Youdao Reports Strong Q3 2024 Results, Highlighting AI-Driven Growth and Profitability

Youdao Reports Third Quarter 2024 Unaudited Financial Results - NetEase (NASDAQ:NTES), Youdao (NYSE:DAO)

HANGZHOU, China, Nov. 14, 2024 /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") DAO, an intelligent learning company with industry-leading technology in China, today announced its unaudited financial results for the third quarter ended September 30, 2024. Third Quarter 2024 Financial Highlights Total net revenues were RMB1.6 billion (US$224.1 million), representing a 2.2% increase from the same period in 2023. - Net revenues from learning services were RMB767.9 million (US$109.4 million), representing a 19.2% decrease from the same period in 2023. - Net revenues from smart devices were RMB315.3 million (US$44.9 million), representing a 25.2% increase from the same period in 2023. - Net revenues from online marketing services were RMB489.4 million (US$69.7 million), representing a 45.6% increase from the same period in 2023.Gross margin was 50.2%, compared with 55.9% for the same period in 2023. "Our profitability significantly improved in the third quarter, marked by record-high income from operations and first-ever third-quarter income from operations. In our products and services, we leveraged our robust LLM (Large Language Model) capabilities to upgrade our Youdao Lingshi Intelligent Learning System, further enhancing the personalized features and elevating the user experience. Additionally, net revenues from online marketing services increased by 45.6% year-over-year to RMB489.4 million, fueled by RTA (Real-Time API) and KOL (Key Opinion Leader) advertising. We also introduced new AI translation upgrades and AI simultaneous interpretation functionality that drove total sales of AI-driven subscription services up by over 150% year-over-year," said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao. "Looking ahead, we are committed to the continued implementation of our LLM, Ziyue, to enhance user experience and create greater value through digital content services, AI-driven subscription services and smart devices. In our online marketing services, we aim to explore new domestic opportunities and expand international prospects to better support client success. Financially we remain dedicated to prudent operations and strengthening our profitability," Dr. Zhou concluded. Third Quarter 2024 Financial Results Net Revenues Net revenues for the third quarter of 2024 were RMB1.6 billion (US$224.1 million), representing a 2.2% increase from RMB1.5 billion for the same period of 2023. Net revenues from learning services were RMB767.9 million (US$109.4 million) for the third quarter of 2024, representing a 19.2% decrease from RMB950.8 million for the same period of 2023. The year-over-year decrease reflects our commitment to a more selective customer acquisition approach, prioritizing higher ROI (return on investment) engagements. This strategy has contributed to the overall resilience and efficiency of our business. Net revenues from smart devices were RMB315.3 million (US$44.9 million) for the third quarter of 2024, representing a 25.2% increase from RMB251.9 million for the same period of 2023, primarily driven by the popularity of Youdao's newly launched products in 2024. Net revenues from online marketing services were RMB489.4 million (US$69.7 million) for the third quarter of 2024, representing a 45.6% increase from RMB336.1 million for the same period of 2023. The year-over-year increase was mainly attributable to the increased demand for performance-based advertisements through third parties' internet properties, which was driven by our continued investments in cutting-edge AI technology. Gross Profit and Gross Margin Gross profit for the third quarter of 2024 was RMB789.5 million (US$112.5 million), representing an 8.2% decrease from RMB859.6 million for the same period of 2023. Gross margin was 50.2 % for the third quarter of 2024, compared with 55.9% for the same period of 2023. Gross margin for learning services was 62.1% for the third quarter of 2024, compared with 67.8% for the same period of 2023. The decrease was mainly resulted from the decline in economies of scale due to the decreased revenues from learning services. Gross margin for smart devices was 42.8% for the third quarter of 2024, compared with 42.6% for the same period of 2023. Gross margin for online marketing services increased to 36.3% for the third quarter of 2024 from 31.9% for the same period of 2023. The increase was mainly attributable to the improved gross margin profile of performance-based advertisements through third parties' internet properties compared with the same period of last year. Operating Expenses Total operating expenses for the third quarter of 2024 were RMB682.2 million (US$97.2 million), compared with RMB917.3 million for the