EX-99.1 2 dp228818_ex9901.htm EXHIBIT 99.1

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 First Quarter 2025 Unaudited Financial Results

 

Hangzhou, China – May 15, 2025 – Youdao, Inc. (“Youdao” or the “Company”) (NYSE: DAO), an AI-powered solutions provider specializing in artificial intelligence applications for the learning and advertising verticals, today announced its unaudited financial results for the first quarter ended March 31, 2025.

 

First Quarter 2025 Financial Highlights

 

•Total net revenues were RMB1.3 billion (US$178.9 million), representing a 6.7% decrease from the same period in 2024.

 

oNet revenues from learning services were RMB602.4 million (US$83.0 million), representing a 16.1% decrease from the same period in 2024.

 

oNet revenues from smart devices were RMB190.5 million (US$26.3 million), representing a 5.1% increase from the same period in 2024.

 

oNet revenues from online marketing services were RMB505.4 million (US$69.6 million), representing a 2.6% increase from the same period in 2024.

 

•Gross margin was 47.3%, compared with 49.0% for the same period in 2024.

 

•Income from operations was RMB104.0 million (US$14.3 million), representing a 247.7% increase from the same period in 2024.

 

•Basic and diluted net income per American depositary share (“ADS”) attributable to ordinary shareholders was RMB0.65 (US$0.09) and RMB0.64 (US$0.09), respectively, compared with RMB0.11 and RMB0.10 for the same period of 2024.

 

“In the first quarter, we significantly improved our profitability, driving operating income to a first-quarter record high of RMB104.0 million, up 247.7% year-over-year. On the product front, our upgraded AI College Admission Advisers drove over 25% year-over-year growth in gross billings for Youdao Lingshi. We also accelerated international market expansion and deepened collaboration with NetEase Group in online marketing services, strengthening the long-term growth of our advertising business. Meanwhile, AI subscription services upgraded existing applications and introduced new offerings like Youdao AI Podcast Assistant, expanding our portfolio and driving over 40% year-over-year growth in total sales,” said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao.

 

 

“Looking ahead, we will accelerate the deployment of our large language model, Confucius, across learning and advertising verticals as part of our AI-native strategy — enhancing user experience while further boosting profitability. Having achieved our first full year of operating profit in 2024, we are well-positioned to sustain this momentum and deliver stronger profit growth and full-year operating cash flow breakeven in 2025,” Dr. Zhou concluded.

 

First Quarter 2025 Financial Results

 

Net Revenues

 

Net revenues for the first quarter of 2025 were RMB1.3 billion (US$178.9 million), representing a 6.7% decrease from RMB1.4 billion for the same period of 2024.

 

Net revenues from learning services were RMB602.4 million (US$83.0 million) for the first quarter of 2025, representing a 16.1% decrease from RMB718.0 million for the same period of 2024. The year-over-year decrease was mainly because we continued to take a disciplined, strategic approach to customer acquisition, which places greater emphasis on high-ROI (return on investment) engagements. We believe despite the short-term revenue decline, this strategy has enhanced the overall resilience and operational efficiency of our business.

 

Net revenues from smart devices were RMB190.5 million (US$26.3 million) for the first quarter of 2025, representing a 5.1% increase from RMB181.2 million for the same period of 2024, primarily driven by the continued increase in sales of Youdao Dictionary Pen in the first quarter of 2025.

 

Net revenues from online marketing services were RMB505.4 million (US$69.6 million) for the first quarter of 2025, representing a 2.6% increase from RMB492.7 million for the same period of 2024.

 

Gross Profit and Gross Margin

 

Gross profit for the first quarter of 2025 was RMB614.2 million (US$84.6 million), representing a 9.9% decrease from RMB681.5 million for the same period of 2024. Gross margin was 47.3% for the first quarter of 2025, compared with 49.0% for the same period of 2024.

 

Gross margin for learning services was 59.8% for the first quarter of 2025, compared with 63.1% for the same period of 2024. The decrease was mainly due to the decline in economies of scale as a result of the decreased revenues from learning services.

 

Gross margin for smart devices increased to 52.3% for the first quarter of 2025 from 32.6% for the same period of 2024. The improvement was mainly attributable to the higher gross margin arising from the newly launched Youdao Dictionary Pen since the second half of 2024.

 

Gross margin for online marketing services was 30.5% for the first quarter of 2025, compared with 34.3% for the same period of 2024. The decrease was mainly attributable to our strategic expansion of our client base for advertising services. As the collaboration with new clients remains in its nascent stage, the gross margin for these clients holds potential for future improvement.

 

Operating Expenses

 

Total operating expenses for the first quarter of 2025 were RMB510.2 million (US$70.3 million), compared with RMB651.6 million for the same period of last year.

