Q2 2024 Youdao Inc Earnings Call

August 22, 2024

Operator: Good day and welcome to the Ya Jiang 2024 Second Quarter Earnings Conference Call. Today's conference is being recorded.

Good day and welcome did they go down 2024 second quarter earnings Conference call.

Today's conference is being recorded.

Dapeng Wang: At this time, I would like to turn the conference over to Mr. Dapeng Wang, Investor Relations Director of Ya Dao. Please go ahead.

Speaker Change: At this time I would like to turn the conference over to Mr. Jeffrey Wong.

Industrial Relations director Al If you do please go ahead.

Dapeng Wang: Thank you, operator.

Speaker Change: Thank you operator. Please note the discussion today will contain forward looking statements relating to the future performance of the company, which are intended to qualify for the safe Harbor from liability.

Dapeng Wang: Please note the discussion today will continue forward-looking statements related to the future performance of the company, which are intended to qualify for the three-proper from liability, as established by the U.S. private security litigation reform act, sustainment and not guarantees of the future performance and a subject to certain risks and uncertainties in substance and other factors. Some of these risks are beyond the company's control and could cause actual doubts to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect U.S. business and financial results is included in the certain company findings with the U.S.

Speaker Change: As we establish that the U S travelers Securities Litigation Reform Act such statements are not guarantees of future performance.

Speaker Change: Subject to certain risks.

Speaker Change: And then certainly the substance and other factors.

Speaker Change: 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.

Speaker Change: But generally discussion of the risk factors that could affect <unk> business and financial results is included in the company's.

Speaker Change: Company's filings with the U S Securities and Exchange Commission.

Dapeng Wang: Securities and Exchange Commission.

Dapeng Wang: The company does not undertake any application to update this report or looking information, except as required by law.

Speaker Change: The company now.

Speaker Change: Now entertain any obligation to update its forward looking information, except as required by law.

Dapeng Wang: 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 non-GAAP financial results, please leave the 2024 second quarter financial result news release issued earlier today.

Speaker Change: During today's call management will also discuss certain non-GAAP financial measures for comparison purposes only.

Speaker Change: The definitions of non-GAAP financial measures and the recalculation of GAAP to non-GAAP financial results.

Speaker Change: We see the 2024 second quarter financial use out of the news release issued earlier today as well.

Dapeng Wang: As a reminder, this conference is being recorded. A webcast replay of this conference call will be available on UDOT's property website at ir.udot.com.

Speaker Change: Remember this conference is being recorded.

Speaker Change: Webcast replay of this conference call will be available on <unk> corporate website.

Speaker Change: Our dog eat dog downtown.

Dapeng Wang: Join us today on the call from UDOT senior management, Dr. Feng Zhou, our Chief Executive Officer, Mr. Legend, our President, Mr. Peng Su, our VP of Strategy and Capital Markets, and Mr. Wayne Lee, a VP of Finance.

Speaker Change: Joining us today on the call from <unk> Senior management are dumped her from Joe Our Chief Executive Officer. He's turned late June or President Mr. Polin, Xu our VP of strategy and capital markets and Mr. Wang Li VP of finance and I will now I will turn it over.

Feng Zhou: I will now turn the call over to Dr. Zhou to review some of our recent highlights and strategic directions. Thank you, Jeffers, and thank you all for participating in today's call. Before we begin, I would like to remind everyone that one numbers are based on the RIMB unless otherwise specifically stated. In the second quarter of 2024, net revenues reached RIMB 1.2 billion, growing 9.5 percent year over year. Operating cash inflow reached the record level of RIMB 250.2 million, an increase of 80.2 percent year over year. Lost from operations was RIMB 72.6 million. As Q2 is typically seasonally weak in the bottom line, and in narrowed by 74.9 percent year over year.

Dr. Joe: Call over to Dr. Joe <unk> to review some of our recent highlights and our strategic direction.

Speaker Change: No.

Dr. Joe: 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 the WB unless otherwise specifically statements.

Dr. Joe: In the second quarter of 2024 net revenues reached RMB, one 3 billion growing nine 5% year over year.

Operating costs and cash inflow reached a record level.

Dr. Joe: RMB $250 2 million, an increase of eight 2% year over year.

Dr. Joe: Loss from operations was RMB $72 6 million as Q2 is typically seasonally weak and the bottom line and it narrowed by 74, 9% year over year.