same period of last year. Sales and marketing expenses for the third quarter of 2024 were RMB519.6 million (US$74.0 million), representing a decrease of 22.9% from RMB674.2 million for the same period of 2023. This decrease was attributable to the reduced marketing expenditures, as well as declined outsourcing labor service fees and payroll related expenses in learning services in the third quarter of 2024. Research and development expenses for the third quarter of 2024 were RMB119.6 million (US$17.0 million), representing a decrease of 36.2% from RMB187.3 million for the same period of 2023. The decrease was primarily due to the decreased headcount for research and development employees, leading to payroll savings in the third quarter of 2024. General and administrative expenses for the third quarter of 2024 were RMB43.0 million (US$6.1 million), representing a decrease of 23.0% from RMB55.8 million for the same period of 2023. The decrease was primarily due to the decreased headcount for general and administrative employees, leading to payroll savings in the third quarter of 2024. Income/(Loss) from Operations As a result of the foregoing, income from operations for the third quarter of 2024 was RMB107.3 million (US$15.3 million), compared with loss from operations of RMB57.7 million for the same period in 2023. The margin of income from operations was 6.8%, compared with margin of loss from operations of 3.7% for the same period of last year. Net Income/(Loss) Attributable to Youdao's Ordinary Shareholders Net income attributable to Youdao's ordinary shareholders for the third quarter of 2024 was RMB86.3 million (US$12.3 million), compared with net loss attributable to Youdao's ordinary shareholders of RMB102.9 million for the same period of last year. Non-GAAP net income attributable to Youdao's ordinary shareholders for the third quarter of 2024 was RMB88.7 million (US$12.6 million), compared with non-GAAP net loss attributable to Youdao's ordinary shareholders of RMB67.3 million for the same period of last year. Basic and diluted net income per American depositary share ("ADS") attributable to ordinary shareholders for the third quarter of 2024 were RMB0.74 (US$0.11), compared with basic and diluted net loss per ADS attributable to ordinary shareholders of RMB0.85 for the same period of 2023. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders were RMB0.76 (US$0.11), compared with non-GAAP basic and diluted net loss per ADS attributable to ordinary shareholders of RMB0.55 for the same period of 2023. Other Information As of September 30, 2024, Youdao's cash, cash equivalents, current and non-current restricted cash, time deposits and short-term investments totaled RMB489.4 million (US$69.7 million), compared with RMB527.1 million as of December 31, 2023. For the third quarter of 2024, net cash used in operating activities was RMB85.4 million (US$12.2 million), capital expenditures totaled RMB1.5 million (US$0.2 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 from May 2024. As of September 30, 2024, Youdao has received various financial support from the NetEase Group, including, among others, RMB878.0 million short-term loans, and US$128.4 million long-term loans with maturity dated March 31, 2027 drawn down under the US$300.0 million revolving loan facility. As of September 30, 2024, the Company's contract liabilities, which mainly consisted of deferred revenues generated from Youdao's learning services, were RMB839.7 million (US$119.7 million), compared with RMB1.1 billion as of December 31, 2023. 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$20.0 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 September 30, 2024, the Company had repurchased a total of approximately 7.5 million ADSs for around US$33.8 million in the open market under the share repurchase program. Second Amended and Restated 2015 Share Incentive Plan The Company adopted a share incentive plan in February 2015, as amended in April 2018, which is referred to as the First Amended and Restated 2015 Plan. In November 2024, the Company has approved a proposed amendment to the First Amended and Restated 2015 Plan to extend the expiration date of the plan to the twentieth anniversary of its effective date. Conference Call Youdao's management team will host a teleconference call with simultaneous webcast at 5:00 a.m. Eastern Time on Thursday, November 14, 2024 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, November 14, 2024). 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: 4892369 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 November 21, 2024: United States: +1-877-344-7529 International: +1-412-317-0088 Replay Access Code: 4892369 About Youdao, Inc. Youdao, Inc. DAO is an intelligent learning company with industry-leading technology in China dedicated to developing and using technologies to provide learning content, applications and solutions to users of all ages. Building on the popularity of its online knowledge tools such as Youdao Dictionary and Youdao Translation, Youdao now offers smart devices, STEAM courses, adult and vocational courses, and education digitalization solutions. In addition, Youdao has developed a variety of interactive learning apps. Youdao was founded in 2006 as part of NetEase, Inc. 