 

Sales and marketing expenses for the first quarter of 2025 were RMB357.6 million (US$49.3 million), representing a decrease of 21.5% from RMB455.4 million for the same period of 2024. This decrease was attributable to the reduced marketing expenditures, as well as declined payroll related expenses in learning services and smart devices in the first quarter of 2025.

 

 

 

Research and development expenses for the first quarter of 2025 were RMB115.5 million (US$15.9 million), representing a decrease of 21.3% from RMB146.7 million for the same period of 2024. The decrease was primarily due to the decreased headcount for research and development employees, leading to payroll savings in the first quarter of 2025.

 

General and administrative expenses for the first quarter of 2025 were RMB37.1 million (US$5.1 million), representing a decrease of 25.0% from RMB49.4 million for the same period of 2024. The decrease was mainly attributable to a decrease in expected credit losses on our accounts receivables in the first quarter of 2025.

 

Income from Operations

 

As a result of the foregoing, income from operations for the first quarter of 2025 was RMB104.0 million (US$14.3 million), representing a 247.7% increase from RMB29.9 million for the same period in 2024. The margin of income from operations was 8.0%, compared with 2.1% for the same period of last year.

 

Net Income Attributable to Youdao’s Ordinary Shareholders

 

Net income attributable to Youdao’s ordinary shareholders for the first quarter of 2025 was RMB76.7 million (US$10.6 million), increased over sixfold from RMB12.4 million for the same period of last year. Non-GAAP net income attributable to Youdao’s ordinary shareholders for the first quarter of 2025 was RMB81.7 million (US$11.3 million), quadrupled from RMB20.3 million for the same period of last year.

 

Basic and diluted net income per ADS attributable to ordinary shareholders for the first quarter of 2025 was RMB0.65 (US$0.09) and RMB0.64 (US$0.09), respectively, compared with RMB0.11 and RMB0.10, respectively, for the same period of 2024. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders was RMB0.69 (US$0.10) and RMB0.68 (US$0.09), respectively, compared with RMB0.17 for the same period of 2024.

 

Other Information

 

As of March 31, 2025, Youdao’s cash, cash equivalents, current and non-current restricted cash, and short-term investments totaled RMB424.5 million (US$58.5 million), compared with RMB662.6 million as of December 31, 2024. For the first quarter of 2025, net cash used in operating activities was RMB255.5 million (US$35.2 million). Youdao’s ability to continue as a going concern is dependent on management’s ability to implement an effective business plan amid a changing regulatory environment, generate operating cash flows, and secure external financing for future development. To support Youdao’s future business, NetEase Group has agreed to provide financial support for ongoing operations in the next thirty-six months starting from May 2024. As of March 31, 2025, Youdao has received various forms of financial support from the NetEase Group, including, among others, RMB878.0 million in short-term loan, and US$128.5 million in long-term loans maturing on March 31, 2027 drawn from the US$300.0 million revolving loan facility.

 

As of March 31, 2025, the Company’s contract liabilities, which mainly consisted of deferred revenues generated from Youdao’s learning services, were RMB711.2 million (US$98.0 million), compared with RMB961.0 million as of December 31, 2024.

 

Share Repurchase Program

 

On November 17, 2022, the Company announced that its board of directors had authorized the Company to adopt a share repurchase program in accordance with applicable laws and regulations for up to US$20 million of its Class A ordinary shares (including in the form of ADSs) during a period of up to 36 months. This amount was subsequently increased to US$40.0 million in August 2023. As of March 31, 2025, the Company had repurchased a total of approximately 7.5 million ADSs for a total consideration of approximately US$33.8 million in the open market under the share repurchase program.

 

 

 

Conference Call

 

Youdao’s management team will host a teleconference call with simultaneous webcast at 6:00 a.m. Eastern Time on Thursday, May 15, 2025 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, May 15, 2025). Youdao’s management will be on the call to discuss the financial results and answer questions.

 

Dial-in details for the earnings conference call are as follows:

 

United States (toll free): +1-888-346-8982
International: +1-412-902-4272
Mainland China (toll free): 400-120-1203
Hong Kong (toll free):  800-905-945
Hong Kong: +852-3018-4992
Conference ID: 8344592

 

A live and archived webcast of the conference call will be available on the Company’s investor relations website at http://ir.youdao.com.

 

A replay of the conference call will be accessible by phone one hour after the conclusion of the live call at the following numbers, until May 22, 2025:

 

United States: +1-877-344-7529
International: +1-412-317-0088
Replay Access Code: 8344592

 

About Youdao, Inc.  

