gaotu”) in July 2021. Shanghai Duwen Education Technology Co., Ltd (“Shanghai Duwen”) was founded in January 2025, as a limited liability company in the PRC. Beijing Gaotu, Shanghai Duwen (collectively “VIEs”) and their subsidiaries are primarily engaged in providing learning services and educational content and digitalized learning products in mainland China.

Current laws and regulations of mainland China impose certain restrictions or prohibitions on foreign ownership of companies that engage in value-added telecommunication services and certain other businesses. To comply with the relevant laws and regulations of mainland China, the Company operates substantially all of its business through its VIEs and their subsidiaries. On April 28, 2015, the Company, through BaiJiaHuLian HK Holdings Limited (“BaiJiaHuLian HK”) and its subsidiary in mainland China, Beijing Lexuebang Network Technology Co., Ltd. (“Beijing Lexuebang”), entered into a series of contractual arrangements with Beijing Gaotu, and the shareholders of Beijing Gaotu. The series of contractual agreements include an Exclusive Management Services and Business Cooperation Agreement, an Exclusive Call Option Agreement, an Equity Pledge Agreement, Powers of Attorney, Spousal Consent Letters and Letters of Commitment (collectively the “Original Agreement”). The Original Agreements were amended in March 2019 with no significant differences. In connection with the amendment and as part of the Group’s efforts to streamline the corporate structure, the Group removed six existing nominee shareholders as parties to the contractual arrangements with Beijing Gaotu and its shareholders. The rights and obligations of these nominee shareholders under these contractual arrangements have been assumed by Mr. Larry Xiangdong Chen.

On January 26, 2021, Beijing Lexuebang, Wuhan Yuexuebang Network Technology Co., Ltd (“Wuhan Yuexuebang”) and Beijing Yuexuebang Network Technology Co., Ltd (“Beijing Yuexuebang”) (collectively the “WFOEs”), entered into a supplementary agreement (“Supplementary Agreement”) with Beijing Gaotu, and the shareholders of Beijing Gaotu. According to the Supplementary Agreement, each of Wuhan Yuexuebang and Beijing Yuexuebang became a party to the Original Agreement, enjoyed the same rights of Beijing Lexuebang under the Original Agreement and jointly assume the obligations of Beijing Lexuebang thereunder.

On November 30, 2024, the WFOEs entered into a Supplementary Agreement to the Exclusive Management Services and Business Cooperation Agreement with Beijing Gaotu and the shareholders of Beijing Gaotu. Pursuant to the Supplementary Agreement, certain significant subsidiaries are included in the list of the subsidiaries of Beijing Gaotu attached as Appendix II of the Exclusive Management Services and Business Cooperation Agreement.

On May 1, 2025, the Company, through BaiJiaHuLian HK and Beijing Lexuebang, entered into a series of contractual arrangements with Shanghai Duwen, and the shareholders of Shanghai Duwen. The series of contractual agreements include an Exclusive Management Services and Business Cooperation Agreement, an Exclusive Call Option Agreement, an Equity Pledge Agreement, Powers of Attorney, Spousal Consent Letters and Letters of Commitment.

The Group believes that these contractual arrangements would enable the Company to (1) have power to direct the activities that most significantly affects the economic performance of VIEs and their subsidiaries, and (2) receive the economic benefits of the VIEs and their subsidiaries that could be significant to the VIEs. Accordingly, the Company is considered the primary beneficiary of the VIEs and their subsidiaries.

1. ORGANIZATION AND PRINCIPAL ACTIVITIES - continued

The English names above are for identification purpose only.

The VIE arrangements

Details of the contractual agreements are set forth below.

Exclusive Management Services and Business Cooperation Agreement

Pursuant to the exclusive management services and business cooperation agreement among the WFOEs, the VIEs and the shareholders of the VIEs, the WFOEs has the exclusive right to provide or designate any third-party to provide, among other things, education management consultancy services, permission of intellectual property rights, technological support and business support to the VIEs and their subsidiaries. In exchange, the VIEs and their subsidiaries pay service fees to the WFOEs in an amount determined by the WFOEs in its sole discretion. Without the prior written consent of the WFOEs, the VIEs and their subsidiaries cannot accept services provided by or establish similar cooperation relationship with any third-party. The WFOEs own the exclusive intellectual property rights created as a result of the performance of this agreement unless otherwise provided by the laws or regulations of mainland China. The agreement will remain effective unless unanimously agreed by the parties concerned or unilaterally terminated by the WFOEs with a written notice. Unless otherwise required by applicable the laws of mainland China, the VIEs and their shareholders do not have any right to terminate the agreement.

Equity Pledge Agreement

Under the equity interest pledge agreement among the WFOEs, the VIEs and their shareholders, the VIEs’ shareholders pledged all of their equity interests of the VIEs to the WFOEs as security for performance of the obligations of the VIEs and their shareholders under the exclusive call option agreement, the exclusive management services and business cooperation agreement and the powers of attorney. If any of the specified events of default occurs, the WFOEs may exercise the right to enforce the pledge immediately. The WFOEs may transfer all or any of its rights and obligations under the equity interest pledge agreement to its designee(s) at any time. The agreement will remain in effect until the fulfillment of all the obligations under the exclusive call option agreement, the exclusive management services and business cooperation agreement and the powers of attorney.

