# EDGAR Filing Document

**Accession Number:** 0001781753
**File Stem:** 0000950103-23-002792
**Filing Date:** 2023-2
**Character Count:** 38574
**Document Hash:** e6d19b684b700117bd2d78fe3cbc95b6
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000950103-23-002792.hdr.sgml**: 20230223

**ACCESSION NUMBER**: 0000950103-23-002792

**CONFORMED SUBMISSION TYPE**: 6-K

**PUBLIC DOCUMENT COUNT**: 3

**CONFORMED PERIOD OF REPORT**: 20230223

**FILED AS OF DATE**: 20230223

**DATE AS OF CHANGE**: 20230223

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Youdao, Inc.
- **CENTRAL INDEX KEY:** 0001781753
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-EDUCATIONAL SERVICES [8200]
- **IRS NUMBER:** 000000000
- **STATE OF INCORPORATION:** E9
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 6-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-39087
- **FILM NUMBER:** 23656021

**BUSINESS ADDRESS:**
- **STREET 1:** NO. 399, WANGSHANG ROAD
- **CITY:** BINJIANG DISTRICT, HANGZHOU
- **STATE:** F4
- **ZIP:** 310051
- **BUSINESS PHONE:** 86 0571-8985-2163

**MAIL ADDRESS:**
- **STREET 1:** 8/F, CHUANG'S TOWER
- **STREET 2:** 30-32 CONNAUGHT ROAD CENTRAL
- **CITY:** HONG KONG
- **STATE:** K3
- **ZIP:** 00000

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

Washington, D.C. 20549

**FORM 6-K**

**REPORT OF FOREIGN ISSUER<br> PURSUANT TO RULE 13a-16 OR 15d-16 UNDER<br> THE SECURITIES EXCHANGE ACT OF 1934**

**For the month of February, 2023.**

**Commission file number 001-39087**

**Youdao, Inc.**

(Exact name of registrant as specified in its charter)

**No. 399, Wangshang Road, Binjiang District <br> Hangzhou 310051, People's Republic of China <br> +86 0571-8985-2163** 

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

**EXHIBIT INDEX**

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| | |
|:---|:---|
| **Exhibit No.**  | **Description**  |
| 99.1 | Press Release |

---

**SignatureS**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | | Youdao, Inc. | Youdao, Inc. | Youdao, Inc. |
| Date | February 23, 2023 | By | /s/ Feng Zhou | /s/ Feng Zhou |
|  |  |  | Name: | Feng Zhou |
|  |  |  | Title: | Chief Executive Officer, Director |

---

## Exhibit 99.1

**EXHIBIT 99.1**

**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

The Piacente Group, Inc.

Emilie Wu

Tel: +86-21-6039-8363

E-mail: youdao@thepiacentegroup.com

In the United States:

The Piacente Group, Inc.

Brandi Piacente

Tel: +1-212-481-2050

E-mail: youdao@thepiacentegroup.com

**Youdao Reports Fourth Quarter and Fiscal Year 2022 Unaudited Financial Results**

Hangzhou, China – February 23, 2023 – Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), a leading technology-focused intelligent learning company in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2022.

**<u>Fourth Quarter 2022 Financial Highlights</u>**<sup>1</sup>

• **Total net revenues** were RMB1.5 billion (US$210.8 million), representing a 38.6% increase from
 the same period in 2021.

○ **Net revenues from learning services** were RMB806.3 million (US$116.9 million), representing a 39.2% increase from the same period in 2021.

○ **Net revenues from smart devices** were RMB407.0 million (US$59.0 million) , representing a 28.1 % increase from the same period in 2021.

○ **Net revenues from online marketing services** were RMB240.8 million (US$34.9 million) , representing a 58.6 % in crease from the same period in 2021.

• **Gross margin** was 53.3%, compared with 42.5% for the same period in 2021.

**<u>Fiscal Year 2022 Financial Highlights</u>**

• **Total net revenues** were RMB5.0 billion (US$726.8 million), representing a 24.8% increase from
 2021.

