Youdao Reports First Quarter 2023 Unaudited Financial Results.

HANGZHOU, China: Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), an intelligent learning company with industry-leading technology in China, today announced its unaudited financial results for the first quarter ended March 31, 2023.

First Quarter 2023 Financial Highlights

Total net revenues were RMB1.2 billion (US$169.4 million), representing a 3.1% decrease from the same period in 2022.

- Net revenues from learning services were RMB732.4 million (US$106.6 million), representing an 11.3% decrease from the same period in 2022.

- Net revenues from smart devices were RMB212.7 million (US$31.0 million), representing a 16.0% decrease from the same period in 2022.

- Net revenues from online marketing services were RMB218.1 million (US$31.8 million), representing a 79.7% increase from the same period in 2022.

Gross margin was 51.7%, compared with 53.5% for the same period in 2022.

"Our high-quality learning services and smart devices, such as Youdao Literature and Youdao Dictionary Pen, continue to grow in popularity. Despite the pandemic's initial impact on these businesses, they rebounded back to growth in the second half of the quarter. Rollout of new and updated digital content services led to over 40% year-over-year growth in gross billings from learning services, excluding adult courses. Our advertisement business experienced significant year-over-year growth of 79.7%, continuing the momentum brought by the matching algorithm upgrades in Q4 last year," said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao.

"This year, our aim is to simultaneously grow our business and improve our financial metrics. We are confident in achieving this by leveraging our user scale, a strong learning services and devices pipeline, and AI technology, particularly generative AI, which is now crucial. Our focus in these areas will enable us to continuously improve the user experience and drive sustainable growth," Dr. Zhou concluded.

First Quarter 2023 Financial Results[1]

Net Revenues

Net revenues for the first quarter of 2023 were RMB1.2 billion (US$169.4 million), remaining stable compared with RMB1.2 billion for the same period of 2022.

Net revenues from learning services were RMB732.4 million (US$106.6 million) for the first quarter of 2023, representing an 11.3% decrease from RMB826.0 million for the same period of 2022. The year-over-year decline was primarily due to the decreased revenue derived from adult and vocational courses and other...