Investment Rating - The report maintains a "Buy" rating for the company with a target price adjusted from $5.00 to $4.50, indicating a potential upside of 34.3% from the current price of $3.35 [1][4][10]. Core Insights - The company is focusing on high school education and AI subscription services, with hardware revenue expected to recover in Q3 2024. The growth rate for high school business has been revised down from 25-30% to 20-25% for 2024 [1]. - The second quarter of 2024 saw a revenue increase of 9.5% year-on-year to 1.3 billion RMB, with learning services, hardware, and advertising revenues showing varied performance [1]. - The company reported an adjusted net loss of 96 million RMB in Q2 2024, which was better than market expectations [1]. Financial Performance Summary - Revenue projections for 2024 have been slightly adjusted, with an expected overall revenue growth of 12%. Learning services and hardware revenues are projected to decline by 3% and 9% respectively, while advertising revenue is expected to grow by 62% [1][11]. - The company achieved a gross profit margin of 48.3% in 2024, with a slight improvement from previous estimates [3][11]. - The adjusted net profit margin is projected to be -0.4% for 2024, indicating ongoing challenges but potential for recovery in subsequent years [3][11]. Revenue Breakdown - Learning services revenue is expected to be 3.05 billion RMB in 2024, down from previous estimates [3]. - Hardware revenue is projected to recover to 832 million RMB in 2024, with a growth rate of 11% [3]. - Advertising revenue is forecasted to reach 2.16 billion RMB, reflecting a growth rate of 7.7% [3]. Market Position - The company has a market capitalization of approximately $104.62 million, with a 52-week high of $4.65 and a low of $3.05 [4][10]. - The company has maintained a strong retention rate of over 70% for its digital content services, indicating robust customer loyalty [1].

maybefalse My Buy investment rating for Youdao, Inc.'s (NYSE:DAO) shares stays unchanged. DAO's Q2 2024 bottom line beat and results briefing commentary indicate that the company is coming closer to reaching an operating profitability inflection point. DAO's first quarter results and its AI-related revenues were the focus of the prior May 27, 2024 update. I review Youdao's latest second quarter bottom line performance with this latest write-up. Narrower Than Expected Losses Were The Key Highlight Of DAO ...

Financial Data and Key Metrics Changes - In Q2 2024, net revenues reached RMB1.3 billion, growing 9.5% year-over-year [6][19] - Operating cash inflow reached a record level of RMB250.2 million, an increase of 88.2% year-over-year [6] - Loss from operations was RMB72.6 million, narrowing by 74.9% year-over-year [7] - For the first half of 2024, net revenues reached RMB2.7 billion, marking an increase of 14.5% year-over-year [7] - The net loss attributable to ordinary shareholders was narrowed to RMB99.5 million, compared to RMB299.2 million for the same period of last year [21] Business Line Data and Key Metrics Changes - Learning services generated net revenues of RMB643.8 million, slightly down by 5.5% year-over-year [7][19] - Digital content services achieved net revenues of RMB403.3 million, up 6.8% year-over-year [7] - Online marketing services reached net revenues of RMB511.2 million, representing a 68.4% increase year-over-year [12][20] - Smart devices segment saw net revenues of RMB166.7 million, down 25% year-over-year due to unfavorable product mix [13][19] Market Data and Key Metrics Changes - The online marketing services segment maintained strong growth, with seven consecutive quarters of over 50% year-over-year growth [12] - The demand for promoting AI tools and applications surged, with AI tools advertisement revenues growing by more than 100% quarter-over-quarter [12] Company Strategy and Development Direction - The company focuses on three core businesses: digital content services, online marketing services, and AI-driven subscription services, all showing good growth and healthy economics [15] - The strategy emphasizes AI empowerment across business lines, combining technical strength with operational excellence [16] - Continuous product and service upgrades are aimed at improving customer satisfaction and retention rates [9][28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving full-year positive operating income, driven by strong performance in core areas [16][63] - The company is committed to improving operational efficiency through AI technology and content innovation [66] - The future of AI plus education is viewed as bright, with a focus on leading the charge in this sector [17] Other Important Information - The gross margin for learning services improved to 60% in Q2 2024, compared to 57.4% in the same period of 2023 [20] - The company has launched new high-end products, such as the Youdao Dictionary Pen X7, which have received positive feedback [15][58] Q&A Session Summary Question: Strategy on education sector amidst intensified competition - Management noted the increasing demand for college entrance exam preparations and emphasized customer satisfaction and retention as key strategies [25][27][28] Question: Outlook for online marketing services in the second half of the year - The outlook remains positive, with expectations for continued revenue growth driven by data accumulation and international advertising expansion [35][36][38] Question: Commercialization of Mr. P AI Tutor - Initial feedback has been positive, with high user engagement and plans for scalable monetization through subscription fees and other channels [41][43][45] Question: Progress in STEAM courses and future investments - The company has seen over 100% year-over-year growth in non-academic courses and plans to continue emphasizing high-quality development in this area [47][49][50] Question: Strategy for smart devices and revenue decline - The focus is on core products and channel efficiency, with expectations for improved performance in the second half of the year [55][56][59] Question: Achieving and sustaining profitability - Management is committed to achieving full-year positive operating income and believes profitability will be sustainable due to strong performance in core areas [62][63][66] Question: Interpretation of recent opinions on service consumption in education - The company plans to continue investing in the education sector while adhering to policies and focusing on innovative product development [69][71]