○ **Net revenues from learning services** were RMB3.1 billion (US$447.2 million) , representing a 26.3 % increase from 2021.

○ **Net revenues from smart devices** were RMB1.3 billion (US$182.2 million) , representing a 28.2 % increase from 2021.

<sup>1</sup> As previously disclosed, in compliance with applicable regulatory requirements, the Company had ceased to offer the after-school tutoring services on academic subjects in China's compulsory education system (the "Academic AST Business") at the end of December 2021. The Academic AST Business met the criteria of discontinued operations. Retrospective adjustments to the historical statement of operations have also been made to provide a consistent basis of comparison for the financial results of the continuing operations. The financial information and non-GAAP financial information included in this press release are presented on a continuing operations basis, unless otherwise specifically stated.

○ **Net revenues from online marketing services** were RMB672.4 million (US$97.5 million) , representing a 13.2 % in crease from 2021.

• **Gross margin** was 51.6%, compared with 49.5% for 2021.

"Our ongoing investment in AI technology facilitated our ability to consistently introduce and broaden our digital content services and smart device offerings throughout 2022. In both the third and fourth quarters, the net revenues from our digital content services covered its costs and operating expenses, showing the improved health of our business. Our new smart devices launched in the second half of 2022, including upgraded dictionary pens and smart learning pads, were highly recognized by customers, which led to strong sales growth during the November 11 Shopping Festival. As a result of the solid performance of our new services and smart devices, we achieved record-high net revenues and our first-ever income from operations in the fourth quarter. Our improved financial and operating indicators demonstrate that we have the right strategy in place to support our growth trajectory," said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao.

"Years of experience have taught us that the full value of AI cannot be realized on its own. To effectively support users, technologies must be integrated with sound business scenarios. Looking ahead, we will continue to prioritize our users. By leveraging our advanced technology and innovation, we will continue to introduce additional high-quality educational products and services to meet users' diverse and personalized demands." Dr. Zhou concluded.

**<u>Fourth Quarter 2022 Financial Results</u>**

**Net Revenues**

Net revenues for the fourth quarter of 2022 were RMB1.5 billion (US$210.8 million), representing a 38.6% increase from RMB1.0 billion for the same period of 2021.

Net revenues from learning services were RMB806.3 million (US$116.9 million) for the fourth quarter of 2022, representing a 39.2% increase from RMB579.3 million for the same period of 2021. The year-over-year growth was primarily driven by the strong sales performance from the new services initiated after the implementation of the "Double Reduction" Policy.

Net revenues from smart devices were RMB407.0 million (US$59.0 million) for the fourth quarter of 2022, representing a 28.1% increase from RMB317.7 million for the same period of 2021, primarily driven by the popularity of Youdao's newly launched products, such as the Youdao Dictionary Pen X5.

Net revenues from online marketing services were RMB240.8 million (US$34.9 million) for the fourth quarter of 2022, representing a 58.6% increase from RMB151.8 million for the same period of 2021. The year-over-year increase in revenues from online marketing services was mainly attributable to the increase in performance-based advertisements through third parties' internet properties.

**Gross Profit and Gross Margin**

Gross profit for the fourth quarter of 2022 was RMB774.7 million (US$112.3 million), representing a 74.0% increase from RMB445.3 million for the same period of 2021. Gross margin increased to 53.3% for the fourth quarter of 2022 from 42.5% for the same period of 2021.

Gross margin for learning services increased to 64.1% for the fourth quarter of 2022 from 51.4% for the same period of 2021, primarily attributable to the significant increase in revenues, improved economics of scale and ongoing optimization of Youdao's faculty compensation structure.

Gross margin for smart devices increased to 46.2% for the fourth quarter of 2022 from 30.8% for the same period of 2021. The improvement was mainly attributable to the popularity of Youdao's newly launched Youdao Dictionary Pen X5, which carries a higher gross margin than other products.

