EX-99.1 2 dp232955_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 Second Quarter 2025 Unaudited Financial Results

 

Hangzhou, China – August 14, 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 second quarter ended June 30, 2025.

 

Second Quarter 2025 Financial Highlights

 

•Total net revenues were RMB1.4 billion (US$197.9 million), representing a 7.2% increase from the same period in 2024.

 

oNet revenues from learning services were RMB657.8 million (US$91.8 million), representing a 2.2% increase from the same period in 2024.

 

oNet revenues from smart devices were RMB126.8 million (US$17.7 million), representing a 23.9% decrease from the same period in 2024.

 

oNet revenues from online marketing services were RMB632.9 million (US$88.3 million), representing a 23.8% increase from the same period in 2024.

  

•Gross margin was 43.0%, compared with 48.2% for the same period in 2024.

 

•Income from operations was RMB28.8 million (US$4.0 million), compared with loss from operations of RMB72.6 million for the same period in 2024.

 

•Basic and diluted net loss per American depositary share (“ADS”) attributable to ordinary shareholders were RMB0.15 (US$0.02), compared with RMB0.85 for the same period of 2024. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders were RMB0.11 (US$0.02) and RMB0.10 (US$0.01), respectively, compared with non-GAAP basic and diluted net loss per ADS attributable to ordinary shareholders of RMB0.82 for the same period of 2024.

 

“Strong execution of our AI Native Strategy drove robust financial results in the second quarter, highlighted by our first-ever profitable second quarter. We released our latest Large Language Model (LLM) Confucius 3 in the second quarter, and open-sourced our Confucius 3-Math. Product wise, we launched the AI Essay Grading function in Youdao Lingshi, leading to a historical high of the retention rate. We also released AI Ad Placement Optimizer enabling end-to-end AI decision-making for our online marketing services. In addition, we deepened the exploration of new AI application scenarios, driving total sales of AI-driven subscription services to approximately 30% year-over-year growth,” said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao.

 

“Looking ahead, we will continue advancing our AI Native Strategy through scenario-driven optimization of our LLMs and accelerated technological innovation and implementation across learning and advertising, aiming to further boost learners’ productivity and elevate advertising return on investment. We remain committed to sustainably creating customer value while strengthening our financial metrics,” Dr. Zhou concluded.

 

 

 

Second Quarter 2025 Financial Results

 

Net Revenues

 

Net revenues for the second quarter of 2025 were RMB1.4 billion (US$197.9 million), representing a 7.2% increase from RMB1.3 billion for the same period of 2024.

 

Net revenues from learning services were RMB657.8 million (US$91.8 million) for the second quarter of 2025, representing a 2.2% increase from RMB643.8 million for the same period of 2024.

 

Net revenues from smart devices were RMB126.8 million (US$17.7 million) for the second quarter of 2025, representing a 23.9% decrease from RMB166.7 million for the same period of 2024, primarily due to the declined demands of consumer electronics in the second quarter of 2025.

 

Net revenues from online marketing services were RMB632.9 million (US$88.3 million) for the second quarter of 2025, representing a 23.8% increase from RMB511.2 million for the same period of 2024. The year-over-year increase was mainly attributable to the increased demands from gaming industry and overseas markets, which was driven by our continued investments in AI technology.

 

Gross Profit and Gross Margin

 

Gross profit for the second quarter of 2025 was RMB609.4 million (US$85.1 million), representing a 4.3% decrease from RMB636.8 million for the same period of 2024. Gross margin was 43.0% for the second quarter of 2025, compared with 48.2% for the same period of 2024.

 

Gross margin for learning services was 59.8% for the second quarter of 2025, kept flat the same period of 2024.

 

Gross margin for smart devices increased to 41.5% for the second quarter of 2025 from 30.3% 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 25.8% for the second quarter of 2025, compared with 39.1% 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 second quarter of 2025 were RMB580.6 million (US$81.0 million), compared with RMB709.3 million for the same period of last year.

