Youdao, Inc.

and welcome to the Yodell 2023 first quarter earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeffrey Wong, investor relations director of Yodell. Please go ahead.

Thank you, operator. Please note the discussion today will continue forward-looking statements. related to future performance of the company, which are intended to qualify for the safe harbor farm liability, as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of the future performance and are subject to certain risks and uncertainties, assumptions, and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of risk factors that could affect U.S. business and financial results is included in certain findings of the company with the U.S. Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information except as required by law. During today's call, Management will also discuss certain non-GAAP financial measures for comparison purposes only. For the definitions of non-GAAP financial measures and recalculations of GAAP to non-GAAP financial results, please see the 2023 First Quarter Financial Results news release issued earlier today. As a reminder, this conference is being recorded. Besides, a webcast replay of this conference call will be available on Udall's corporate website at ir.udall.com. Joining us today on the call from Udall's senior management is Dr. Feng Zhou, our chief executive officer, Mr. Lei Jin, our president, Mr. Peng Su, our VP of strategy and capital markets, and Mr. Wayne Lee, our VP of Finance. I will now turn the call over to Dr. Zhou to review some of our recent highlights and strategic directions.

Thank you, Jeffrey, and thank you all for participating in today's call. Before we begin, I would like to remind everyone that the financial information and non-GAAP financial information mentioned in this release is presented on a continuing operations basis, and all numbers are based on MMB, unless otherwise specifically stated. Q1 net revenue was RMB 1.2 billion, a decrease of 3.1% year-over-year. Lost from operations was RMB 195.8 million, up 56.5% year-over-year. Net cash used in continuing operating activities was RMB 437 million, an increase of 2.7% year-over-year. During the first half of the quarter, our main learning services and smart devices businesses faced the significant challenges due to the pandemic. However, the challenges gradually eased in the second half and our business returned to growth. Despite the headwinds, our digital content services maintained a strong trajectory. In fact, its gross margin approached 70% and net revenues covered the cost and operating expenses for three consecutive quarters. Furthermore, Gross billions from learning services, excluding adult courses, increased over 40% year-over-year in Q1, rising by over 70% in February and March, after falling by over 20% in January. In Q1, our advertisement business was a bright spot, with net revenues of RMB 218.1 million, representing a 79% year-over-year growth. This was mainly attributed to the expansion of customers led by the significant upgrade of advertising technology since Q4. We foresee continued positive momentum in this sector. In Q1, we also made notable progress with generative AI and large language model technologies that offer breakthroughs abilities in knowledge reasoning, language tutoring, and other applications. This marks a significant inflection point in our six-year journey of applying modern artificial intelligence to education, which began with the release of Yudan Neural Machine Translation technology in 2017. As one of the first companies to release generative AI-powered education products, we recently launched Yudal AI Speaking, Kaikōshō, in Yudal Dictionary Japan. Leveraging our proprietary generative model, we also unveiled AI Box for Yodal desktop translation, which utilizes our generative AI technology. The AI Box feature received an overwhelmingly positive response and contributed to a nearly 200% year-over-year increase in translation subscription fees. Looking ahead to the full year of 2023, I am confident in the growth and improved overall health of our business and also fruitful applications of generative AI in our products. Regarding AI, we remain committed to abiding by related laws and regulations to ensure that our technology is developed and utilized in an ethical and responsible manner. Furthermore, our controlling shareholder, NetEase Group, will continue to support our long-term development. I would like to provide more details on our business segments in Q1. We generated IMB 732.4 million in net revenues from learning services, which represented an 11.3% year-over-year decrease, primarily due to the pandemic. Nonetheless, as we just mentioned, gross billings from learning services, excluding adult courses, increased over 40% year-over-year in Q1, indicating positive momentum. Our STEAM courses continue to see notable achievements, contributing to the overall gross billions growth. In Q1, our flagship Youdao Literature, Youdao Bowen, product gained even more popularity, while the Minecraft Collaboration Project, Youdao Literature Creative Writing, Youdao Bowen, Miao Bi Shi Jie, received positive feedback from more users. Additionally, the champion class of Youdao Go, released in Q4 of last year, had already coached an award-winning student who secured the top spot in a youth group championship at the British Junior Gold Championship. Our child-oriented digital online reading service, Your Adult Fund Reading, demonstrated promising growth in Q1 by utilizing AI algorithms to recommend books to readers of diverse ages and interests. The growth billions of Your Adult Fund Reading rose by almost 40% year-over-year. Furthermore, we were recently designated as a GESP certification service center of the China Computer Federation, signifying our recognition and leadership in competitive programming education. In terms of adult courses, our postgraduate entrance exam courses sustained healthy momentum in Q1, posting mid-double-digit percentage growth. in the gross billings of professional courses for postgraduate entrance exams year-over-year. Regarding smart devices, net revenue were RMB $212.7 million in Q1, representing a 16% year-over-year decline due to the pandemic. However, the sector saw a rebound of more than 20% year-over-year in the activation of dictionary payments in March. The rapid recovery indicates that both the education needs of our customers and our distinct product design and features allows the device business to demonstrate resilience against the macro headwinds and the challenging consumer electronics market. We continue to improve DictionaryPan's experience with over-the-air updates to DictionaryPan OS. In addition to the AI speaking feature we just mentioned earlier, Users can now access other new applications such as Baidu Netdisk, Baidu Wangpan, and Chinese children's encyclopedia, 中国少年儿童百科全书. Furthermore, UDAH dictionary pen X5 and P5 rank highest among a number of dictionary pens based on tests conducted by the China Academy of Information and Communications Technology, underscoring our product leadership. In addition, we recently upgraded our Smart Learning Path by launching a comprehensive data-based learning dashboard and other significant updates. This dashboard enables parents to conveniently monitor their children's study plans and daily learning progress. Looking ahead to the remainder of 2023, assuming no unexpected micro events, we anticipate a continuation of the recovery in education consumer demand and a robust market demand for digital learning products, including both our online learning services and smart learning devices. Moreover, generative AI technology will play a significant role in driving more consumer demand for digital learning products. We also expect continued growth from our longstanding advertising business, which will contribute to our overall expansion and profitability. At UDAH, we will continue to leverage our technological leadership and innovation capabilities to deliver industry-leading experiences to serve our users, consumers, and stakeholders while driving sustainable growth. We will continue to provide high-quality education services and deliver pioneering solutions that have a positive impact on society. With that, I will turn the call over to Supong. to give you more details on our financial performance.