Gross margin for online marketing services was 29.2% for the fourth quarter of 2022, compared with 32.6% for the same period of 2021. The decrease was mainly attributable to the increase in performance-based advertisements through third parties' internet properties, which typically have a lower gross margin profile.

**Operating Expenses**

Total operating expenses for the fourth quarter of 2022 were RMB750.0 million (US$108.7 million), compared with RMB693.6 million for the same period of last year.

Sales and marketing expenses for the fourth quarter of 2022 were RMB515.9 million (US$74.8 million), representing an increase of 22.7% from RMB420.4 million for the same period of 2021. This increase was mainly driven by increasing sales and marketing efforts associated with Youdao's learning services and smart devices.

Research and development expenses for the fourth quarter of 2022 were RMB179.5 million (US$26.0 million), representing an increase of 5.4% from RMB170.2 million for the same period of 2021. The increase was primarily due to higher payroll-related expenses associated with a larger number of development and technology professionals in smart devices.

General and administrative expenses for the fourth quarter of 2022 were RMB54.6 million (US$7.9 million), representing an increase of 18.4% from RMB46.1 million for the same period of 2021. The increase was mainly attributable to an increase in employee related expenses in the fourth quarter of 2022.

Impairment of intangible assets from business combination for the fourth quarter of 2021 reflected the impairment of the intangible assets related to a subsidiary acquired due to the adverse development of its business and change of the regulatory environment.

**(Loss)/Income from Operations**

As a result of the foregoing, income from operations for the fourth quarter of 2022 was RMB24.7 million (US$3.6 million), compared with loss from operations of RMB248.3 million for the same period in 2021. The margin of income from operations was 1.7%, compared with margin of loss from operations of 23.7% for the same period of last year.

**Net (Loss)/Income from Continuing Operations Attributable to Youdao's Ordinary Shareholders**

Net income from continuing operations attributable to Youdao's ordinary shareholders for the fourth quarter of 2022 was RMB12.3 million (US$1.8 million), compared with net loss from continuing operations attributable to Youdao's ordinary shareholders of RMB215.9 million for the same period of last year. Non-GAAP net income from continuing operations attributable to Youdao's ordinary shareholders for the fourth quarter of 2022 was RMB31.1 million (US$4.5 million), compared with Non-GAAP net loss from continuing operations attributable to Youdao's ordinary shareholders of RMB168.2 million for the same period of last year.

Basic and diluted net income from continuing operations per American depositary share ("ADS") attributable to ordinary shareholders for the fourth quarter of 2022 was RMB0.10 (US$0.01), compared with basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders of RMB1.75 for the same period of 2021. Non-GAAP basic and diluted net income from continuing operations per ADS attributable to ordinary shareholders was RMB0.25 (US$0.04), compared with Non-GAAP basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders of RMB1.37 for the same period of 2021.

**Balance Sheet**

As of December 31, 2022, Youdao's cash, cash equivalents, restricted cash, time deposits and short-term investments totaled RMB1.0 billion (US$147.4 million), compared with RMB1.6 billion as of December 31, 2021. For the fourth quarter of 2022, net cash provided by continuing operating activities was RMB84.1 million (US$12.2 million), capital expenditures totaled RMB3.8 million (US$0.5 million), and depreciation and amortization expenses amounted to RMB11.7 million (US$1.7 million). Youdao's ability to continue as a going concern is dependent on management's ability to implement an effective business plan in future periods in light of the changing regulatory environment, generate operating cash flows and continue to be able to obtain outside sources of financing as necessary for Youdao's future development. As of the date of this release, Youdao has received various financial support from the NetEase Group, including, among others, RMB878.0 million short-term loans and US$80.0 million long-term loans with maturity dated March 31, 2024 drawn down under the US$300.0 million revolving loan facility.

As of December 31, 2022, the Company's contract liabilities, which mainly consisted of deferred revenues generated from Youdao's learning services, were RMB1.1 billion (US$154.7 million), compared with RMB1.1 billion as of December 31, 2021.