 

Sales and marketing expenses for the second quarter of 2025 were RMB401.8 million (US$56.1 million), representing a decrease of 22.1% from RMB515.7 million for the same period of 2024. This decrease was attributable to the reduced marketing expenditures in learning services in the second quarter of 2025.

 

Research and development expenses for the second quarter of 2025 were RMB128.3 million (US$17.9 million), representing a decrease of 16.1% from RMB153.0 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 second quarter of 2025.

 

General and administrative expenses for the second quarter of 2025 were RMB50.4 million (US$7.0 million), representing an increase of 24.1% from RMB40.6 million for the same period of 2024. The increase was mainly attributable to an increase in employee related expenses and expected credit losses on our accounts receivables in the second quarter of 2025.

 

 

 

Income/(Loss) from Operations

 

As a result of the foregoing, income from operations for the second quarter of 2025 was RMB28.8 million (US$4.0 million), compared with loss from operations of RMB72.6 million for the same period in 2024. The margin of income from operations was 2.0%, compared with margin of loss from operations of 5.5% for the same period of last year.

 

Others, Net

 

Others, net for the second quarter of 2025 were RMB29.1 million (US$4.1 million) net loss, compared with RMB0.9 million net loss for the same period of 2024. Others, net for the second quarter of 2025 mainly included RMB25.7 million (US$3.6 million) impairment loss arising from certain long-term investments.

 

Net (Loss)/Income Attributable to Youdao’s Ordinary Shareholders

 

Net loss attributable to Youdao’s ordinary shareholders for the second quarter of 2025 was RMB17.8 million (US$2.5 million), compared with RMB99.5 million for the same period of last year. Non-GAAP net income attributable to Youdao’s ordinary shareholders for the second quarter of 2025 was RMB12.5 million (US$1.7 million), compared with non-GAAP net loss attributable to Youdao’s ordinary shareholders of RMB96.0 million for the same period of last year.

 

Basic and diluted net loss per ADS attributable to ordinary shareholders for the second quarter of 2025 was RMB0.15 (US$0.02), compared with RMB0.85 for the same period of 2024. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders was RMB0.11 (US$0.02) and RMB0.10 (US$0.01), respectively, compared with non-GAAP basic and diluted net loss per ADS attributable to ordinary shareholders of RMB0.82 for the same period of 2024.

 

Other Information

 

As of June 30, 2025, Youdao’s cash, cash equivalents, current and non-current restricted cash, and short-term investments totaled RMB617.0 million (US$86.1 million), compared with RMB662.6 million as of December 31, 2024. For the second quarter of 2025, net cash provided by operating activities was RMB185.0 million (US$25.8 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 June 30, 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$130.7 million in long-term loans maturing on March 31, 2027 drawn from the US$300.0 million revolving loan facility.

 

As of June 30, 2025, the Company’s contract liabilities, which mainly consisted of deferred revenues generated from Youdao’s learning services, were RMB856.7 million (US$119.6 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 June 30, 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, August 14, 2025 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, August 14, 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: 7085699

 

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 August 21, 2025:

 

United States:                +1-877-344-7529
International: +1-412-317-0088
Replay Access Code: 7085699

 

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, impairment of long-term investments, gain from fair value change of long-term investment 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 RMB7.1636 to US$1.00, the exchange rate on June 30, 2025 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ 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 June 30,   As of June 30,  
    2024   2025   2025  
    RMB   RMB   USD (1)  
Assets              
Current assets:              
Cash and cash equivalents                         592,721                         536,228                           74,855  
Restricted cash                             3,567                             2,924                               408  
Short-term investments                           63,064                           74,695                           10,427  
Accounts receivable, net                         418,644                         329,523                           46,000  
Inventories                         174,741                         166,288                           23,213  
Amounts due from NetEase Group                           79,700                         322,428                           45,009  
Prepayment and other current assets                         154,331                         141,197                           19,710  
Total current assets                    1,486,768                    1,573,283                       219,622  
               
