Youdao, Inc. (NYSE:DAO) Q4 2023 Earnings Call Transcript

Operator: The next question is from [indiscernible] with Citi.

Unidentified Analyst: Well, I have only one question. With the improved cash flow observed in 2023, could management provide outlook for the cash flow in 2024? Thank you.

Yongwei Li: Thank you for your question. This is Wayne. I will take your question. Operating cash flow is always treated as a key healthy indicator for our company, and we are pleased to note a remarkable improvement in our operating cash flow of 2023 compared with prior period. The operating cash outflow in 2023 was narrowed by near 20% year-over-year. Notably, in the fourth quarter, the operating cash inflow reached a record of around RMB 161 million, rising by net 1% year-over-year. This indicates that the business is progressing towards a healthy direction. On a settlement basis, both the Learning services and Online Marketing services helped achieve positive operating cash inflow, which makes us more confident in the further improved operating cash flow in 2024.

We expect to maintain such good momentum for our operating cash flow in 2024. Firstly, we will continue to enhance our ability to generate cash inflow through leveraging AI technology and optimizing business operations. In addition, as to the Smart Devices segment, improvements in product performance and the sales channel management are expected to boost the cash generation capability from this segment. It is also worth noting that the cash flow exhibit quarterly, but varying with a stronger seasonality in the second and the fourth quarter, preliminary due to user acquisition and retention activity in the Learning Services segment during this period. Furthermore, from a long-term perspective, NetEase has been providing financial support to us.

For instance, three years revolving loan facility amounting to $300 million as disclosed in our earnings release with maturity dated on March 31, 2027, we should facilitate the development of Youdao’s business, especially in the area of our long-term investment in core technologies and resources. In sum, we are very confident in our cash flow for 2024. Thanks.

Operator: And that concludes the question-and-answer session. I would like to turn the conference back over to the management for any additional or closing comments.

Jeffrey Wang: Thank you once again for joining us today. If you have any further questions, please feel free to contact us at Youdao directly or reach out to Pearson Financial Communications in China or the U.S. Have a great day.

Operator: Ladies and gentlemen, thank you for joining the conference is now over. You may disconnect your telephones. Thank you.