Financial Performance Overview - Total net revenues for Q4 2024 were RMB1.3 billion (US$183.6 million), a 9.5% decrease from RMB1.5 billion in Q4 2023 [2][5] - For the fiscal year 2024, total net revenues reached RMB5.6 billion (US$770.7 million), representing a 4.4% increase from RMB5.4 billion in 2023 [21] Revenue Breakdown - Net revenues from learning services in Q4 2024 were RMB617.7 million (US$84.6 million), a 21.2% decrease from RMB784.0 million in Q4 2023 [2][6] - Net revenues from smart devices increased to RMB240.4 million (US$32.9 million) in Q4 2024, an 8.1% increase from RMB222.4 million in Q4 2023 [7] - Net revenues from online marketing services were RMB481.7 million (US$66.0 million) in Q4 2024, showing a modest increase from RMB474.1 million in Q4 2023 [7] Profitability Metrics - Gross profit for Q4 2024 was RMB640.8 million (US$87.8 million), a 13.3% decrease from RMB738.8 million in Q4 2023, with a gross margin of 47.8% compared to 49.9% in the same period last year [8][9] - Income from operations for Q4 2024 was RMB84.2 million (US$11.5 million), a 10.3% increase from RMB76.3 million in Q4 2023, with an operating margin of 6.3% [15] - Net income attributable to ordinary shareholders for Q4 2024 was RMB83.0 million (US$11.4 million), a 47.0% increase from RMB56.5 million in Q4 2023 [16] Strategic Initiatives - The company achieved its first-ever full-year profitability in 2024, with a retention rate exceeding 70% for Youdao Lingshi in Q4 [3] - An 'AI Native' strategy is being launched to integrate AI across business lines, including automating advertising platforms and introducing AI-driven tutoring [4] Operating Expenses - Total operating expenses for Q4 2024 were RMB556.6 million (US$76.3 million), down from RMB662.5 million in Q4 2023 [11] - Sales and marketing expenses decreased by 13.5% to RMB381.8 million (US$52.3 million) in Q4 2024 [12] - Research and development expenses were RMB120.7 million (US$16.5 million), a decrease of 28.2% from RMB168.1 million in Q4 2023 [13] Cash and Financial Position - As of December 31, 2024, the company's cash and cash equivalents totaled RMB662.6 million (US$90.8 million), up from RMB527.1 million a year earlier [19] - The company has received financial support from NetEase Group, including RMB878.0 million in short-term loans and US$126.1 million in long-term loans [19]

Core Points - Youdao, Inc. will report its fourth quarter and fiscal year 2024 financial results on February 20, 2025, before the U.S. markets open [1] - The earnings teleconference call will occur at 5:00 a.m. Eastern Time on the same day, with management available to discuss results and answer questions [2] - Youdao is an intelligent learning company in China, offering a range of educational technologies and solutions, including online tools, smart devices, and interactive learning apps [4] Financial Reporting - The financial results announcement is scheduled for February 20, 2025, before market opening [1] - A live webcast of the earnings call will be available on the company's investor relations website [2] - A replay of the conference call will be accessible by phone for a week after the live call [3] Company Overview - Youdao, Inc. is dedicated to developing technologies for learning content and solutions for users of all ages [4] - The company offers products such as Youdao Dictionary, Youdao Translation, STEAM courses, and vocational training [4] - Youdao was founded in 2006 as part of NetEase, Inc., a leading internet technology company in China [4]