Non-current assets:              
Property, equipment and software, net                           46,725                           45,381                             6,335  
Operating lease right-of-use assets, net                           68,494                           49,596                             6,923  
Long-term investments                           72,380                           31,785                             4,437  
Goodwill                         109,944                         109,944                           15,348  
Other assets, net                           30,084                           31,087                             4,339  
Total non-current assets                       327,627                       267,793                         37,382  
               
Total assets                    1,814,395                    1,841,076                       257,004  
               
Liabilities and Shareholders' Deficit              
Current liabilities:              
Accounts payables                         145,148                           99,659                           13,912  
Payroll payable                         264,520                         209,735                           29,278  
Amounts due to NetEase Group                           21,997                           46,825                             6,537  
Contract liabilities                         961,024                         856,684                         119,588  
Taxes payable                           37,603                           51,823                             7,234  
Accrued liabilities and other payables                         638,660                         738,837                         103,138  
Short-term loan from NetEase Group                         878,000                         878,000                         122,564  
Total current liabilities                    2,946,952                    2,881,563                       402,251  
               
Non-current liabilities:              
Long-term lease liabilities                           25,566                           14,685                             2,050  
Long-term loans from NetEase Group                         913,000                         935,999                         130,660  
Other non-current liabilities                           18,189                           19,116                             2,669  
Total non-current liabilities                       956,755                       969,800                       135,379  
               
Total liabilities                    3,903,707                    3,851,363                       537,630  
               
Shareholders' deficit:              
Youdao's shareholders' deficit                     (2,139,958)                     (2,059,016)                        (287,428)  
Noncontrolling interests                           50,646                           48,729                             6,802  
Total shareholders' deficit                   (2,089,312)                   (2,010,287)                      (280,626)  
               
Total liabilities and shareholders’ deficit                    1,814,395                    1,841,076                       257,004  

 

Note 1: 

The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.1636 on the last trading day of June (June 30, 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   Six Months Ended  
    June 30,   March 31,   June 30,   June 30,   June 30,   June 30,  
    2024   2025   2025   2025   2024   2025  
    RMB   RMB   RMB   USD (1)   RMB   RMB  
Net revenues:                          
Learning services              643,762              602,414              657,838                91,831           1,361,758           1,260,252  
Smart devices              166,722              190,498              126,821                17,704              347,920              317,319  
Online marketing services              511,237              505,350              632,882                88,346           1,003,902           1,138,232  
Total net revenues         1,321,721         1,298,262         1,417,541            197,881         2,713,580         2,715,803  
                           
Cost of revenues (2)            (684,942)            (684,035)            (808,181)            (112,817)          (1,395,298)          (1,492,216)  
Gross profit            636,779            614,227            609,360              85,064         1,318,282         1,223,587  
                           
Operating expenses:                          
Sales and marketing expenses (2)            (515,711)            (357,641)            (401,826)              (56,093)            (971,151)            (759,467)  
Research and development expenses (2)            (152,987)            (115,474)            (128,321)              (17,913)            (299,710)            (243,795)  
General and administrative expenses (2)              (40,634)              (37,071)              (50,414)                (7,038)              (90,050)              (87,485)  
Total operating expenses           (709,332)           (510,186)           (580,561)             (81,044)        (1,360,911)        (1,090,747)  
(Loss)/Income from operations             (72,553)            104,041              28,799                4,020             (42,629)            132,840  
                           
Interest income                    917                    517                    628                      88                 1,892                 1,145  
Interest expense              (20,816)              (16,104)              (16,566)                (2,313)              (41,150)              (32,670)  
Others, net                  (909)                  (960)              (29,118)                (4,065)                 1,983              (30,078)  
(Loss)/Income before tax             (93,361)              87,494             (16,257)               (2,270)             (79,904)              71,237  
                           
Income tax expenses                (7,053)                (9,895)                (4,279)                  (597)                (6,025)              (14,174)  
Net (loss)/income           (100,414)              77,599             (20,536)               (2,867)             (85,929)              57,063  
Net loss/(income) attributable to noncontrolling interests                    939                  (856)                 2,773                    387                (1,114)                 1,917  
Net (loss)/income attributable to ordinary shareholders of the Company             (99,475)              76,743             (17,763)               (2,480)             (87,043)              58,980  
                           