**<u>Fiscal Year 2022 Financial Results</u>**

**Net Revenues**

Net revenues for 2022 were RMB5.0 billion (US$726.8 million), representing a 24.8% increase from RMB4.0 billion for 2021.

Net revenues from learning services were RMB3.1 billion (US$447.2 million) for 2022, representing a 26.3% increase from RMB2.4 billion for 2021. The increase was primarily driven by the strong sales performance from the new services initiated after the implementation of the "Double Reduction" Policy.

Net revenues from smart devices were RMB1.3 billion (US$182.2 million) for 2022, representing a 28.2% increase from RMB980.4 million for 2021. The increase was primarily driven by the popularity of Youdao's newly launched products, such as the Youdao Dictionary Pen X5.

Net revenues from online marketing services were RMB672.4 million (US$97.5 million) for 2022, representing a 13.2% increase from RMB593.9 million for 2021. The increase was attributable to the increase in the sales of performance-based advertisements through third parties' internet properties.

**Gross Profit and Gross Margin**

Gross profit for 2022 was RMB2.6 billion (US$375.0 million), compared with RMB2.0 billion for 2021. Gross margin for 2022 was 51.6%, compared with 49.5% for 2021.

Gross margin for learning services increased to 62.0% for 2022 from 59.8% for 2021, primarily attributable to the significant increase in revenues, improved economics of scale and ongoing optimization of Youdao's faculty compensation structure.

Gross margin for smart devices increased to 39.1% for 2022 from 36.9% for 2021, primarily attributable to the substantial rise in sales volume of Youdao Dictionary Pen X5, which carries a higher gross margin than other products.

Gross margin for online marketing services was 27.4% for 2022, keeping flat with 28.1% for 2021.

**Operating Expenses**

Total operating expenses for 2022 were RMB3.4 billion (US$487.3 million), representing an increase of 14.6%, compared with RMB2.9 billion for 2021.

Sales and marketing expenses for 2022 were RMB2.3 billion (US$337.5 million), representing an increase of 12.1%, compared with RMB2.1 billion for 2021. This increase was mainly driven by increasing sales and marketing efforts associated with Youdao's learning services and smart devices.

Research and development expenses for 2022 were RMB803.8 million (US$116.5 million), representing an increase of 32.3%, compared with RMB607.4 million for 2021. The increase was primarily due to higher payroll-related expenses associated with a larger number of development and technology professionals in smart devices and education digitalization solutions.

General and administrative expenses for 2022 were RMB229.2 million (US$33.2 million), representing an increase of 20.4%, compared with RMB190.3 million for 2021. The increase was mainly attributable to an increase in employee related expenses in 2022.

Impairment of intangible assets from business combination for 2021 reflected the impairment of the intangible assets related to a subsidiary acquired due to the adverse development of its business and change of the regulatory environment.

**Loss from Operations**

Loss from operations for 2022 was RMB774.7 million (US$112.3 million), compared with RMB943.2 million for 2021. The margin of loss from operations was 15.5%, compared with 23.5% for 2021.

**Net Loss from Continuing Operations Attributable to Youdao's Ordinary Shareholders**

Net loss from continuing operations attributable to Youdao's ordinary shareholders for 2022 was RMB720.9 million (US$104.5 million), compared with RMB895.4 million for 2021. Non-GAAP net loss from continuing operations attributable to Youdao's ordinary shareholders for 2022 was RMB639.9 million (US$92.8 million), compared with RMB788.3 million for 2021.

Basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders for 2022 was RMB5.83 (US$0.84), compared with RMB7.36 for 2021. Non-GAAP basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders was RMB5.18 (US$0.75), compared with RMB6.48 for 2021.

**Operating Cash Flow from Continuing Operations**

For 2022, net cash used in continuing operating activities was RMB531.4 million (US$77.0 million), capital expenditures totaled RMB69.8 million (US$10.1 million), and depreciation and amortization expenses amounted to RMB42.2 million (US$6.1 million).