Feng Zhou: In the first half of 2024, net revenues reached RIMB 2.7 billion, marking an increase of 14.5 percent. The last one operations was RMB 42.6 million, narrowing 91.2% over year. Operating cash outflow was reduced to RMB 103.8 million, reflecting the improvement of 53.7% over the year. The financial performance was in line with RMB.

In the first half of 2024 net revenues reached RMB, two 7 billion, marking an increase of 14, 5% year over year.

Dr. Joe: Loss from operations was RMB $42 6 million narrow in 91, 2% year over year.

Dr. Joe: Operating cash outflow was reduced to RMB 108.

Dr. Joe: 8 million, reflecting the improvement of 53, 7% year over year.

Dr. Joe: Actual performance was in line with right.

Feng Zhou: Now, let's review the major developments across our business lines in the second part. Net revenues from learning services were RMB 643.8 million, slightly down by 5.5% compared with the same period of last year. Digital content services maintained a healthy growth trajectory, achieving net revenues of RMB 403.3 million, up 6.8% over year. Operating cash inflows generated by digital content services exceeded RMB 200,000. Yodalling Shi continued to drive product upgrades and customer satisfaction. Firstly, in Q2, we released over 400 newly-healthily calibrated tiered learning videos for students of different levels. We also significantly upgraded the class-based study experience for better motivation and context.

Dr. Joe: Now lets review the major developments across our business lines in the second quarter.

Dr. Joe: Net revenues from loading sources were RMB $643 8 million slightly down by five 5% compared with the same period of last year.

Dr. Joe: Digital content services maintained a healthy growth trajectory, achieving net revenues of RMB $403 3 million up six 8% year over year.

Dr. Joe: Operating cash inflows generated by digital content and services exceeded RMB $200 million should continue to drive product upgrades and customer satisfaction.

Speaker Change: Firstly in Q2, we released the over 400, numerous healthily calibrated cheered the learning for us.

Speaker Change: Students of different levels, we also significantly upgraded the class space to study experience for better motivation and context.

Feng Zhou: As we discussed before, Ling Shi pioneered the approach of personalized pre-recorded video learning. Building upon this vast library of thousands of high-quality videos, we offer a set of important services, including automatic diagnosis of students' current learning levels, class-based digital learning, personalized quiz generation, and we can derive consultation with our experienced staff members. These are all key to the high effectiveness of our products, and we keep improving them every year.

Speaker Change: As we discussed before making sure pioneer approach of personalize the prerecorded video learning.

Speaker Change: Building upon this vast library of thousands of high quality produce we offer a set of important services, including automatic diagnosis of students come into learning levels class basis that digital learning personalized Chris generation and we came to life consultation with all of our experienced staff.

Speaker Change: Members. These are all key to the high effectiveness of our products and we keep improving them every year.

Feng Zhou: Second, in terms of applications of AI and growth initiatives, we upgraded our college and mission consultation services to the new AI college mission advisors. Using large language models, the AI advisor effectively discusses and guides students in their college application process, helping them in choosing universities and majors. Since the new release, the service saw nearly 3 million in-patries, rising by 30% over a year, making it a key asset in attracting new students and parents. Continuous product and service upgrades significantly boosted the retention ratio of Yodelling Shi, reaching over 70% in the second quarter, a record high, and an increase of more than 10 percentage points over a year.

Speaker Change: Second in terms of applications of AI and the growth initiatives, we upgraded our college admission.

Speaker Change: Sultan consultation service to the all new AI College admission the geysers.

Speaker Change: So I'm sure it will ship in Q2.

Speaker Change: Using large language models, the AI adviser effectively discusses and guide students in the college application process, helping them in choosing universities and majors.

Speaker Change: Since the new release, the service on nearly 3 million Patriots rising by 30% year over year.

Speaker Change: <unk> is a key asset in attracting new students and parents.

Speaker Change: Continuous product and service upgrades significantly boosted the retention ratio of Yodelling should reaching over 70% in the second quarter, a record high and an increase of more than 10 percentage points year over year.

Feng Zhou: In addition, as for Yodelling literature, we offer nearly 40,000 high-quality AI-righton refinements in the second quarter, improving our retention rate by approximately 10 percentage points on a year-based basis.

Speaker Change: In addition, as for Utah literature.

Speaker Change: We offered a nearly 40000 high quality Reits and refinements in the second quarter.

Speaker Change: Improving our retention rates by approximately 10 percentage points.

Speaker Change: On a year over year basis.