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Exclusive Call Option Agreement

Under the exclusive call option agreement among the WFOEs, the VIEs and their shareholders, each of the shareholders of the VIEs irrevocably granted the WFOEs a right to purchase, or designate a third-party to purchase, all or any part of their equity interests in the VIEs at a purchase price equal to the lowest price permissible by the then-applicable laws and regulations of mainland China at the WFOEs’ sole and absolute discretion to the extent permitted by the laws of mainland China. The shareholders of the VIEs shall promptly give all considerations they received from the exercise of the options to the WFOEs or its designee(s). The VIEs and their shareholders covenant that, without the WFOEs’ prior written consent, they will not, among other things, (i) create any pledge or encumbrance on their equity interests in the VIEs; (ii) transfer or otherwise dispose of their equity interests in the VIEs; (iii) change the VIEs' registered capital; (iv) amend the VIEs’ articles of association; (v) sell, transfer, license or otherwise dispose of any of the VIEs’ assets or allow any encumbrance of any assets, except for the disposal or the encumbrances of the assets that are treated as necessary for their daily business operations with the value of the assets involved in a single transaction not exceeding RMB100; (vi) cause the VIEs to enter into any major contracts or terminate any material contracts to which one of the VIEs is a party; (vii) declare or distribute dividends; (viii) terminate, liquidate or dissolve the VIEs; or (ix) allow the VIEs to incur, inherit, guarantee or permit any debts, except for those payables incurred in the ordinary or usual course of business but not incurred by way of borrowing. The agreement will remain effective until terminated by the WFOEs at its discretion or the entire equity interests in the VIEs have been transferred to the WFOEs or its designees.

Powers of Attorney

Pursuant to the powers of attorney executed by the VIEs’ shareholders, each of them irrevocably authorized the WFOEs or its designee(s) to act on their respective behalf as exclusive agent and attorney, to the extent permitted by law, with respect to all rights of shareholders concerning all the equity interest held by each of them in the VIEs, including but not limited to proposing to convene or attend shareholder meetings, signing the resolutions and minutes of such meetings, exercising all the rights as shareholders (including but not limited to voting rights, nomination rights, appointment rights, the right to receive dividends and the right to sell, transfer, pledge or dispose of all the equity held in part or in whole).

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Spousal Consent Letters

Pursuant to the spousal consent letters executed by the spouses of certain shareholders of the VIEs, the signing spouses unconditionally and irrevocably agreed that the equity interest in the VIEs held by and registered in the name of their spouses be disposed of in accordance with the exclusive call option agreement, the exclusive management services and business cooperation agreement, the equity interest pledge agreement and the powers of attorney described above, and that their spouses may perform, amend or terminate such agreements without their additional consent. Additionally, the signing spouses agreed not to assert any rights over the equity interest in the VIEs held by their spouses. In addition, in the event that the signing spouses obtains any equity interest in the VIEs held by their spouses for any reason, they agree to be bound by and sign any legal documents substantially similar to the contractual arrangements described above, as may be amended from time to time.

The Company believes that the contractual arrangements with the VIEs and their shareholders are in compliance with existing laws and regulations of mainland China and are legally enforceable. However, the contractual arrangements are subject to risks and uncertainties, including:

The VIE arrangements - continued

The Group’s ability to conduct its business may be negatively affected if the PRC government were to carry out any of the aforementioned actions. As a result, the Group may not be able to consolidate the VIEs and their subsidiaries in the consolidated financial statements as the Group may lose the ability to exert effective control over the VIEs and their shareholders, and the Group may lose the ability to receive economic benefits from the VIEs.

The Group’s business has been directly operated by the VIEs and their subsidiaries. As of December 31, 2024 and 2025 the VIEs and their subsidiaries accounted for an aggregate of 58.56% and 77.02%, respectively, of the Group’s consolidated total assets, and 87.82% and 91.49%, respectively, of the Group’s consolidated total liabilities.

The VIE arrangements - continued

There are no consolidated VIEs’ assets that are collateral for the VIEs’ obligations and which can only be used to settle the VIEs’ obligations. No creditors (or beneficial interest holders) of the VIEs have recourse to the general credit of the Company or any of their consolidated subsidiaries. No terms in any arrangements, considering both explicit arrangements and implicit variable interests, require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs ever need financial support, the Company or its subsidiaries may, at its option and subject to statutory limits and restrictions, provide financial support to the VIEs through loans to the shareholders of the VIEs or entrustment loans to the VIEs.

Non-consolidated variable interest entities

The Company holds variable interest in certain third parties but is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact the economic performance of the third parties. Therefore, they are concluded as non-consolidated variable interest entities of the Company. The variable interests in the third parties companies held by the Company are in the form of loans and receivables, the size and nature of which are disclosed in Note 4(3).