**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 million of its Class A ordinary shares (including in the form of ADSs) during a period of up to 36 months. As of the date of this release, the Company accumulatively repurchased an aggregate of approximately 1.8 million ADSs for approximately US$10.0 million from the open market under the share repurchase program.

**Conference Call**

Youdao's management team will host a teleconference call with simultaneous webcast at 5:00 a.m. Eastern Time on Thursday, February 23, 2023 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, February 23, 2023). 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:

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| | |
|:---|:---|
| 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: | 8917789 |

---

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 March 2, 2023:

United States: +1-877-344-7529 <br> International: +1-412-317-0088 <br> Replay Access Code: 8917789

**About Youdao, Inc.** 

Youdao, Inc. (NYSE: DAO) is a leading technology-focused intelligent learning company 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. (NASDAQ: 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) from continuing operations attributable to the Company's ordinary shareholders and non-GAAP basic and diluted income/(loss) from continuing operations 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) from continuing operations attributable to the Company's ordinary shareholders as net income/(loss) from continuing operations attributable to the Company's ordinary shareholders excluding share-based compensation expenses, amortization of intangible assets from business combination, impairment of long-term investments, impairment of intangible assets from business combination, income tax effects of above GAAP to non-GAAP reconciling items, and adjustment for GAAP to non-GAAP reconciling items for the income/(loss) attributable to noncontrolling interests. Non-GAAP net income/(loss) from continuing operations attributable to the Company's 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 RMB6.8972 to US$1.00, the exchange rate on December 30, 2022 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ 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. 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. Further information regarding such risks, uncertainties or factors is included in the Company's filings with the SEC. The announced results of the fourth quarter and full year of 2022 are preliminary and subject to audit 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.

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| | | | |
|:---|:---|:---|:---|
| **YOUDAO, INC.** | | | |
| **UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS** | | | |
| **(RMB and USD in thousands)** | | | |
|  | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **2021** | **2022** | **2022** |
|  | **RMB** | **RMB** | **USD <sup>(1)</sup>** |