Feng Zhou: Next is the learning services segment, which is our AI-driven subscription service. In the second quarter, our AI-driven subscription services maintained rapid growth with total sales of passing RMB 60 million, marking a nearly 200% year-over-year increase and over 30% quarter-over-quarter growth. Over, this represents the six consecutive quarters of over 50% year-over-year growth.

Next is learning services segment.

Speaker Change: He is our.

Speaker Change: AI driven subscription services.

Speaker Change: In the second quarter, our AI driven subscription services maintained rapid growth with total sales, surpassing RMB 16 million, marking a nearly 200% year over year increase.

Speaker Change: Over 30% quarter over quarter of course.

Speaker Change: Moreover, this represents the sixth consecutive quarter, it's up over 50% year over year growth.

Feng Zhou: Otherwise, in June, we launched a major new mobile app, Mr. P, AI Tutor. The first ARM subject, AI Tutor in China, and it received positive feedback from users after its initial integration into UDOT dictionary pen earlier this year. Second, AI translation in UDOT dictionary translation now supports languages other than English and Chinese. There is also new support for on-term databases and multi-model document input. These upgrades pushed AI translation usage to exceed 30 million times in Q2. Third, in collaboration with NETI's Cloud Music, UDOT Dictionary introduced a music sentence feature in the second quarter, helping users learn vocabulary while listening to music.

Speaker Change: In June we launched a major new mobile App, Mr. Pete Hey, I tutor.

Speaker Change: The first subject in China.

Speaker Change: And it received a positive feedback from users after its initial integration into Dr Dictionary pen earlier this year.

Speaker Change: They got a translation in your direction are you trying to steer you towards.

Speaker Change: Desktop translation now supports languages other than English and Chinese there is also new support foreign term databases and multi motto.

Speaker Change: Document input.

Speaker Change: These upgrades pushed AIG translation usage to exceed 30 million times in Q2.

Speaker Change: Third.

Speaker Change: In collaboration with Netease cloud music.

Dictionary introduced music centers feature in the second quarter, helping users learn vocabulary, while listening to music.

Feng Zhou: Last but not least, High Echo introduced the children mode, offering tailored topics for children, child-friendly digital avatars, and generating exclusive post-convitation reports to eight children in improving their English speaking skills. We are also delighted to observe that the average usage time of children mode is nearly twice that of other modes, highlighting its effectiveness in engaging and retaining users, as well as enhancing their English proficiency.

Speaker Change: Last but not least hi uncle introduced the children mode offering tailored topics for children child friendly to get a albatross and generating explosive post conversation reports to eight children and improving their English speaking skills.

Speaker Change: So the light we're also delighted to observe that the average usage time of chosen mode is nearly twice that of other modes, highlighting its effectiveness in engaging them retaining users as well as <unk>.

Enhancing their English proficiency.

Operator: Good day and welcome to the Ya Jiang 2024 second quarter earnings conference call. Today's conference is being recorded.

Feng Zhou: Our online marketing service segment maintained a strong growth trajectory in Q2, with NETI's reaching RMB 511.2 million, pitting a record high and representing an increase of 68.4% over year. This marks the seventh consecutive quarter of over 50% year-over-year growth. Children primarily by RTA, real-time API, and domestic KOL's ongoing robust performance, with RTA revenue more than doubling year over year in Q2. Furthermore, as large language models rapidly advance in the market, the demand for promoting these models and their applications among tech companies is searched. Our team sees this opportunity and is helping leading players like Biden's football, Liverpool, and Baidu Ernie in this area to grow their products in Q2.

Speaker Change: Our online marketing services segment maintained a strong growth trajectory in Q2 with net revenues, reaching RMB 511, 2 million hitting a record high and representing a increase of 68, 4% year over year.

Jeffrey Wang: At this time I would like to turn the conference over to Mr. Jeffrey Wang and best of relations director of Ya Jiang.

Dapeng Wang: At this time I would like to turn the conference over to Mr. Dapeng Wang, investor relations director of Ya Dao. Please go ahead. Thank you, operator. Please note the discussion today will continue forward-looking statements related to the future performance of the company, which are intended to qualify for the three-proper from liability, as established by the U.S, private security litigation reform act, sustainment and not guarantees of the future performance and a subject to certain risks and uncertainties in substance and other factors.

Operator: Please go ahead.

Speaker Change: This marks the seventh consecutive quarter of over 50% year over year growth driven.

Jeffrey Wang: Thank you, operator.