Company Overview - Youdao is a leading intelligent learning company in China, showcasing its AI-equipped smart device, the Youdao Dictionary Pen X7 series, at CES 2025 [1] - The company focuses on using technology to provide educational content, applications, and solutions for learners of all ages [16] Product Highlights - The Youdao Dictionary Pen X7 series features proprietary applications, including Hi Echo and Mr P AI Tutor, based on the 'Zi Yue' educational large language model [2] - The X7 series provides offline translation capabilities through an edge-side large language model, enhancing the accuracy and fluency of language learning [12] - The dictionary pen also offers AI intelligent learning features such as AI essay refinement [13] - The Youdao Dictionary Pen X7 quickly became the best-selling product in the thousand-yuan price range, surpassing 30,000 units sold [14] Technological Innovation - Youdao launched China's first educational large language model, 'Zi Yue', in 2023, which has been integrated into all of its software and hardware products [4] - The company has developed the industry's first edge large language model, applied to the X7 series of dictionary pens, achieving translation results comparable to online NMT [11][12] - Youdao is exploring the application of smaller models on the edge for specific scenarios, enhancing precision and user experience [8][10] Market Performance - Youdao's AI subscription service has achieved rapid growth for seven consecutive quarters [7] - During the 2024 Nov 11th Shopping Festival in China, the Youdao Dictionary Pen X7 Pro topped several industry rankings on major e-commerce platforms, marking the fifth consecutive year of leading sales in its category [14] Strategic Focus - Youdao is actively promoting the application of the 'Zi Yue' educational large language model in various scenarios, conducting a comprehensive AI upgrade of its business products [7] - The company will continue to increase investment in the research and development of edge model applications, focusing on AI + education to provide learners with a better learning experience [15] Industry Collaboration - Youdao participated in the Microsoft Greater China offline event at CES 2025, engaging in discussions on AI innovation and the globalization of consumer electronics in China [3]

Investment Rating - The report maintains a "Buy" rating for DAO (Youdao) with a target price of $6.69 per ADS [6][17] Core Views - DAO achieved its first-ever Q3 profitability in 2024, with revenue reaching a historical high of RMB 1.573 billion, a 2.19% YoY increase [1] - The company's AI-driven education products showed strong performance, with AI subscription services sales growing over 150% YoY to nearly RMB 70 million [2] - DAO's smart hardware business revenue increased by 25.18% YoY, driven by the launch of the AI-powered Youdao Dictionary Pen X7 series [2] - Online marketing services revenue grew 45.59% YoY, benefiting from AI-optimized RTA advertising and overseas game promotion [2] Financial Performance - For 2024 Q1-Q3, DAO reported revenue of RMB 4.286 billion, a 9.66% YoY increase, with a significant reduction in net loss to RMB 0.79 million [1] - Non-GAAP net income turned positive at RMB 13 million for the first nine months of 2024 [1] - The company improved cost efficiency, with sales expense ratio decreasing by 10.77 percentage points YoY to 33.04% in Q3 2024 [2] Business Segment Analysis Learning Services - Revenue decreased by 19.24% YoY to RMB 768 million in Q3 2024 due to reduced low-ROI customized services [2] - Digital content services generated RMB 514 million in net revenue, while AI subscription services contributed nearly RMB 70 million [2] Smart Hardware - Revenue grew 25.18% YoY to RMB 315 million in Q3 2024 [2] - The Youdao Dictionary Pen X7 series became the first learning hardware to achieve offline AI large model translation [2] Online Marketing Services - Revenue increased 45.59% YoY to RMB 489 million in Q3 2024 [2] - RTA advertising grew over 100% YoY, and KOL advertising increased more than 50% due to overseas game promotion [2] Financial Projections - Revenue is expected to grow from RMB 5.75 billion in 2024 to RMB 7.198 billion in 2026 [4][15] - Non-GAAP net income is projected to increase from RMB 41 million in 2024 to RMB 291 million in 2026 [15] - The PS ratio is forecasted to decrease from 0.75x in 2024 to 0.60x in 2026 [4] Valuation and Comparison - DAO's 2024E PS ratio of 0.75x is lower than peers like New Oriental (2.12x) and Gaotu (1.07x) [18] - The company's market capitalization stands at RMB 4.332 billion as of November 18, 2024 [18]

