Youdao Inc (DAO) Q1 2025 Earnings Call Highlights: Record Operating Income Amid Revenue Challenges

GuruFocus News

Fri, May 16, 2025, 12:04 AM 4 min read

• Operating Income: RMB104.0 million, a 247.7% summation year-over-year.

• Net Revenue: RMB1.3 billion, a 6.7% alteration year-over-year.

• Operating Cash Outflow: RMB255.5 million, reduced by 34.7% year-over-year.

• Learning Services Revenue: RMB602.4 million, a 16.1% alteration year-over-year.

• Smart Devices Revenue: RMB190.5 million, a 5.1% summation year-over-year.

• Online Marketing Services Revenue: RMB505.4 million, a 2.6% summation year-over-year.

• Gross Profit: RMB614.2 million, a 9.9% alteration year-over-year.

• Gross Margin - Learning Services: 59.8%, down from 63.1% year-over-year.

• Gross Margin - Smart Devices: 52.3%, up from 32.6% year-over-year.

• Gross Margin - Online Marketing Services: 30.5%, down from 34.3% year-over-year.

• Operating Income Margin: 8%, up from 2.1% year-over-year.

• Net Income Attributable to Ordinary Shareholders: RMB76.7 million, accrued implicit 6x from RMB12.4 cardinal year-over-year.

• Non-GAAP Net Income: RMB81.7 million, importantly accrued from RMB20.3 cardinal year-over-year.

• Net Cash Used successful Operating Activities: RMB255.5 million.

• Contract Liabilities: RMB711.2 million, down from RMB961 cardinal arsenic of December 31, 2024.

• Cash and Cash Equivalents: RMB424.5 cardinal arsenic of March 31, 2025.

• Warning! GuruFocus has detected 5 Warning Sign with DAO.

Release Date: May 15, 2025

For the implicit transcript of the net call, delight notation to the full net telephone transcript.

• Operating income reached a Q1 grounds of RMB104.0 million, a 247.7% year-over-year increase.

• Operating currency outflow narrowed by 34.7% to RMB255.5 million, indicating stronger fiscal efficiency.

• AI-driven subscription services generated astir RMB70 cardinal successful Q1 sales, increasing implicit 40% year-over-year.

• The upgraded AI assemblage admittance advisers contributed to implicit 25% year-over-year gross billing maturation successful Q1.

• Smart Devices conception delivered RMB190.5 cardinal successful Q1 revenues, representing a 5.1% year-over-year growth.

• Net revenues declined by 6.7% year-over-year, chiefly owed to decreased learning services revenue.

• Net gross from learning services decreased by 16.1% year-over-year.

• Gross borderline for learning services decreased to 59.8% from 63.1% successful the aforesaid play of 2024.

• Gross borderline for online selling services declined importantly to 3.5% from 34.3% successful the aforesaid play of 2024.

• Net currency utilized successful operating activities was RMB255.5 million, indicating ongoing currency travel challenges.

Q: How does absorption presumption the differentiation betwixt Youdao's ample connection exemplary fusions and different models successful acquisition scenarios? A: Dr. Feng Zhou, CEO, explained that Youdao's attack combines unfastened and proprietary technologies, enhancing idiosyncratic experiences and accelerating exertion growth. The proprietary model, Confucius, excels successful education-specific scenarios, offering faster responses and higher accuracy successful translation and problem-solving compared to general-purpose models. This strategy solidifies Youdao's enactment successful deploying ample connection models for acquisition successful China.