| **Assets** |  |  |  |
| **Current assets:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | 322777 | 783611 | 113613 |
| &nbsp;&nbsp;&nbsp;Time deposits | 268 | 273 | 40 |
| &nbsp;&nbsp;&nbsp;Restricted cash | 749770 | 873 | 127 |
| &nbsp;&nbsp;&nbsp;Short-term investments | 503831 | 232152 | 33659 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net | 248339 | 405139 | 58740 |
| &nbsp;&nbsp;&nbsp;Inventories, net | 255411 | 232260 | 33675 |
| &nbsp;&nbsp;&nbsp;Amounts due from NetEase Group | 6192 | 7888 | 1144 |
| &nbsp;&nbsp;&nbsp;Prepayment and other current assets | 182577 | 207777 | 30124 |
| &nbsp;&nbsp;&nbsp;Assets held for sale | 497 |  |  |
| **Total current assets** | **2269662** | **1869973** | **271122** |
| **Non-current assets:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Property, equipment and software, net | 80315 | 92116 | 13356 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use assets, net | 118104 | 78405 | 11368 |
| &nbsp;&nbsp;&nbsp;Long-term investments | 32518 | 90703 | 13151 |
| &nbsp;&nbsp;&nbsp;Goodwill | 109944 | 109944 | 15940 |
| &nbsp;&nbsp;&nbsp;Other assets, net | 22436 | 35015 | 5075 |
| &nbsp;&nbsp;&nbsp;Assets held for sale | 1088 |  |  |
| **Total non-current assets** | **364405** | **406183** | **58890** |
| **Total assets** | **2634067** | **2276156** | **330012** |
| **Liabilities, Mezzanine Equity and Shareholders' Deficit** |  |  |  |
| **Current liabilities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payables | 161006 | 282354 | 40937 |
| &nbsp;&nbsp;&nbsp;Payroll payable | 277383 | 266340 | 38616 |
| &nbsp;&nbsp;&nbsp;Amounts due to NetEase Group | 83041 | 68809 | 9976 |
| &nbsp;&nbsp;&nbsp;Contract liabilities | 1065639 | 1067285 | 154742 |
| &nbsp;&nbsp;&nbsp;Taxes payable | 53323 | 50908 | 7381 |
| &nbsp;&nbsp;&nbsp;Accrued liabilities and other payables | 515567 | 564922 | 81907 |
| &nbsp;&nbsp;&nbsp;Short-term loans from NetEase Group | 878000 | 878000 | 127298 |
| **Total current liabilities** | **3033959** | **3178618** | **460857** |
| **Non-current liabilities:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Long-term lease liabilities | 73070 | 43635 | 6326 |
| &nbsp;&nbsp;&nbsp;Long-term loans from NetEase Group | 255028 | 522345 | 75733 |
| &nbsp;&nbsp;&nbsp;Other non-current liabilities | 2411 | 8832 | 1281 |
| **Total non-current liabilities** | **330509** | **574812** | **83340** |
| **Total liabilities** | **3364468** | **3753430** | **544197** |
| **Mezzanine equity** | **78592** | **64571** | **9362** |
| **Shareholders' deficit:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Youdao's shareholders' deficit | (807067) | (1535089) | (222567) |
| &nbsp;&nbsp;&nbsp;Noncontrolling interests | (1926) | (6756) | (980) |
| **Total shareholders' deficit** | **(808993)** | **(1541845)** | **(223547)** |
| **Total liabilities, mezzanine equity and shareholders' deficit** | **2634067** | **2276156** | **330012** |