Jeffrey Wang: Please know the discussion today will continue forward-looking statements related to the future performance of the company, which are intended to qualify for the sleep harbor from lability, as established by the U.S. Private Security Litigation Reform Act, sustainment and not guarantees of the future performance, and a subject to certain risks and uncertainties, in substance and other factors. Some of these risks are beyond the company's control, and could cause actually doubts to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect U.S, business and financial results, is included in the certain company findings with the U.S.

Dapeng Wang: Some of these risks are beyond the company's control and could cause actually doubts to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect U.S, business and financial results is included in the certain company findings with the U.S. Securities and Exchange Commission. The company does not undertake any application to update this report or looking information, except as required by law.

Speaker Change: Driven primarily by our T. A real time, API and domestic kols ongoing robust performance with Archie revenue more than doubling year over year in Q2.

Speaker Change: Furthermore, as larger language models rapidly advance in the markets the demand for promoting these models.

Speaker Change: Their applications among Tech company does search our team seized this opportunity and is helping leading players like by dentist the cobalt.

Speaker Change: Pool and Baidu Ernie.

Speaker Change: In this area to grow their products in Q2, net revenues from AI tools and basement grew by more than 100% quarter over quarter.

Feng Zhou: Nevervenews from AI tools and investment grew by more than 100% quarter over quarter. Additionally, our advertising collaboration with NETI School has been advancing smoothly and demonstrating synergy. On one hand, Udau's data application significantly enhances the traffic monetization rate on a number of NETI's assets by over 100% in Q2. On the other hand, our improved advertising performance has attracted more netizens' product teams to use our service. In the second quarter, the percentage of our total advertising revenue from many as our clients increased around 3 percentage points quarter over quarter. It is still less than 10 percent of our total ad revenue, indicating significant future growth potential.

Speaker Change: Additionally.

Speaker Change: Our advertising collaboration with MIT Eastgroup has been advancing smoothly and demonstrating synergy.

Jeffrey Wang: Securities and Exchange Commission.

Jeffrey Wang: The company does not undertake any obligation to update this forward-looking information, except as required by law.

One hand, you dose data applications significantly enhances the traffic monies that station right on a number of net lease assets by over 100% in Q2.

Dapeng Wang: During today's call, management will also discuss certain non-gap financial measures for comparison purpose only. For the definitions of non-gap financial measures and reconcilations of non-gap financial results, please leave the 2024 second quarter financial result news release issued earlier today. As a reminder, this conference is being recorded.

Jeffrey Wang: During today's call, management will also discuss certain non-gap financial measures for comparison purpose only, for the definitions of non-gap financial measures and reconcilations of non-gap financial results.

Speaker Change: On the other hand.

Speaker Change: Our improved advertising performance has attracted more than that he is product teams to use our service.

Speaker Change: In the second quarter, the percentage of our total advertising revenue.

Jeffrey Wang: Please leave the 2024 second quarter financial result news release issued earlier today, as a reminder, this conference is being recorded.

Speaker Change: For Moody's as our clients increased around three percentage points quarter over quarter.

Jeffrey Wang: A webcast replay of this conference call will be available on U.S. Property Website at ir.u.com.

Operator: A webcast replay of this conference call will be available on UDOT's property website at ir.udot.com.

Speaker Change: It is still less than 10% of our total AD revenue, indicating.

Speaker Change: Significant future growth potential.

Jeffrey Wang: Join us today on the call from U.S.

Dapeng Wang: Join us today on the call from UDOT Senior Management, Dr. Feng Zhou, our Chief Executive Officer, Mr. Legend, our President, Mr. Peng Su, our VP of Strategy and Capital Markets, and Mr. Wayne Lee, a VP of Finance.

Feng Zhou: Providing the smart devices segment, the net revenues were RMB166.7 million in Q2, done 25 percent every year. The decline was in large part due to unfavorable product mix. In Q1, we updated our entry-level concern pain, so these reached record unit sales in Q2. In the meantime, our high-end products were from last year and reached the latter part of their life cycle in Q2. So high-end products had relatively lower sales. These factors net negatively impacted total device revenue and also average unit price for Q2. We expect Q2 to be the low point operationally for the device business this year.

Speaker Change: Regarding the smart devices segment. The net revenues were RMB $166 7 million in Q2.

Jeffrey Wang: Senior Management, Dr. Feng Zhou, our Chief Executive Officer, Mr. Legend, our President, Mr. Peng Su, our VP of Strategy and Capital Markets, and Mr. Wayne Lee, a VP of Finance.

Speaker Change: 125% year over year, the decline was in large part due to unfavorable product mix in Q1.

