Youdao, Inc.

Good day and welcome to YoDAO's first quarter 2025 earnings conference call. All participants are in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press more than one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Jeffrey Wong, investor relations director. Please go ahead.

Thank you, operator. Please note the discussion today will contain forward-looking statements related to the future performance of the company, which are intended to qualify for the safe harbor from liability. as established by the U.S. Private Securities Litigation Reform Act. Such statements announce guarantees of 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 the risk factors that could affect UDOT's business and financial results is included in certain company filings 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 reconciliations of GAAP to non-GAAP financial results, please see the 2025 first quarter financial results news release issued earlier today. As a reminder, this conference is being recorded. A web coverage replay of this conference call will be available on UDAO's corporate website at ir.udao.com. Joining us today on the call from UDAO's senior management as Dr. Feng Zhou, our Chief Executive Officer, Mr. Lei Jing, our President, Mr. Peng Su, our Senior President, 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 direction.

Thank you, Jeffrey, and thank you all for participating in today's call. Before we begin, I would like to remind everyone that all numbers are based on RMB, unless otherwise specifically stated. In the first quarter, we significantly boosted profitability while executing our AI-native strategy through product development. Operating income reached a Q1 record of RMB 104.0 million, surging 247.7% year-over-year. Net revenues were RMB 1.3 billion declining 6.7%, primarily due to decreased learning services revenue. Operating cash outflow narrowed by 34.7% to RMB 255.5 million, reflecting stronger financial efficiency. Product RMD accelerated in Q1. We launched Confucius 01, our first open source reasoning model. We trialed with key clients Udall Magic Box, an AI-powered app creative suite. We also introduced Space One, our first large-screen tutoring pen. These advances reinforce our AI-native strategy that is applying large language model technology to critical learning and advertisement scenarios, serving real-world challenges, driving user satisfaction and business growth. Now let's look at our business lines. In the first quarter, although net revenues from the learning services segment declined by 16.1% year-over-year, the rate of decline narrowed by approximately 5 percentage points compared to the previous quarter. Net revenues covered the segment's costs and operating expenses and yielded meaningful profits. Within the learning services segment, net revenues from digital content services were 10 and 0.8 million in Q1. The product team enhanced Youdao Lingshi's college planning solutions using our proprietary Confucius LRM. The upgraded AI college admission advisors now features six integrated components, 24 by 7 online Q&A services, comprehensive university and program databases, specialized proprietary courses and materials, professional assessment tools, and AI-powered recommendation system for school selection and predictive admission analytics. This comprehensive ecosystem has significantly improved our differentiated user experience, contributing to over 25% year-over-year growth, gross billing growth in Q1 and recently improved retention rates. In STEAM courses, our programming courses saw strong gross billing growth of over 40% year-over-year, fueled primarily by strong demand for GESP, that is, grade examination of software programming, preparation courses, and more efficient customer acquisition channels. Our AI-driven subscription services generated nearly RMB 70 million in Q1 sales, growing over 40% year over year. On the model development front, we open-sourced Confucius 01 in Q1, a lightweight 14 billion parameter reasoning model that delivers competitive K-12 performance while being significantly more cost-effective and easier to deploy than larger alternatives. We also enhanced our flagship translation model through multi-model fusion and online direct preference optimization training, achieving quality improvements, cost reductions, and increased adoption. The translation model now processes over 1.5 billion tokens daily as of April, representing 100% growth since Q1. Additionally, we recently started self-hosting full-size DeepSeq R1 inference for our products instead of relying on third-party DeepSeq model services, improving latency and stability while reducing costs at the same time. Moving on to our applications, the upgraded Mr. PAI Tutor now features a multi-model visual system with over 92% accuracy for K-12 problem solving, up from 85% last year, and is available across both the Mr. P app and our hardware devices. We recently launched Youdao AI podcast assistant, Youdao Wendao, an innovative audio synthesis platform that instantly converts text documents like PDF, Word files, and web pages into studio-quality podcasts. earning a featured recommendation on the Apple App Store. We also introduced our AI-powered academic paper plagiarism detection system, which detects AI-generated content in academic writing while providing actionable suggestions to enhance originality and quality. Turning to online marketing services, Q1 net revenues rose 2.6% year-over-year to RMB 505.4 million. Our performance-based advertising client base grew by 20% year-over-year in Q1, reflecting the successful scaling of our client acquisition efforts, a key driver for future performance growth. In overseas advertising, we have recently secured official Google Partner certification, complementing our existing TikTok partnership. These collaborations provide access to premium ad inventory and optimization tools, enabling more impactful international campaigns. Technology remains at the heart of our advertising strategy. Leveraging our Confucius LRI We launched the Yodam Magic Box, an AI-powered creative suite that automatically produces high-quality ad assets, including images, videos, and dynamic templates. This innovative solution is poised to play a pivotal role in transforming content creation workflows. In addition, we have deepened the collaboration with NetEase Group through two operational initiatives. First, we strengthened our partnership with NetEase Games, driving over 50% year-over-year growth in advertising revenue from gaming industry clients. Second, we enhanced the collaboration with NetEase Cloud Music, expanding the range of advertising scenarios available to advertisers. First margin from online marketing services moderated to 30.5% in Q1. an approximately four percentage point decline year over year. This primarily reflects our strategic emphasis on client acquisition, as newer clients typically impact margins during initial onboarding. Looking ahead, we anticipate the segment's gross margin to stabilize between 25% to 35% in the medium to long term. Our Smart Devices segment delivered RMB 190.5 million in Q1 revenues, representing a 5.1% year-over-year growth. In February, we introduced Yodao Space One, an AI-powered large-screen tutoring pen featuring our Confucius Multi-Model LLM. This innovative device offers precise image recognition, photo-to-speech conversion, and voice dictation capabilities, significantly broadening application scenarios while improving the learning experience. The product's strong market reception was evident as the initial inventory sold out within 10 days, contributing to over 20% year-over-year growth in our dictionary PAN revenue during the quarter. Moving forward, we will accelerate the integration of our Confucius large language model across both learning and advertising verticals, executing our AI native strategy to elevate user experiences while driving greater growth. Having achieved our first full year operating profit in 2024, we are now strategically positioned to maintain this positive trajectory, targeting accelerated profit growth and achieving operating cash flow breakeven for full year 2025. With that, I'll pass the call to Supong for a detailed review of our financial performance. Thank you.