Youdao, Inc. (NYSE:DAO) Q2 2023 Earnings Call Transcript

This is a strong demand. We have advantage in terms of resources, language capabilities and experience in this field. With our in-house AI technology recommendation [indiscernible] and the intra network translation, we can connect with over 1 million [indiscernible] worldwide, directly reaching more than 2 billion users in our 55 countries and regions. Those are reaching Chinese brand to overseas expansion. Secondly, we will further enhance our data capabilities. Since the upgrade of ad platform in Q4 last year, we have seen a huge benefit of the real time and accurate data in helping our user decision making and posting on the ad revenue. By the end of this year, we will strive to further enhance our ad platform to give our client better marketing performance.

Thank you.

Operator: Our next question today will come from Candis Chan of Daiwa. Please go ahead.

Candis Chan: Great. Thank you for taking my question. I have a question regarding this learning services. Can management talk about our coming focus where the learning services in the second half of this year, both on the K-12 and also the education — sorry, the [indiscernible] segment? Thank you.

Feng Zhou: Digital content services are the largest part of our learning service business segment. As we mentioned in the prepared remarks, digital content services are actually a bright spot. Its sales reached RMB800 million in Q2. It’s the first time, it’s the record high, and retention is also at a high-level of around the 60%. So within the digital content category, in Q2, we launched AI University Application Adviser to support students in their college selection process. So this is — we think going forward, this is going to be important because it allows us to touch many users. So in this — since its launch its already gained over 2 million page views as we mentioned in prepared remarks. So if you look at digital content service over the last five quarters, so it’s actually been growing very healthily over the course over the last five quarters as our learners keep adopting this new form of interactive online learning.

So it’s different from online learning before. So it’s a new form with video materials, personalized practice and also AI feedback. So it’s great for us to see that users — more and more users adopt this new form, and the business is growing, growing very quickly, yes. So we’re happy to see that. So we expect the digital learning content and learning services as a whole to continue to perform well in the second half. So we will enhance our learning further by investing in educational R&D to create high-quality content, and also improve our personalized assessment and feedback system, which is a strong feature of our systems. Furthermore, our collaboration with Shaanxi History Museum for immersive learning on Youdao Literature, that project was a great success.

So we have more IP collaboration plans for this year, offering users more opportunity to learn about Chinese culture through immersive experiences. So the second category of learning services is the STEAM courses, including mainly Go courses and kids programming. So Youdao became a GSP certification service center. GSP is graded examination of software programming of the China Computer Federation in the first half of the year. In addition, as a exclusive online education partner, Youdao hosted the seventh Wisdom Cup as we talked about. So in the second half of the year, we will continue to focus on our strengths in the STEAM area, which is two leading online course systems for students enthusiastic about Go and also competitive program, respectively.

So we already upgraded our programming process for the summer, and we’ll move on to upgrade our fall and winter courses in the second half. Another project we have ongoing for STEAM customers is we also plan to offer more offline activities and events for customers. We’ve had offline events like Go Game events and competitive programming events for years. And they are particularly popular this summer, because parents and students are eager to go out and participate in community activities and events. So given our huge online learning audience and also our experience in organizing offline STEAM events, we are working to provide more STEAM events opportunities to our learners and families in the second half of the year, and to drive engagement and growth.