Speaker Change: We updated our entry level Dictionary pen. So these reached record unit.

Feng Zhou: I will now turn the call over to Dr. Zhou to review some of our recent highlights and strategic directions. Thank you, Jeffers, and thank you all for participating today's call. Before we begin, I would like to remind everyone that one numbers are based on the RIMB unless otherwise specifically stated. In the second quarter of 2024, net revenues reached RIMB 1.2 billion, growing 9.5 percent year over year. Operating cash inflow reached the record level of RIMB 250.2 million, an increase of 80.2 percent year over year.

Feng Zhou: I will now turn the call over to Dr. Zhou to review some of our recent highlights and strategic directions.

Speaker Change: Unit sales in Q2.

Speaker Change: The meantime, our heightened products were from last year and reached the latter part of there.

Feng Zhou: Thank you, Jeffers, and thank you all for participating today's call.

Speaker Change: Lifecycle in Q2, so high end products at relatively lower sales. These factors are not negatively impacted total device revenue and also average unit price for Q2.

Feng Zhou: Before we begin, I would like to remind everyone that all numbers are based on the RMB, unless otherwise specifically stated.

Feng Zhou: In the second quarter of 2024, net revenues reached RMB 1.3 billion, growing 9.5% over year.

Speaker Change: We expect Q2 to be the low point.

Feng Zhou: Operating cash inflow reached the record level of RMB 250.2 million, an increase of 80.2% over year.

Speaker Change: Operationally for the device business this year as.

Feng Zhou: As we are currently ramping up high-end products for the new school year. In fact, UDXNR pain was again the category top seller on JD.com during the June 18th shopping festival for the fifth consecutive year. And Q2 unit sales show a year-over-year increase of over 50 percent, broadening our brand's reach. More recently, we launched the new high-end UDXNR pain X7, large language model functions like AI translation and SPAI tutor, has already been now widely welcomed by users. First month sales units double those of X6 Pro, the high-end product really released. This week, we just released our top-of-the-line X7 Pro with a premium screen and more advanced AI features.

Speaker Change: As we are currently ramping up high end products for the New school year. In fact dictionary pen was again the category top seller on JD com during the June to June 18th shopping festival for the fifth consecutive year.

Feng Zhou: Lost from operations was RMB 72.6 million, as Q2 is typically seasonally weak in the bottom line, and in narrowed by 74.9% over year.

Feng Zhou: Lost from operations was RIMB 72.6 million. As Q2 is typically seasonally weak in the bottom line, and in narrowed by 74.9 percent year over year. In the first half of 2024, net revenues reached RIMB 2.7 billion, marking an increase of 14.5 percent The last one operations was RMB 42.6 million, narrowing 91.2% over year. Operating cash outflow was reduced to RMB 103.8 million, reflecting the improvement of 53.7% over year. The financial performance was in line with RMB.

Speaker Change: In Q2 unit sales show a year over year increase of over 50%.

Feng Zhou: In the first half of 2024, net revenues reached RMB 2.7 billion, marking an increase of 14.5% over year.

Speaker Change: Broadening our brands reach.

Speaker Change: More recently.

Speaker Change: We launched a new high end Dictionary Pen X seven.

Feng Zhou: Loss from operations was RMB 42.6 million, narrowing 91.2% every year.

Speaker Change: Language model functions like translation of this P a tutor.

Speaker Change: Already being widely welcomed by users first month's sales units doubled those of six.

Feng Zhou: Operating cash outflow was reduced to RMB 103.8 million, reflecting the improvement of 53.7% every year.

Speaker Change: Six the high end of products really released.

Speaker Change: This week, we just released our top of the line X seven probes with the premium screens and more advanced features it is gaining a lot of interest.

Feng Zhou: The financial performance was in line with our money.

Feng Zhou: Now, let's review the major development across our business lines in the second part. Net revenues from learning services were RMB 643.8 million, slightly done by 5.5% compared with the same period of last year. Digital content services maintained a healthy growth trajectory, achieving net revenues of RMB 403.3 million, up 6.8% over year. Operating cash inflows generated by digital content services exceeded RMB 200.000. Yodalling Shi continued to drive product upgrades and customer satisfaction.

Feng Zhou: Now let's review the major development across our business lines in the second part.

Feng Zhou: It is gaining a lot of interest.