Exhibit 99.1 For investor and media inquiries, please contact: In China: Jeffrey Wang Youdao, Inc. Tel: +86-10-8255-8163 ext. 89980 E-mail: IR@rd.netease.com Piacente Financial Communications Helen Wu Tel: +86-10-6508-0677 E-mail: youdao@thepiacentegroup.com In the United States: Piacente Financial Communications Brandi Piacente Tel: +1-212-481-2050 E-mail: youdao@thepiacentegroup.com Youdao Reports Second Quarter 2024 Unaudited Financial Results Hangzhou, China – August 22, 2024 – Youdao, Inc. ("Youdao" or ...

HANGZHOU, China, Aug. 22, 2024 /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), an intelligent learning company with industry-leading technology in China, today announced its unaudited financial results for the second quarter ended June 30, 2024.Second Quarter 2024 Financial HighlightsTotal net revenues were RMB1.3 billion (US$181.9 million), representing a 9.5% increase from the same period in 2023.- Net revenues from learning services were RMB643.8 million (US$88.6 million), represent ...

HANGZHOU, China, Aug. 5, 2024 /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), an intelligent learning company with industry-leading technology in China, today announced that it will report its second quarter 2024 financial results on Thursday, August 22, 2024, before the open of the U.S. markets.The earnings teleconference call with simultaneous webcast will take place at 6:00 a.m. Eastern Time on Thursday, August 22, 2024 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, August 22, 2024). ...

HANGZHOU, China, July 11, 2024 /PRNewswire/ --Youdao introduced its latest smart device, the Youdao Dictionary Pen X7, at the World AI Conference on July 4, 2024, in Shanghai. This launch marks a significant step forward in the field of integrated tutoring, utilizing artificial intelligence to expand educational opportunities.At the Youdao booth, a series of impressive and innovative products were displayed. These included Youdao Listening Pod E6 Pro, serving both as a listening device and a language coach; ...

Investment Rating - The investment rating for the company is "Buy" with a current price of $3.69 and a fair value of $7.13 [1][2]. Core Insights - The company achieved its first consecutive profitable quarters, with Q1 2024 revenue of 1.392 billion RMB, a year-on-year increase of 19.65%, and a net profit of 12 million RMB, marking a turnaround from losses [2][12]. - Digital content services showed steady growth, while online marketing services experienced significant momentum, with a 125.89% year-on-year revenue increase in Q1 2024 [2][12]. - The company has improved cost control, with a sales expense ratio of 32.7%, down 15.9 percentage points year-on-year [2][12]. - AI technology has empowered all business lines, with AI-driven subscription services achieving over 140% year-on-year sales growth in Q1 2024 [2][12]. Financial Performance Summary - For 2024-2026, the company is projected to generate revenues of 6.058 billion RMB, 6.984 billion RMB, and 7.890 billion RMB, respectively, with net profits of -140 million RMB, 86 million RMB, and 199 million RMB [2][15]. - The learning services segment is expected to generate revenues of 3.463 billion RMB, 3.913 billion RMB, and 4.422 billion RMB from 2024 to 2026 [12][15]. - The smart devices segment is projected to achieve revenues of 864 million RMB, 907 million RMB, and 979 million RMB during the same period [12][15]. - The online marketing services are anticipated to generate revenues of 1.731 billion RMB, 2.164 billion RMB, and 2.489 billion RMB from 2024 to 2026 [12][15].