---

**Note 1:**

The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of **USD1.00=RMB6.8972** on the last trading day of December (December 30, 2022) as set forth in the H. 10 statistical release of the U.S. Federal Reserve Board.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **YOUDAO, INC.** | | | | | | |
| **UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS** | **UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS** | | | | | |
| **(RMB and USD in thousands, except share and per ADS data)** | | | | | | |
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Year Ended** | **Year Ended** |
|  | **December 31,** | **September 30,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2021** | **2022** | **2022** | **2022** | **2021** | **2022** |
|  | **RMB** | **RMB** | **RMB** | **USD <sup>(1)</sup>** | **RMB** | **RMB** |
| **Net revenues:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Learning services | 579259 | 888493 | 806270 | 116899 | 2441421 | 3084375 |
| &nbsp;&nbsp;&nbsp;Smart devices | 317702 | 356480 | 406956 | 59003 | 980424 | 1256446 |
| &nbsp;&nbsp;&nbsp;Online marketing services | 151836 | 157461 | 240756 | 34906 | 593949 | 672361 |
| **Total net revenues** | **1048797** | **1402434** | **1453982** | **210808** | **4015794** | **5013182** |
| &nbsp;&nbsp;&nbsp;Cost of revenues <sup>(2)</sup> | (603504) | (642254) | (679295) | (98489) | (2026956) | (2426766) |
| **Gross profit** | **445293** | **760180** | **774687** | **112319** | **1988838** | **2586416** |
| **Operating expenses:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Sales and marketing expenses <sup>(2)</sup> | (420437) | (709769) | (515944) | (74805) | (2077638) | (2328095) |
| &nbsp;&nbsp;&nbsp;Research and development expenses <sup>(2)</sup> | (170245) | (212926) | (179474) | (26021) | (607373) | (803791) |
| &nbsp;&nbsp;&nbsp;General and administrative expenses <sup>(2)</sup> | (46112) | (56520) | (54597) | (7916) | (190297) | (229210) |
| &nbsp;&nbsp;&nbsp;Impairment of intangible assets from business combination | (56778) |  |  |  | (56778) |  |
| **Total operating expenses** | **(693572)** | **(979215)** | **(750015)** | **(108742)** | **(2932086)** | **(3361096)** |
| **(Loss)/Income from operations** | **(248279)** | **(219035)** | **24672** | **3577** | **(943248)** | **(774680)** |
| &nbsp;&nbsp;&nbsp;Interest income | 3012 | 4033 | 3072 | 445 | 18780 | 12908 |
| &nbsp;&nbsp;&nbsp;Interest expense | (8428) | (12277) | (14643) | (2123) | (31644) | (45607) |
| &nbsp;&nbsp;&nbsp;Others, net | 12339 | 40058 | 3767 | 546 | 36673 | 81445 |
| **(Loss)/Income before tax** | **(241356)** | **(187221)** | **16868** | **2445** | **(919439)** | **(725934)** |
| &nbsp;&nbsp;&nbsp;Income tax benefit/(expense) | 556 | 1108 | (13833) | (2006) | (6648) | (13844) |
| &nbsp;&nbsp;&nbsp;**Net (loss)/income from continuing operations** | **(240800)** | **(186113)** | **3035** | **439** | **(926087)** | **(739778)** |
| &nbsp;&nbsp;&nbsp;**Net income/(loss) from discontinued operations** | **199290** | **—** | **—** | **—** | **(100267)** | **(6105)** |
| **Net (loss)/income** | **(41510)** | **(186113)** | **3035** | **439** | **(1026354)** | **(745883)** |
| &nbsp;&nbsp;&nbsp;Net loss attributable to noncontrolling interests | 24897 | 2194 | 9263 | 1343 | 30699 | 18851 |
| **Net (loss)/income attributable to ordinary shareholders of the Company** | **(16613)** | **(183919)** | **12298** | **1782** | **(995655)** | **(727032)** |
| &nbsp;&nbsp;&nbsp;Including: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Net (loss)/income from continuing operations attributable to ordinary shareholders of the Company | **(215903)** | **(183919)** | **12298** | **1782** | **(895388)** | **(720927)** |
| &nbsp;&nbsp;&nbsp;Net income/(loss) from discontinued operations attributable to ordinary shareholders of the Company | **199290** | **—** | **—** | **—** | **(100267)** | **(6105)** |
| Basic net (loss)/income per ADS | (0.13) | (1.49) | 0.10 | 0.01 | (8.18) | (5.88) |
| &nbsp;&nbsp;&nbsp;-Continuing operations | (1.75) | (1.49) | 0.10 | 0.01 | (7.36) | (5.83) |
| &nbsp;&nbsp;&nbsp;-Discontinued operations | 1.62 |  |  |  | (0.82) | (0.05) |
| Diluted net (loss)/income per ADS | (0.13) | (1.49) | 0.10 | 0.01 | (8.18) | (5.88) |
| &nbsp;&nbsp;&nbsp;-Continuing operations | (1.75) | (1.49) | 0.10 | 0.01 | (7.36) | (5.83) |
| &nbsp;&nbsp;&nbsp;-Discontinued operations | 1.62 |  |  |  | (0.82) | (0.05) |
| Shares used in computing basic net (loss)/income per ADS | 123193273 | 123767013 | 123584460 | 123584460 | 121650907 | 123597604 |
| Shares used in computing diluted net (loss)/income per ADS | 123193273 | 123767013 | 124345717 | 124345717 | 121650907 | 123597604 |