Feng Zhou: Looking at our business as a whole, in the first half of this year, we executed on our overload strategy of AI plus education and made a significant progress in our journey. We focused our resources on three called businesses, digital content services, especially the dollar. Sure, online marketing services and AI-driven subscription services. All three areas show good growth, healthy economics, our unique competitiveness, and long future runways. And more importantly, they are key actors in our mission of helping every person learn more effectively. In the meantime, financially, we worked hard to drive towards sustainable profitability, which we believe is the foundation for our next phase of growth.

Speaker Change: Looking at our business as a whole.

Feng Zhou: Net revenues from learning services were RMB 643.8 million, slightly done by 5.5% compared with the same period of last year.

Speaker Change: In the first half of this year, we executed on our overall strategy of AI, plus education and made a significant progress in our journey.

Feng Zhou: Digital content services maintained a healthy growth trajectory, achieving net revenues of RMB 403.3 million up 6.8% every year.

Speaker Change: We focused our resources on three core businesses digital content and services, especially with all the truth.

Online marketing services and AI driven the subscription services all three areas show good growth healthy economies, our unique competitive competitiveness and long future run rates.

Feng Zhou: Operating cash inflows generated by digital content services exceeded RMB 200.000.

Feng Zhou: Yodalling Shi continued to drive product upgrades and customer satisfaction.

And more importantly, they are key assets in our mission of helping every person.

Feng Zhou: Firstly in Q2, we released over 400 newly healthily calibrated tiered learning videos for students of different levels.

Feng Zhou: Firstly, in Q2, we released over 400 newly-healthily calibrated tiered learning videos for students of different levels. We also significantly upgraded the class-based study experience for better motivation and context. As we discussed before, Ling Shi pioneered the approach of personalized pre-recorded video learning. Building upon this vast library of thousands of high-quality videos, we offer a set of important services, including automatic diagnosis of students' current learning levels, class-based digital learning, personalized quiz generation, and we can derive consultation with our experienced staff members. These are all key to the high effectiveness of our products, and we keep improving them every year.

Speaker Change: More effectively.

Speaker Change: In the meantime, financially we worked hard to drive towards sustainable profitability, which we believe is the foundation for our next phase of growth.

Feng Zhou: We also significantly upgraded the class-based study experience for better motivation and context.

Feng Zhou: I am pleased with the team's progress and solid execution. Our operational and financial metrics showed increased the competitiveness of our business. For example, in addition to the numbers I shared at the beginning, the ratio of sales and marketing expenses to net revenues was 35.8 percent in the first half of this year, done by approximately 13 percentage points here over here. A very good improve.

Speaker Change: I am pleased with the team's progress and solid execution.

Speaker Change: Operational and financial metrics showed increase the competitiveness of our business. For example in addition to the numbers I shared at the beginning the ratio.

Speaker Change: Sales and marketing expenses to net revenues was 35, 8% in the first half of this year done by approximately 13 percentage points year over year, a very good improvement looking ahead.

Feng Zhou: I'm looking ahead, borrowing unexpected market changes. We expect the business to achieve four-year positive operating income in the near future. Youdao's strength lies in our unique ability to advance AI empowerment across business lines, combining technical strength with operational excellence. The rapid development of our online marketing and AI subscription services will continue to drive our course. Our online courses underpinned by high-quality content, differentiated services, and unique ways of leverage in AI are another pillar of our future goals.

Speaker Change: Borrowing the unexpected market changes, we expect the business to achieve full year positive operating income in the near future.

Feng Zhou: Second, in terms of applications of AI and growth initiatives, we upgraded our college admission consultation services to the new AI college mission advisors. Using large language models, the AI advisor effectively discusses and guides students in their college application process, helping them in choosing universities and majors.

Speaker Change: <unk> strength lies in our unique ability to advance AI in apartments across business lines, combining technical strengths with operational excellence.

Speaker Change: Rapid development of our online marketing and subscription services prove this and we will continue to drive our growth.

Speaker Change: Our online courses underpinned by high quality content differentiated services and unique ways of leveraging our annul.

Feng Zhou: Since the new release, the service saw nearly 3 million pages rising by 30% over year, making it a key asset in attracting new students and parents.

Speaker Change: Other pillar of our future growth and the long term future of AI, plus education looks incredibly bright and we will strive to lead the charge.

Feng Zhou: In the long term, the future of AI plus education looks incredibly bright, and we will strive to lead the charge.

Feng Zhou: Continuous product and service upgrades significantly boosted the retention ratio of Yodali and Shi. Reaching over 70% in the second quarter, a record high, and an increase of more than 10% points over year.