Investment Rating - The report maintains a "Buy" rating for the company with a target price raised from $4.50 to $7.30, indicating a potential upside of 47.5% from the current price of $4.95 [2][5][12]. Core Insights - The company achieved its first profitable quarter in Q3, with an adjusted net profit of 89 million RMB, exceeding market expectations of 35 million RMB. Revenue grew by 2% year-on-year, despite a 19% decline in learning services revenue due to reduced customer acquisition spending under strict ROI standards. AI-driven subscription services saw a significant increase, with sales reaching 70 million RMB, a 150% year-on-year growth [3][4]. - Hardware revenue increased by 25% year-on-year, driven by the launch of new products, particularly the X7 series of dictionary pens, which helped restore hardware revenue and gross margin, achieving a gross margin of 42.8%, up 13 percentage points quarter-on-quarter [3][4]. - The company continues to focus on its AI and education strategy, with a high school renewal rate reaching 70%, up 5 percentage points year-on-year, laying a solid foundation for long-term business growth [3][4]. Financial Forecast Changes - Revenue forecasts for 2024 and 2025 have been adjusted downwards by 6.2% and 7.2% respectively, reflecting a strategic shift towards profitability. The 2025 revenue is now projected at 6,419 million RMB, while the adjusted net profit for 2024 is expected to be 63 million RMB, increasing to 122 million RMB in 2025 [4][16]. - The gross profit margin is projected to be 49.3% in 2024, slightly improving to 50.1% in 2025, while the adjusted operating profit margin is expected to rise to 4.1% in 2025 [4][16].

Financial Data and Key Metrics Changes - Net revenues for Q3 2024 reached RMB1.57 billion, marking a 2.2% increase year-over-year [9][24] - Income from operations reached RMB107.3 million compared to a loss of RMB57.7 million in the same period last year, representing the first profitable third quarter [9][30] - Operating cash outflow narrowed to RMB85.4 million, an improvement of 71% compared to the same period last year [9] Business Line Data and Key Metrics Changes - Learning services net revenues were RMB767.9 million, down 19.2% year-over-year, due to a focus on high-demand services and reduced low ROI customer acquisition [10][25] - Digital content services within learning services generated RMB513.7 million, covering costs and yielding profit [11] - AI-driven subscription services in learning services grew to nearly RMB70 million, representing over 150% year-over-year growth [13] - Online marketing services net revenues reached RMB489.4 million, representing a 45.6% increase year-over-year, driven by expansion into new sectors and AI optimization [15][27] - Smart devices segment net revenues reached RMB315.3 million, up 25.2% year-over-year, with improved gross margin at 42.8% [17][28] Market Data and Key Metrics Changes - Overseas advertising accounted for approximately 20% of ad revenue in Q3, with KOL ad revenue up over 50% year-over-year [16] - The online marketing services sector saw significant growth in gaming and related industries, driving ad revenue to historical highs [51] Company Strategy and Development Direction - The company aims to integrate generative AI technology across its businesses to enhance competitiveness and achieve full-year operational profitability [20][22] - Focus on delivering high-quality services and learning outcomes at scale in the online learning sector [12][58] - Plans to explore new domestic and international opportunities in online marketing services [22][60] Management Comments on Operating Environment and Future Outlook - Management expressed optimism about the medium to long-term growth potential of online learning services, emphasizing the importance of customer satisfaction and retention [35][40] - The smart devices segment is expected to continue its growth trajectory, supported by successful product launches and enhanced team capabilities [44][46] - The advertising business is anticipated to maintain solid profitability despite facing short-term challenges [54] Other Important Information - The company has made significant strides towards achieving full-year operational profitability, with cumulative income from operations reaching RMB64.6 million [21] - The company plans to launch new products in the fourth quarter, including enhancements to existing offerings [19][47] Q&A Session Summary Question: Strategy on increasing investments in the learning service sector - Management emphasized a focus on strong demand services and scaling back low ROI customer acquisition efforts, ensuring sustainable development for long-term success [34][35] Question: Sustainability of growth in the smart devices sector - Management highlighted positive outcomes from strategic focus and channel reorganization, with expectations for continued growth in the fourth quarter [41][44] Question: Future growth potential of online marketing services - Management identified significant growth potential in domestic and international advertising, particularly in online entertainment and AI tools [50][51][53] Question: Outlook for the fourth quarter - Management expressed confidence in achieving profitability for the year, with continued focus on digital content services, online marketing, and AI-driven subscription services [55][56][58]