 

Youdao, Inc. (NYSE: DAO) is strategically positioned as an AI-powered solutions provider specializing in artificial intelligence applications for the learning and advertising verticals. Youdao now mainly offers learning services, online marketing services and smart devices – all powered by advanced technologies. Youdao was founded in 2006 as part of NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), a leading internet technology company in China.

 

For more information, please visit: http://ir.youdao.com.

 

Non-GAAP Measures

 

Youdao considers and uses non-GAAP financial measures, such as non-GAAP net income/(loss) attributable to the Company’s ordinary shareholders and non-GAAP basic and diluted net income/(loss) per ADS, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Youdao defines non-GAAP net income/(loss) attributable to the Company’s ordinary shareholders as net income/(loss) attributable to the Company’s ordinary shareholders excluding share-based compensation expenses and adjustment for GAAP to non-GAAP reconciling item for the income/(loss) attributable to noncontrolling interests. Non-GAAP net income/(loss) attributable to the Company’s ordinary shareholders enables Youdao’s management to assess its operating results without considering the impact of these items, which are non-cash charges in nature. Youdao believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company’s current operating performance and prospects in the same manner as management does, if they so choose.

 

 

 

Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools, which possibly do not reflect all items of expense that affect our operations. In addition, the non-GAAP financial measures Youdao uses may differ from the non-GAAP measures uses by other companies, including peer companies, and therefore their comparability may be limited.

 

For more information on these non-GAAP financial measures, please see the table captioned “Unaudited Reconciliation of GAAP and Non-GAAP Results” set forth at the end of this release.

 

The accompanying table has more details on the reconciliation between our GAAP financial measures that are mostly directly comparable to non-GAAP financial measures. Youdao encourages you to review its financial information in its entirety and not rely on a single financial measure.

 

Exchange Rate Information

 

This announcement contains translations of certain RMB amounts into U.S. dollars (“US$”) at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB7.2567 to US$1.00, the exchange rate on March 31, 2025 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all.

 

Safe Harbor Statement

 

This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “target,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Further information regarding such risks, uncertainties or factors is included in the Company’s filings with the SEC. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law.

 

 

 

 

YOUDAO, INC.            
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS          
(RMB and USD in thousands)            
             

 

    As of December 31,   As of March 31,   As of March 31,
    2024   2025   2025
    RMB   RMB   USD (1)
             
Assets            
Current assets:            
Cash and cash equivalents                     592,721                     335,892                       46,287
Restricted cash                         3,567                         3,027                           417
Short-term investments                       63,064                       82,384                       11,353
Accounts receivable, net                     418,644                     417,315                       57,508
Inventories                     174,741                     155,651                       21,449
Amounts due from NetEase Group                       79,700                       63,490                         8,749
Prepayment and other current assets                     154,331                     170,439                       23,487
Total current assets                1,486,768                1,228,198                   169,250
             
Non-current assets:            
Property, equipment and software, net                       46,725                       42,687                         5,882
Operating lease right-of-use assets, net                       68,494                       59,042                         8,136
Long-term investments                       72,380                       68,862                         9,489
Goodwill                     109,944                     109,944                       15,151
Other assets, net                       30,084                       30,475                         4,201
Total non-current assets                   327,627                   311,010                     42,859
             
Total assets                1,814,395                1,539,208                   212,109
             
Liabilities and Shareholders' Deficit            
Current liabilities:            
Accounts payables                     145,148                     102,122                       14,073
Payroll payable                     264,520                     144,894                       19,967
Amounts due to NetEase Group                       21,997                       34,636                         4,773
Contract liabilities                     961,024                     711,221                       98,009
Taxes payable                       37,603                       53,064                         7,312
Accrued liabilities and other payables                     638,660                     651,993                       89,847
Short-term loan from NetEase Group                     878,000                     878,000                     120,992
Total current liabilities                2,946,952                2,575,930                   354,973
             
Non-current liabilities:            
Long-term lease liabilities                       25,566                       18,828                         2,595
Long-term loans from NetEase Group                     913,000                     926,652                     127,696
Other non-current liabilities                       18,189                       20,129                         2,773
Total non-current liabilities                   956,755                   965,609                   133,064
             
Total liabilities                3,903,707                3,541,539                   488,037
             
Shareholders' deficit:            
Youdao's shareholders' deficit                 (2,139,958)                 (2,053,833)                    (283,025)
Noncontrolling interests                       50,646                       51,502                         7,097
Total shareholders' deficit               (2,089,312)               (2,002,331)                  (275,928)
             
Total liabilities and shareholders’ deficit                1,814,395                1,539,208                   212,109

 

Note 1:

The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.2567 on the last trading day of March (March 31, 2025) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.

