Youdao Reports First Quarter 2024 Unaudited Financial Results

Core Viewpoint - Youdao, Inc. reported its first-ever profitable first quarter and consecutive two quarters of profitability, driven by strong growth in online marketing services and AI-driven subscription services [1][4]. Financial Highlights - Total net revenues for Q1 2024 were RMB1.4 billion (US$192.8 million), a 19.7% increase from RMB1.2 billion in Q1 2023 [2][18]. - Net revenues from learning services decreased by 2.0% to RMB718.0 million (US$99.4 million) [2][18]. - Net revenues from smart devices decreased by 14.8% to RMB181.2 million (US$25.1 million) [2][18]. - Net revenues from online marketing services increased by 125.9% to RMB492.7 million (US$68.2 million) [2][18]. Gross Profit and Margin - Gross profit for Q1 2024 was RMB681.5 million (US$94.4 million), a 13.2% increase from RMB601.9 million in Q1 2023 [3][18]. - Gross margin for Q1 2024 was 49.0%, down from 51.7% in Q1 2023 [3][18]. - Gross margin for learning services was 63.1%, while for smart devices it decreased to 32.6% [3][18]. Operating Expenses - Total operating expenses for Q1 2024 were RMB651.6 million (US$90.2 million), down from RMB797.6 million in Q1 2023 [4][18]. - Sales and marketing expenses decreased by 19.4% to RMB455.4 million (US$63.1 million) [4][18]. - Research and development expenses decreased by 19.7% to RMB146.7 million (US$20.3 million) [4][18]. Income and Net Income - Income from operations for Q1 2024 was RMB29.9 million (US$4.1 million), compared to a loss of RMB195.8 million in Q1 2023 [4][18]. - Net income attributable to ordinary shareholders for Q1 2024 was RMB12.4 million (US$1.7 million), compared to a net loss of RMB204.4 million in Q1 2023 [4][18]. Cash and Financial Support - As of March 31, 2024, Youdao's cash and equivalents totaled RMB326.0 million (US$45.2 million), down from RMB527.1 million at the end of 2023 [6][18]. - Youdao has received financial support from NetEase Group, including RMB878.0 million in short-term loans and US$123.7 million in long-term loans [6][18]. Share Repurchase Program - The company has repurchased approximately 6.6 million ADSs for around US$30.4 million under its share repurchase program, which was authorized for up to US$40.0 million [7][18]. Future Strategy - The company plans to focus on digital content services, online marketing services, and AI-driven subscription services, leveraging its AI capabilities to enhance educational applications [1][4].