Core Insights - Youdao, Inc. reported strong financial results for Q1 2024, driven by its dual-drive strategy of "AI + education content," leading to steady growth across multiple financial metrics [1][2] Financial Performance - Total net revenues for Q1 2024 reached RMB 1.4 billion, a 19.7% increase year-over-year [2] - Income from operations was RMB 29.9 million, marking the first time Youdao has posted two consecutive quarters of profitability [2] - Non-GAAP net income attributable to ordinary shareholders was RMB 20.3 million, a positive shift compared to the same period last year [2] - Net cash used in operating activities improved by 10.5% year-over-year [2] Revenue Breakdown - Net revenues from learning services were RMB 718.0 million, remaining largely unchanged from the previous year [4] - Digital content services generated RMB 500 million in net revenues, an 11.0% year-on-year increase [4] - Online marketing services reached a record high of RMB 492.7 million, increasing by 125.9% year-over-year, marking six consecutive quarters of over 50% growth [4] - Net revenues from smart devices totaled RMB 181.2 million, with significant sales from the latest Dictionary Pen iterations [6] AI and Product Development - Youdao's generative AI applications are being rapidly commercialized, focusing on three major application scenarios with high growth potential [6] - AI-driven subscription services, including Youdao Dictionary and Youdao Desktop Translation, saw total sales approach RMB 50 million, increasing by over 140% year-on-year [8] - The number of monthly active users for Youdao Desktop Translation exceeds 100 million, solidifying its position as a leader in the domestic dictionary translation market [8] International Expansion - Youdao has launched several apps based on LLM capabilities in international markets, with total sales of international apps doubling year-over-year [9] - The audio transcription app iRecord ranks among the top two in North American audio recording tracks [9] Strategic Focus - The company aims to concentrate on businesses and products with high growth potential and significant competitive advantages [9] - Consumer-facing products represent the largest growth opportunity for AI, with a focus on accelerating product reach and increasing user subscriptions [9]

Core Insights - Youdao, Inc. reported strong financial results for Q1 2024, driven by its dual-drive strategy of "AI + education content," leading to significant growth in various financial metrics [1][2]. Financial Performance - Total net revenues for Q1 2024 reached RMB 1.4 billion, a 19.7% increase year-over-year [2]. - Income from operations was RMB 29.9 million, marking the first time Youdao has posted two consecutive quarters of profitability [2]. - Non-GAAP net income attributable to ordinary shareholders was RMB 20.3 million, a positive shift compared to the same period last year [2]. - Net cash used in operating activities improved by 10.5% year-over-year [2]. Revenue Breakdown - Net revenues from learning services were RMB 718.0 million, remaining largely unchanged from the previous year [4]. - Digital content services generated RMB 500 million in net revenues, an 11.0% increase year-over-year [4]. - Online marketing services reached a record high of RMB 492.7 million, increasing by 125.9% year-over-year, marking six consecutive quarters of over 50% growth [4]. Product and Service Development - Youdao launched the first large language model for education in China, "Ziyue," accelerating its commercial deployment in education and advertising [3]. - The company introduced a one-stop overseas marketing platform to support its online marketing services customers [5]. - Net revenues from smart devices were RMB 181.2 million, with the Dictionary Pen leading in innovation and sales [6]. AI-Driven Services - AI-driven subscription services saw total sales approaching RMB 50 million, increasing by over 140% year-over-year [8]. - Youdao's Desktop Translation has over 100 million monthly active users, making it a leader in the domestic dictionary translation market [8]. - International app sales doubled compared to the same period last year, with notable success in audio transcription and translation [9]. Strategic Focus - The company is concentrating on three primary segments: digital content services, online marketing services, and AI-driven subscription services, with a focus on high growth potential areas [9]. - Youdao aims to accelerate product reach and scale, increase user subscriptions, and improve returns on investments [9].