• Net Revenues (Q4 2024): RMB1.3 billion, a 9.5% decrease year-over-year.
• Net Revenues from Learning Services (Q4 2024): RMB617.7 million, a 21.2% decrease year-over-year.
• Net Revenues from Smart Devices (Q4 2024): RMB240.4 million, an 8.1% increase year-over-year.
• Net Revenues from Online Marketing Services (Q4 2024): RMB481.7 million, a 1.6% increase year-over-year.
• Gross Profit (Q4 2024): RMB640.8 million, a 13.3% decrease year-over-year.
• Gross Margin for Learning Services (Q4 2024): 60.0%, down from 63.6% in Q4 2023.
• Gross Margin for Smart Devices (Q4 2024): 43.9%, up from 38.3% in Q4 2023.
• Gross Margin for Online Marketing Services (Q4 2024): 34.2%, up from 32.7% in Q4 2023.
• Operating Income (Q4 2024): RMB84.2 million, a 10.3% increase year-over-year.
• Net Income Attributable to Ordinary Shareholders (Q4 2024): RMB83.0 million, compared to RMB56.5 million in Q4 2023.
• Non-GAAP Net Income Attributable to Ordinary Shareholders (Q4 2024): RMB91.8 million, compared to RMB69.3 million in Q4 2023.
• Operating Cash Inflow (Q4 2024): RMB158.2 million, stable year-over-year.
• Total Revenues (Full Year 2024): RMB5.6 billion, a 4.4% increase year-over-year.
• Net Revenues from Learning Services (Full Year 2024): RMB2.7 billion, a 12.7% decrease year-over-year.
• Net Revenues from Smart Devices (Full Year 2024): RMB903.7 million, stable compared to 2023.
• Net Revenues from Online Marketing Services (Full Year 2024): RMB2 billion, a 48.3% increase year-over-year.
• Total Operating Expenses (Full Year 2024): RMB2.7 billion, down from RMB3.2 billion in 2023.
• Net Income Attributable to Ordinary Shareholders (Full Year 2024): RMB82.2 million.
• Cash, Cash Equivalents, and Short-term Investments (End of 2024): RMB662.6 million.

• Warning! GuruFocus has detected 4 Warning Signs with BILI.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Youdao Inc (NYSE:DAO) achieved full-year operating profitability for the first time in 2024, marking a significant financial milestone.
• The company reported a substantial improvement in financial health, with income from operations reaching RMB148.8 million, a turnaround from a loss of RMB466.3 million in 2023.
• AI-driven subscription services experienced over 50% year-over-year growth for eight consecutive quarters, with sales surpassing RMB200 million in 2024.
• The Youdao Dictionary Pen maintained its position as the top-seller in its category during the Nov 11 Shopping Festival, contributing to a 20% year-over-year revenue increase.
• Youdao Inc (NYSE:DAO) established an official partnership with Google, laying a foundation for further growth in overseas advertising.

Negative Points

• Net revenues for the fourth quarter of 2024 decreased by 9.5% compared to the same period in 2023, primarily due to a decline in learning services revenues.
• Learning services revenues dropped by 21.2% year-over-year in the fourth quarter, reflecting a strategic focus on selective customer acquisition.
• Gross profit for the fourth quarter decreased by 13.3% compared to the same period in 2023.
• The company faced challenges in the competitive landscape and business uncertainty, impacting revenue growth potential.
• Despite improvements, the economic environment remains challenging, necessitating a focus on balancing growth and profitability.

Q & A Highlights

Q: Can management elaborate on the outlook for 2025, including strategies for different business lines? A: Feng Zhou, CEO, explained that Youdao is focusing on AI-driven education and online marketing technologies. The strategy involves leveraging AI to enhance offerings, improve content quality, and gain deeper customer insights. The company anticipates significant growth in AI applications in education and advertising. Financially, Youdao aims for modest revenue growth while maintaining profitability, focusing on high-demand products like Youdao Lingshi and integrating AI tutoring into courses.

Q: What opportunities exist for the online marketing business in 2025, and is there a plan to expand internationally? A: Lei Jin, President, stated that Youdao's advertising strategy will focus on collaboration with NetEase Group, global expansion, and AI innovation. The partnership with NetEase has shown over 200% revenue growth, and international expansion is gaining momentum with partnerships like TikTok and Google. AI advancements will enhance advertising efficiency and operational capabilities.

Q: What are the priorities for Learning Services in 2025? A: Peng Su, VP of Strategies and Capital Markets, highlighted that Youdao is focusing on courses with strong demand, particularly Youdao Lingshi. The company is phasing out non-essential programs and expects revenue stabilization in the latter half of the year. AI services will be upgraded to enhance learning experiences, and data-driven updates will be implemented for instructional videos.

Q: What impact can be expected from integrating Youdao's large language model, Confucius, with DeepSeek? A: Feng Zhou, CEO, explained that integrating DeepSeek opens up opportunities in education and advertising. Enhancements with domain-specific knowledge and retrieval augmented generation (RAG) technology will improve applications. AI agents will automate multistep tasks, and smaller, specialized models will be developed for specific needs, enhancing competitive advantage.

Q: How will financial performance be tracked in 2025, particularly regarding profitability and cash flow? A: Wayne Li, VP of Finance, noted that 2024 marked the first year of scalable profit, with significant improvement in the bottom line. In 2025, Youdao will focus on leveraging AI technology for cost optimization and profitability. Cash flow improvements will continue, aiming for breakeven in annual operating cash flow, despite economic challenges.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.