---

**Note 1:**

The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of **USD1.00=RMB6.8972** on the last trading day of December (December 30, 2022) as set forth in the H. 10 statistical release of the U.S. Federal Reserve Board.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Note 2:** | | | | | | |
| Share-based compensation in each category: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Cost of revenues | 3249 | 798 | 1231 | 178 | 7862 | 5984 |
| &nbsp;&nbsp;&nbsp;Sales and marketing expenses | 2800 | 2879 | 3249 | 471 | 10521 | 12669 |
| &nbsp;&nbsp;&nbsp;Research and development expenses | 8735 | 7586 | 5702 | 828 | 33775 | 30578 |
| &nbsp;&nbsp;&nbsp;General and administrative expenses | 5449 | 4801 | 6845 | 992 | 20043 | 21478 |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **YOUDAO, INC.** | | | | | | |
| **UNAUDITED ADDITIONAL INFORMATION** | | | | | | |
| **(RMB and USD in thousands)** | | | | | | |
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Year Ended** | **Year Ended** |
|  | **December 31,** | **September 30,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2021** | **2022** | **2022** | **2022** | **2021** | **2022** |
|  | **RMB** | **RMB** | **RMB** | **USD** | **RMB** | **RMB** |
| **Net revenues** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Learning services | 579259 | 888493 | 806270 | 116899 | 2441421 | 3084375 |
| &nbsp;&nbsp;&nbsp;Smart devices | 317702 | 356480 | 406956 | 59003 | 980424 | 1256446 |
| &nbsp;&nbsp;&nbsp;Online marketing services | 151836 | 157461 | 240756 | 34906 | 593949 | 672361 |
| **Total net revenues** | **1048797** | **1402434** | **1453982** | **210808** | **4015794** | **5013182** |
| **Cost of revenues** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Learning services | 281433 | 315086 | 289829 | 42021 | 980700 | 1172703 |
| &nbsp;&nbsp;&nbsp;Smart devices | 219703 | 212365 | 218969 | 31748 | 618925 | 765641 |
| &nbsp;&nbsp;&nbsp;Online marketing services | 102368 | 114803 | 170497 | 24720 | 427331 | 488422 |
| **Total cost of revenues** | **603504** | **642254** | **679295** | **98489** | **2026956** | **2426766** |
| **Gross margin** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Learning services | 51.4% | 64.5% | 64.1% | 64.1% | 59.8% | 62.0% |
| &nbsp;&nbsp;&nbsp;Smart devices | 30.8% | 40.4% | 46.2% | 46.2% | 36.9% | 39.1% |
| &nbsp;&nbsp;&nbsp;Online marketing services | 32.6% | 27.1% | 29.2% | 29.2% | 28.1% | 27.4% |
| **Total gross margin** | **42.5%** | **54.2%** | **53.3%** | **53.3%** | **49.5%** | **51.6%** |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **YOUDAO, INC.** | | | | | | |
| **UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS** | **UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS** | | | | | |
| **(RMB and USD in thousands, except per ADS data)** | | | | | | |
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Year Ended** | **Year Ended** |
|  | **December 31,** | **September 30,** | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
|  | **2021** | **2022** | **2022** | **2022** | **2021** | **2022** |
|  | **RMB** | **RMB** | **RMB** | **USD** | **RMB** | **RMB** |
| **Net (loss)/income from continuing operations attributable to ordinary shareholders of the Company** | **(215903)** | **(183919)** | **12298** | **1782** | **(895388)** | **(720927)** |
| Add: share-based compensation | 20233 | 16064 | 17027 | 2469 | 72201 | 70709 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;amortization of intangible assets from business combination | 1976 |  |  |  | 2972 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;impairment of long-term investments |  | 3500 | 1800 | 261 | 7000 | 10300 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;impairment of intangible assets from business combination | 56778 |  |  |  | 56778 |  |
| Less: tax effects on non-GAAP adjustments | (8813) |  |  |  | (8962) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GAAP to non-GAAP reconciling items for the loss attributable to <br> noncontrolling interests | (22473) |  |  |  | (22854) |  |
| **Non-GAAP net (loss)/income from continuing operations attributable to ordinary shareholders of the Company** | **(168202)** | **(164355)** | **31125** | **4512** | **(788253)** | **(639918)** |
| Non-GAAP basic net (loss)/income from continuing operations per ADS | (1.37) | (1.33) | 0.25 | 0.04 | (6.48) | (5.18) |
| Non-GAAP diluted net (loss)/income from continuing operations per ADS | (1.37) | (1.33) | 0.25 | 0.04 | (6.48) | (5.18) |

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