Feng Zhou: Continuous product and service upgrades significantly boosted the retention ratio of Yodelling Shi, reaching over 70% in the second quarter, a record high, and an increase of more than 10% points over a year. In addition, as for Yodelling literature, we offer nearly 40,000 high-quality AI-righton refinements in the second quarter, improving our retention rate by approximately 10% points on a year-based basis.

Peng Su: With that, I will turn the call over to Supon to provide you with more detailed insights into our financial performance. Thank you.

Speaker Change: With that I will turn the call over to <unk> to provide you with more detailed insights into our financial performance. Thank you.

Speaker Change: Yes.

Peng Su: Thank you, Dr. Zhou, and hello, everyone. Today, I will be presenting some financial highlights around the second quarter of 2024, where you can calculate which were requested these years earlier today for further details. The second quarter, total net revenue will R&B 1.3 billion, or your dollar 181.9 million, representing a 9.5% increase from the same period of the 20th century. Net revenue from our online services will R&B 640.8 million, or US dollar 88.6 million, representing a 5.5% decrease from the same period of 20th century. Net revenue from our smart devices will R&B 166.7 million, or US dollar 22.9 million, down 25% from the same period of 20th century, which was mainly attributable to the decreased unit price due to the change of the product mix.

Speaker Change: Chuck will talk control Hello, everyone. So that there'll be presenting some financial highlights from the second quarter of 274 million.

Feng Zhou: In addition, as for Yodali literature, we offer nearly 40,000 high-quality AI-righton refinements in the second quarter, improving our retention rate by approximately 10 percentage points on a year-based basis.

In country able to withdraw cash at least you saw earlier today for further details.

Speaker Change: The second quarter total net revenue were RMB, one 3 billion.

Speaker Change: 181.9 million, representing a 19, 5% interest for all the computer is also tied to penetrate that.

Feng Zhou: Next is learning services segment.

Feng Zhou: Next is learning services segment, which is our AI driven subscription service. In the second quarter, our AI-driven subscription services maintained rapid growth with total sales of passing RMB 60 million, marking a nearly 200% year-over-year increase in over 30% quarter-over-quarter growth. Over, this represents the six consecutive quarters of over 50% year-over-year growth.

Speaker Change: Revenue from our learning services were RMB, 643, 8 million or U S. Dollar 88, 6 million, representing a five 5% decrease from the same period, all the 20th century.

Feng Zhou: This is our AI driven subscription service.

Feng Zhou: In the second quarter, our AI-driven subscription services maintained rapid growth. With total sales surpassing RMB 60 million, marking a nearly 200% year-over-year increase, and over 30% quarter-over-quarter growth. Moreover, this represents the six consecutive quarters of over 50% year-over-year growth.

Speaker Change: Net revenue from our smart watches were RMB 166 planes Havent made it well you're a scholar plenty to 0.9 meter down.

Speaker Change: <unk> 25 per cent in front of the same pure write off 100 Street, which was mainly attributable to the decrease unit price due to the change of Oxycodone product mix.

Peng Su: Net revenue from our online marketing services will R&B 512.2 million, or US dollar 70.3 million, representing a 68.4% increase from the same period of 20th century. The increase was primarily due to the increased sales of the performance-based advertisement, to the third-party internet properties, which were driven by our continuing investment in the cutting-edge AI technology. For the second quarter, our total gross profit was R&B 636.8 million, or US dollar 87.6 million, representing a 12.3% increase from the second quarter of 20th century. What smarter for learning services was 60% for second quarter of 20th century. Compare with 57.4% for the same period of the 20th century.

Speaker Change: Net revenue from online marketing services were RMB 500, and that you would have been 22 minutes.

Feng Zhou: Otherwise, in June, we launched a major new mobile app, Mr. P, AI Tutor. The first ARM subject, AI Tutor in China, and it received a positive feedback from users after its initial integration into UDOT dictionary pen earlier this year. Second, AI translation in UDOT dictionary translation now supports languages other than English and Chinese. There is also new support for on-term databases and multi-model document input. These upgrades pushed AI translation usage to exceed 30 million times in Q2.

Feng Zhou: Otherwise, in June, we launched a major new mobile app, Mr. P, AI Tutor. The first all-subject AI tutor in China, and it received a positive feedback from users' after its initial integration into UDOT dictionary pen earlier this year.

Speaker Change: Seven people in front of me that representing about 68, 4% increase from the same here at often times right.

Speaker Change: Increase was primarily due to the increased sales also performance based advertisement.

