Q2 2025 Youdao Inc Earnings Call Transcript
Key Points
- Youdao Inc (DAO) achieved its first profitable second quarter with an operating income of RMB28.8 million, compared to an operating loss of RMB72.6 million in the same period last year.
- Net revenues increased by 7.2% year over year to RMB1.4 billion, driven by strong performance in learning services and online marketing services.
- The AI Essay Grading feature and personalized learning plans powered by the Confucius large language model received widespread acclaim, driving retention rates above 75%.
- Online marketing services net revenues reached a record RMB632.9 million, up 23.8% year over year, fueled by strong demand from the gaming industry and Chinese clients expanding overseas.
- The company reduced total operating expenses to RMB580.6 million, a significant decrease from RMB709.3 million in the same period last year, improving financial health.
- Operating cash inflow decreased by 26.1% year over year to RMB185 million, primarily due to the strategic scaling back of certain STEAM and adult courses.
- Net revenues from smart devices declined 23.9% year over year to RMB126.8 million, attributed to the end of product life cycles for certain high-end Dictionary Pen models and reduced marketing expenditure.
- Gross margin for online marketing services decreased to 25.8% from 39.1% a year ago, primarily due to the initial onboarding of new clients.
- The company reported a net loss attributable to ordinary shareholders of RMB17.8 million, although this was an improvement from a loss of RMB99.5 million in the same period last year.
- Contract liabilities, mainly consisting of deferred revenue from online learning services, decreased to RMB856.7 million from RMB961 million as of December 31, 2024.
Good day, and welcome to the Youdao 2025 second-quarter earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeffrey Wang, Investor Relations Director of Youdao. Thank you, and over to you.
Thank you, operator. Please note the discussion today will contain forward-looking statements related to the future performance of the company, which are intended to qualify for the safe harbor from liability as established by the US Private Securities Litigation Reform Act. Such statements are not guarantees of the future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.
A general discussion of the risk factors that could affect Youdao's business and financial results is included in certain company filings with the US
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