 

 

 

 

YOUDAO, INC.                
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS        
(RMB and USD in thousands, except share and per ADS data)                

 

    Three Months Ended
    March 31,   December 31,   March 31,   March 31,
    2024   2024   2025   2025
    RMB   RMB   RMB   USD (1)
Net revenues:                
Learning services            717,996            617,673            602,414              83,015
Smart devices            181,198            240,444            190,498              26,251
Online marketing services            492,665            481,681            505,350              69,639
Total net revenues        1,391,859        1,339,798        1,298,262           178,905
                 
Cost of revenues (2)           (710,356)           (699,045)           (684,035)             (94,263)
Gross profit           681,503           640,753           614,227             84,642
                 
Operating expenses:                
Sales and marketing expenses (2)           (455,440)           (381,815)           (357,641)             (49,283)
Research and development expenses (2)           (146,723)           (120,694)           (115,474)             (15,913)
General and administrative expenses (2)             (49,416)             (54,068)             (37,071)              (5,109)
Total operating expenses         (651,579)         (556,577)         (510,186)           (70,305)
Income from operations             29,924             84,176           104,041             14,337
                 
Interest income                  975                  970                  517                    71
Interest expense             (20,334)             (16,828)             (16,104)              (2,219)
Others, net                2,892                1,594                 (960)                 (132)
Income before tax             13,457             69,912             87,494             12,057
                 
Income tax benefits/(expenses)                1,028                2,386              (9,895)              (1,364)
Net income             14,485             72,298             77,599             10,693
Net (income)/loss attributable to noncontrolling interests              (2,053)              10,705                 (856)                 (118)
Net income attributable to ordinary shareholders of the Company             12,432             83,003             76,743             10,575
                 
Basic net income per ADS                 0.11                 0.71                 0.65                 0.09
Diluted net income per ADS                 0.10                 0.70                 0.64                 0.09
                 
Shares used in computing basic net income per ADS      118,317,220      117,259,091      117,594,976      117,594,976
Shares used in computing diluted net income per ADS      118,928,848      118,705,233      119,504,097      119,504,097
                 
                 

Note 1:

The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.2567 on the last trading day of March (March 31, 2025) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.

                 

 

Note 2:                
Share-based compensation in each category:                
Cost of revenues                  778                1,025                  612                    84
Sales and marketing expenses                1,136                1,069                  728                  100
Research and development expenses                3,503                2,402                2,352                  324
General and administrative expenses                2,479                4,285                1,538                  213

 

 

 

 

YOUDAO, INC.                
UNAUDITED ADDITIONAL INFORMATION                
(RMB and USD in thousands)                

 

    Three Months Ended
    March 31,   December 31,   March 31,   March 31,
    2024   2024   2025   2025
    RMB   RMB   RMB   USD
                 
Net revenues                
Learning services            717,996            617,673            602,414              83,015
Smart devices            181,198            240,444            190,498              26,251
Online marketing services            492,665            481,681            505,350              69,639
Total net revenues        1,391,859        1,339,798        1,298,262           178,905
                 
Cost of revenues                
Learning services            264,759            247,059            242,111              33,364
Smart devices            122,060            134,896              90,851              12,520
Online marketing services            323,537            317,090            351,073              48,379
Total cost of revenues           710,356           699,045           684,035             94,263
                 
Gross margin                
Learning services   63.1%   60.0%   59.8%   59.8%
Smart devices   32.6%   43.9%   52.3%   52.3%
Online marketing services   34.3%   34.2%   30.5%   30.5%
Total gross margin   49.0%   47.8%   47.3%   47.3%

 

 

 

 

 

YOUDAO, INC.                
UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS            
(RMB and USD in thousands, except share and per ADS data)                

 

    Three Months Ended
    March 31,   December 31,   March 31,   March 31,
    2024   2024   2025   2025
    RMB   RMB   RMB   USD
                 
Net income attributable to ordinary shareholders of the Company             12,432             83,003             76,743             10,575
Add: share-based compensation                7,896                8,781                5,230                  721
Less: GAAP to non-GAAP reconciling item for the income attributable to
         noncontrolling interests		                    -                       -                    (297)                   (41)
Non-GAAP net income attributable to ordinary shareholders of the Company             20,328             91,784             81,676             11,255
                 
                 
Non-GAAP basic net income per ADS                 0.17                 0.78                 0.69                 0.10
Non-GAAP diluted net income per ADS                 0.17                 0.77                 0.68                 0.09
                 
Shares used in computing non-GAAP basic net income per ADS      118,317,220      117,259,091      117,594,976      117,594,976
Shares used in computing non-GAAP diluted net income per ADS      118,928,848      118,705,233      119,504,097      119,504,097