Core Points - Youdao, Inc. will hold its annual general meeting of shareholders on December 12, 2024, from 3:00 p.m. to 5:00 p.m. Beijing Time, at its offices in Beijing [1] - No proposals will be submitted for shareholder approval at the AGM; it will serve as an open forum for discussions between shareholders and management [1] - The record date for determining shareholders entitled to attend the AGM is set for December 2, 2024 [2] Company Overview - Youdao, Inc. is an intelligent learning company in China, focusing on developing technologies for learning content, applications, and solutions for users of all ages [5] - The company offers a range of products including online knowledge tools, smart devices, STEAM courses, and education digitalization solutions [5] - Youdao was founded in 2006 as part of NetEase, Inc., a leading internet technology company in China [5]

Financial Highlights - Total net revenues for Q3 2024 were RMB1.6 billion (US$224.1 million), a 2.2% increase from RMB1.5 billion in Q3 2023 [1][2] - Net revenues from learning services decreased by 19.2% year-over-year to RMB767.9 million (US$109.4 million) [1][2] - Net revenues from smart devices increased by 25.2% year-over-year to RMB315.3 million (US$44.9 million) [1][2] - Net revenues from online marketing services increased by 45.6% year-over-year to RMB489.4 million (US$69.7 million) [1][2] - Gross margin for Q3 2024 was 50.2%, down from 55.9% in Q3 2023 [1][3] Profitability and Operations - Income from operations for Q3 2024 was RMB107.3 million (US$15.3 million), compared to a loss of RMB57.7 million in Q3 2023 [5] - Net income attributable to ordinary shareholders for Q3 2024 was RMB86.3 million (US$12.3 million), compared to a net loss of RMB102.9 million in Q3 2023 [5] - Non-GAAP net income attributable to ordinary shareholders for Q3 2024 was RMB88.7 million (US$12.6 million), compared to a non-GAAP net loss of RMB67.3 million in Q3 2023 [5][8] Operating Expenses - Total operating expenses for Q3 2024 were RMB682.2 million (US$97.2 million), down from RMB917.3 million in Q3 2023 [4] - Sales and marketing expenses decreased by 22.9% year-over-year to RMB519.6 million (US$74.0 million) [4] - Research and development expenses decreased by 36.2% year-over-year to RMB119.6 million (US$17.0 million) [4] Cash and Financial Support - As of September 30, 2024, total cash and cash equivalents were RMB489.4 million (US$69.7 million), down from RMB527.1 million at the end of 2023 [6] - NetEase Group has agreed to provide financial support for ongoing operations, including RMB878.0 million in short-term loans and US$128.4 million in long-term loans [6] Share Repurchase Program - The company has repurchased approximately 7.5 million ADSs for around US$33.8 million under its share repurchase program [7]

Company Overview - Youdao, Inc. is an intelligent learning company in China, recognized for its industry-leading technology [4] - The company offers a range of products including online knowledge tools, smart devices, STEAM courses, and digital education solutions [4] - Youdao was founded in 2006 as part of NetEase, Inc., a prominent internet technology company in China [4] Upcoming Financial Results - Youdao will report its third quarter 2024 financial results on November 14, 2024, before the U.S. market opens [1] - A teleconference call will be held at 5:00 a.m. Eastern Time on the same day, with management discussing the quarterly results and answering questions [2] Conference Call Details - Dial-in details for the earnings conference call include toll-free numbers for Mainland China and Hong Kong, as well as an international number [2] - A replay of the conference call will be available one hour after the live call, accessible until November 21, 2024 [3]

On October 3, NetEase Youdao (DAO, Financial) experienced a significant increase of 30.79%, reaching $5.65 per share with a trading volume of $3.47 million.Financial data reveals that as of June 30, 2024, NetEase Youdao's total revenue was RMB 2.714 billion, marking a 14.5% year-over-year growth. The company's net loss attributable to shareholders was RMB 87.043 million, showing an improvement of 82.71% year-over-year.Important Note: NetEase Youdao is scheduled to disclose its 2024 fiscal third-quarter repo ...