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 and impairment of long-term investments. 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 RMB7.0176 to US$1.00, the exchange rate on September 30, 2024 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ 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. The announced results of the third quarter of 2024 are preliminary and subject to adjustments. 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. 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, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (RMB and USD in thousands) As of December 31, As of September 30, As of September 30, 2023 2024 2024 RMB RMB USD (1) Assets Current assets: Cash and cash equivalents 454,536 421,056 60,000 Time deposits 277 282 40 Restricted cash 395 2,076 296 Short-term investments 71,848 62,790 8,948 Accounts receivable, net 354,006 415,391 59,193 Inventories 217,067 178,556 25,444 Amounts due from NetEase Group 26,117 80,784 11,511 Prepayment and other current assets 175,705 163,109 23,243 Total current assets 1,299,951 1,324,044 188,675 Non-current assets: Property, equipment and software, net 70,906 53,149 7,574 Operating lease right-of-use assets, net 89,022 78,869 11,239 Long-term investments 51,396 74,600 10,630 Goodwill 109,944 109,944 15,667 Other assets, net 44,976 43,106 6,142 Total non-current assets 366,244 359,668 51,252 Total assets 1,666,195 1,683,712 239,927 Liabilities, Mezzanine Equity and Shareholders' Deficit Current liabilities: Accounts payables 159,005 170,770 24,335 Payroll payable 282,679 138,512 19,738 Amounts due to NetEase Group 82,430 61,920 8,823 Contract liabilities 1,052,622 839,670 119,652 Taxes payable 52,781 52,911 7,540 Accrued liabilities and other payables 591,770 759,750 108,263 Short-term loans from NetEase Group 878,000 878,000 125,114 Total current liabilities 3,099,287 2,901,533 413,465 Non-current liabilities: Long-term lease liabilities 49,337 34,425 4,906 Long-term loans from NetEase Group 630,360 900,511 128,322 Other non-current liabilities 16,314 17,944 2,556 Total non-current liabilities 696,011 952,880 135,784 Total liabilities 3,795,298 3,854,413 549,249 Mezzanine equity 37,961 39,939 5,691 Shareholders' deficit: Youdao's shareholders' deficit (2,186,736) (2,232,052) (318,064) Noncontrolling interests 19,672 21,412 3,051 Total shareholders' deficit (2,167,064) (2,210,640) (315,013) Total liabilities, mezzanine equity and shareholders' deficit 1,666,195 1,683,712 239,927 Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.0176 on the last trading day of September (September 30, 2024) 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 Nine Months Ended September 30, June 30, September 30, September 30, September 30, September 30, 2023 2024 2024 2024 2023 2024 RMB RMB RMB USD (1) RMB RMB Net revenues: Learning services 950,761 643,762 767,859 109,419 2,364,102 2,129,617 Smart devices 251,879 166,722 315,305 44,931 686,785 663,225 Online marketing services 336,143 511,237 489,377 69,735 857,800 1,493,279 Total net revenues 1,538,783 1,321,721 1,572,541 224,085 3,908,687 4,286,121 Cost of revenues (2) (679,147) (684,942) (783,085) (111,588) (1,880,026) (2,178,383) Gross profit 859,636 636,779 789,456 112,497 2,028,661 2,107,738 Operating expenses: Sales and marketing expenses (2) (674,173) (515,711) (519,620) (74,045) (1,827,029) (1,490,771) Research and development expenses (2) (187,328) (152,987) (119,594) (17,042) (575,234) (419,304) General and administrative expenses (2) (55,822) (40,634) (42,968) (6,123) (169,007) (133,018) Total operating expenses (917,323) (709,332) (682,182) (97,210) (2,571,270) (2,043,093) (Loss)/Income from operations (57,687) (72,553) 107,274 15,287 (542,609) 64,645 Interest income 2,167 917 1,057 151 6,615 2,949 Interest expense (17,753) (20,816) (15,112) (2,153) (50,603) (56,262) Others, net (21,097) (909) (1,992) (285) (8,989) (9) (Loss)/Income before tax (94,370) (93,361) 91,227 13,000 (595,586) 11,323 Income tax expenses (2,557) (7,053) (2,370) (338) (10,648) (8,395) Net (loss)/income (96,927) (100,414) 88,857 12,662 (606,234) 2,928 Net (income)/loss attributable to noncontrolling interests (5,978) 939 (2,604) (371) (183) (3,718) Net (loss)/income attributable to ordinary shareholders of the Company (102,905) (99,475) 86,253 12,291 (606,417) (790) Basic net (loss)/income per ADS (0.85) (0.85) 0.74 0.11 (4.97) (0.01) Diluted net (loss)/income per ADS (0.85) (0.85) 0.74 0.11 (4.97) (0.01) Shares used