Basic net (loss)/income per ADS                 (0.85)                   0.65                 (0.15)                 (0.02)                 (0.74)                   0.50  
Diluted net (loss)/income per ADS                 (0.85)                   0.64                 (0.15)                 (0.02)                 (0.74)                   0.49  
                           
Shares used in computing basic net (loss)/income per ADS        117,173,272        117,594,976        117,868,295        117,868,295        117,745,253        117,732,413  
Shares used in computing diluted net (loss)/income per ADS        117,173,272        119,504,097        117,868,295        117,868,295        117,745,253        119,583,256  

 

Note 1: 

The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.1636 on the last trading day of June (June 30, 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                    727                    612                    152                      21                 1,505                    764  
Sales and marketing expenses                    337                    728                    840                    117                 1,473                 1,568  
Research and development expenses                    939                 2,352                 2,898                    405                 4,442                 5,250  
General and administrative expenses                 1,506                 1,538                 2,695                    376                 3,985                 4,233  

 

 

 

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

 

    Three Months Ended   Six Months Ended
    June 30,   March 31,   June 30,   June 30,   June 30,   June 30,
    2024   2025   2025   2025   2024   2025
    RMB   RMB   RMB   USD   RMB   RMB
                         
Net revenues                        
Learning services              643,762              602,414              657,838                91,831           1,361,758           1,260,252
Smart devices              166,722              190,498              126,821                17,704              347,920              317,319
Online marketing services              511,237              505,350              632,882                88,346           1,003,902           1,138,232
Total net revenues         1,321,721         1,298,262         1,417,541            197,881         2,713,580         2,715,803
                         
Cost of revenues                        
Learning services              257,482              242,111              264,734                36,955              522,241              506,845
Smart devices              116,274                90,851                74,135                10,349              238,334              164,986
Online marketing services              311,186              351,073              469,312                65,513              634,723              820,385
Total cost of revenues            684,942            684,035            808,181            112,817         1,395,298         1,492,216
                         
Gross margin                        
Learning services   60.0%   59.8%   59.8%   59.8%   61.6%   59.8%
Smart devices   30.3%   52.3%   41.5%   41.5%   31.5%   48.0%
Online marketing services   39.1%   30.5%   25.8%   25.8%   36.8%   27.9%
Total gross margin   48.2%   47.3%   43.0%   43.0%   48.6%   45.1%

 

 

 

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

 

    Three Months Ended   Six Months Ended
    June 30,   March 31,   June 30,   June 30,   June 30,   June 30,
    2024   2025   2025   2025   2024   2025
    RMB   RMB   RMB   USD   RMB   RMB
                         
Net (loss)/income attributable to ordinary shareholders of the Company             (99,475)              76,743             (17,763)               (2,480)             (87,043)              58,980
Add: share-based compensation                 3,509                 5,230                 6,585                    919                11,405                11,815
         impairment of long-term investments                      -                         -                   25,730                 3,592                      -                   25,730
Less: gain from fair value change of long-term investment                      -                         -                   (1,765)                  (246)                      -                   (1,765)
Less: GAAP to non-GAAP reconciling item for the loss/(income) attributable to
         noncontrolling interests		                      -                     (297)                  (272)                    (38)                      -                     (569)
Non-GAAP net (loss)/income attributable to ordinary shareholders of the Company             (95,966)              81,676              12,515                1,747             (75,638)              94,191
                         
                         
Non-GAAP basic net (loss)/income per ADS                 (0.82)                   0.69                   0.11                   0.02                 (0.64)                   0.80
Non-GAAP diluted net (loss)/income per ADS                 (0.82)                   0.68                   0.10                   0.01                 (0.64)                   0.79
                         
Shares used in computing non-GAAP basic net (loss)/income per ADS        117,173,272        117,594,976        117,868,295        117,868,295        117,745,253        117,732,413
Shares used in computing non-GAAP diluted net (loss)/income per ADS        117,173,272        119,504,097        119,660,859        119,660,859        117,745,253        119,583,256