in computing basic net (loss)/income per ADS 121,275,391 117,173,272 116,965,181 116,965,181 121,926,770 117,483,341 Shares used in computing diluted net (loss)/income per ADS 121,275,391 117,173,272 117,343,848 117,343,848 121,926,770 117,483,341 Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.0176 on the last trading day of September (September 30, 2024) 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 2,312 727 (171) (24) 4,620 1,334 Sales and marketing expenses 1,659 337 (1,359) (194) 5,206 114 Research and development expenses (2,071) 939 1,868 266 8,332 6,310 General and administrative expenses 3,255 1,506 2,072 295 9,837 6,057 YOUDAO, INC. UNAUDITED ADDITIONAL INFORMATION (RMB and USD in thousands) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, September 30, 2023 2024 2024 2024 2023 2024 RMB RMB RMB USD RMB RMB Net revenues Learning services 950,761 643,762 767,859 109,419 2,364,102 2,129,617 Smart devices 251,879 166,722 315,305 44,931 686,785 663,225 Online marketing services 336,143 511,237 489,377 69,735 857,800 1,493,279 Total net revenues 1,538,783 1,321,721 1,572,541 224,085 3,908,687 4,286,121 Cost of revenues Learning services 305,694 257,482 290,877 41,449 873,974 813,118 Smart devices 144,528 116,274 180,390 25,705 415,660 418,724 Online marketing services 228,925 311,186 311,818 44,434 590,392 946,541 Total cost of revenues 679,147 684,942 783,085 111,588 1,880,026 2,178,383 Gross margin Learning services 67.8 % 60.0 % 62.1 % 62.1 % 63.0 % 61.8 % Smart devices 42.6 % 30.3 % 42.8 % 42.8 % 39.5 % 36.9 % Online marketing services 31.9 % 39.1 % 36.3 % 36.3 % 31.2 % 36.6 % Total gross margin 55.9 % 48.2 % 50.2 % 50.2 % 51.9 % 49.2 % YOUDAO, INC. UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS (RMB and USD in thousands, except per ADS data) Three Months Ended Nine Months Ended September 30, June 30, September 30, September 30, September 30, September 30, 2023 2024 2024 2024 2023 2024 RMB RMB RMB USD RMB RMB Net (loss)/income attributable to ordinary shareholders of the Company (102,905) (99,475) 86,253 12,291 (606,417) (790) Add: share-based compensation 5,155 3,509 2,410 343 27,995 13,815 impairment of long-term investments 30,500 - - - 33,740 - Non-GAAP net (loss)/income attributable to ordinary shareholders of the Company (67,250) (95,966) 88,663 12,634 (544,682) 13,025 Non-GAAP basic net (loss)/income per ADS (0.55) (0.82) 0.76 0.11 (4.47) 0.11 Non-GAAP diluted net (loss)/income per ADS (0.55) (0.82) 0.76 0.11 (4.47) 0.11 Non-GAAP shares used in computing basic net (loss)/income per ADS 121,275,391 117,173,272 116,965,181 116,965,181 121,926,770 117,483,341 Non-GAAP shares used in computing diluted net (loss)/income per ADS 121,275,391 117,173,272 117,343,848 117,343,848 121,926,770 117,996,668 View original content:https://www.prnewswire.com/news-releases/youdao-reports-third-quarter-2024-unaudited-financial-results-302305221.html SOURCE Youdao, Inc. 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Youdao Reports Third Quarter 2024 Unaudited Financial Results By Investing.com

"Our profitability significantly improved in the third quarter, marked by record-high income from operations and first-ever third-quarter income from operations. In our products and services, we leveraged our robust LLM (Large Language Model) capabilities to upgrade our Youdao Lingshi Intelligent Learning System, further enhancing the personalized features and elevating the user experience. Additionally, net revenues from online marketing services increased by 45.6% year-over-year to , fueled by RTA (Real-Time API) and KOL (Key Opinion Leader) advertising. We also introduced new AI translation upgrades and AI simultaneous interpretation functionality that drove total sales of AI-driven subscription services up by over 150% year-over-year," said Dr. , Chief Executive Officer and Director of Youdao. "Looking ahead, we are committed to the continued implementation of our LLM, Ziyue, to enhance user experience and create greater value through digital content services, AI-driven subscription services and smart devices. In our online marketing services, we aim to explore new domestic opportunities and expand international prospects to better support client success. Financially we remain dedicated to prudent operations and strengthening our profitability," concluded. Net revenues from learning services were () for the third quarter of 2024, representing a 19.2% decrease from for the same period of 2023. The year-over-year decrease reflects our commitment to a more selective customer acquisition approach, prioritizing higher ROI (return on investment) engagements. This strategy has contributed to the overall resilience and efficiency of our business. Net revenues from smart devices were () for the third quarter of 2024, representing a 25.2% increase from for the same period of 2023, primarily driven by the popularity of Youdao's newly launched products in 2024. Net revenues from online marketing services were () for the third quarter of 2024, representing a 45.6% increase from for the same period of 2023. The year-over-year increase was mainly attributable to the increased demand for performance-based advertisements through third parties' internet properties, which was driven by our continued investments in cutting-edge AI technology. Gross margin for learning services was 62.1% for the third quarter of 2024, compared with 67.8% for the same period of 2023. The decrease was mainly resulted from the decline in economies of scale due to the decreased revenues from learning services. Gross margin for smart devices was 42.8% for the third quarter of 2024, compared with 42.6% for the same period of 2023. Gross margin for online marketing services increased to 36.3% for the third quarter of 2024 from 31.9% for the same period of 2023. The increase was mainly attributable to the improved gross margin profile of performance-based advertisements through third parties' internet properties compared with the same period of last year. Sales and marketing expenses for the third quarter of 2024 were (), representing a decrease of 22.9% from for the same period of 2023. This decrease was attributable to the reduced marketing expenditures, as well as declined outsourcing labor service fees and payroll related expenses in learning services in the third quarter of 2024. Research and development expenses for the third quarter of 2024 were (), representing a decrease of 36.2% from for the same period of 2023. The decrease was primarily due to the decreased headcount for research and development employees, leading to payroll savings in the third quarter of 2024. General and administrative expenses for the third quarter of 2024 were (), representing a decrease of 23.0% from for the same period of 2023. The decrease was primarily due to the decreased headcount for general and administrative employees, leading to payroll savings in the third quarter of 2024. Income/(Loss) from Operations As a result of the foregoing, income from operations for the third quarter of 2024 was (), compared with loss from operations of for the same period in 2023. The margin of income from operations was 6.8%, compared with margin of loss from operations of 3.7% for the same period of last year. Basic and diluted net income per American depositary share ("ADS") attributable to ordinary shareholders for the third quarter of 2024 were (), compared with basic and diluted net loss per ADS attributable to ordinary shareholders of for the same period of 2023. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholders were (), compared with non-GAAP basic and diluted net loss per ADS attributable to ordinary shareholders of for the same period of 2023. On , 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 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 in . As of , the Company had repurchased a total of approximately 7.5 million ADSs for around in the open market under the share repurchase program. Second Amended and Restated 2015 Share Incentive Plan The Company adopted a share incentive plan in , as amended in , which is referred to as the First Amended and Restated 2015 Plan. In , the Company has approved a proposed amendment to the First Amended and Restated 2015 Plan to extend the expiration date of the plan to the twentieth anniversary of its effective date. Dial-in details for the earnings conference call are as follows: 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 : About Youdao, Inc. Youdao, Inc. (NYSE: DAO) is an intelligent learning company with industry-leading technology in dedicated to developing and using technologies to provide learning content, applications and solutions to users of all ages. Building on the popularity of its online knowledge tools such as Youdao Dictionary and Youdao Translation, Youdao now offers smart devices, STEAM courses, adult and vocational courses, and education digitalization solutions. In addition, Youdao has developed a variety of interactive learning apps. Youdao was founded in 2006 as part of NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), a leading internet technology company in . 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 (" 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 and impairment of long-term investments. 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 GAAP and are not presented in accordance with 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 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 to , the exchange rate on 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 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. The announced results of the third quarter of 2024 are preliminary and subject to adjustments. 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.