Speaker Change: It was a third party internet properties, which was driven by our continuing investment in cutting edge technology.

Feng Zhou: Second, AI translation in UDOT dictionary translation now supports languages other than English and Chinese. There is also new support for on-term databases and multi-model document input.

Speaker Change: For the second quarter, our total gross profit was RMB $636 8 million dollar.

Speaker Change: 7.6 minutes.

Speaker Change: Presenting a 12, 3% an increase from the second quarter alternatives right.

Speaker Change: Gross margin for learning services was 60% for second quarter, often painful compared with 57, 4% for the central office and penetrate.

Feng Zhou: These upgrades pushed AI translation usage to exceed 30 million times in Q2.

Feng Zhou: Third, in collaboration with NETI's Cloud Music, UDOT dictionary introduced a music sentence feature in a second quarter, helping users learn vocabulary while listening to music.

Feng Zhou: Third, in collaboration with NETI's Cloud Music, UDOT dictionary introduced a music sentence feature in the second quarter, helping users learn vocabulary while listening to music. Last but not least, high echo introduced the children mode, offering tailored topics for children, child-friendly digital avatars, and generating exclusive post-convitation reports to eight children in improving their English speaking skills. We are also delighted to observe that the average usage time of children mode is nearly twice that of other modes, highlighting its effectiveness in engaging and retaining users as well as enhancing their English proficiency.

Peng Su: what smarter for smart devices was 30.3% for the same quarter of 20th century. Compare with 35.8% for the same period of the 20th century. What smarter for online marketing services was 39.1% for the same quarter of 20th century. Compare with 31.9% for the same period of the 20th century. For second quarter, we reduced our total operating expense to R&B 699.3 million, or US dollar 97.6 million. Compare with R&B 856.3 million for the same period of last year. Looking at our expense in more detail, sales and marketing expense declined to the R&B 515.7 million. Compare with R&B 587.7 million in the second quarter of 20th century.

Speaker Change: Gross margin for smart glasses, what's the three 3% for the second quarter of 204, compared with 35, 8% for the same people or adult type of injury.

Speaker Change: Gross margin for online marketing services was 39, 1% for the second quarter of 'twenty 'twenty, four compared with 31, 9% and it wasn't shipyard on the 20th century.

Feng Zhou: Last but not least, high-equals introduced the children mode, offering tailored topics for children, child-friendly digital avatars, and generating exclusive post-convitation reports to eight children in improving their English speaking skills.

Speaker Change: For the second quarter, we reduced our total operating expense to RMB 691, 3 million or U S. Dollar 97, 6 million compared with RMB $856 3 million for the same period of last year.

Feng Zhou: We are also delighted to observe that the average usage time of children mode is nearly twice that of other modes, highlighting its effectiveness in engaging and retaining users, as well as enhancing their English proficiency.

Speaker Change: Looking at all expense in more detail.

Speaker Change: Marketing expense declined to the RMB $515 7 million compared with RMB 587.7 million in the second quarter of three research and development expense.

Feng Zhou: Our online marketing service segment maintained a strong growth trajectory in Q2, with NETI's reaching RMB 511.2 million, pitting a record high and representing an increase of 68.4% over year. This marks the seventh consecutive quarter of over 50% over year growth. Children primarily by RTA, real-time API, and domestic KOL's ongoing robust performance, with RTA revenue more than doubling year over year in Q2. Furthermore, as large language models rapidly advance in the market, the demand for promoting these models and their applications among tech companies as searched.

Feng Zhou: Our online marketing service segment maintained a strong growth trajectory in Q2, with NETI's reaching RMB 511.2 million, hitting a record high and representing an increase of 68.4% over year. This marks the seventh consecutive quarter of over 50% over year growth.

Peng Su: Research and theoretical expense were decreased to R&B 153 million. Or compared with R&B 251.1 million in the same quarter of the 20th century. or operating loss margins, also significantly narrowed to 5.5% in the second quarter of 2004, compared with 24% for the same period of last year. For the same quarter of the 2024, we narrowed our net loss attributable to other net shareholders to R&B 99.5 million, or US dollar 13.7 million, compared with R&B 299.2 million for the same period of last year. NONCAP net loss attributable to the ordinary shareholders for the same quarter was R&B 96 million, or US dollar 13.2 million, compared with R&B 283.6 million for the same period of last year.

Speaker Change: <unk> decreased to RMB 153 million.

Speaker Change: Compared with RMB 205 point about minutes in the same quarter of 20th century.

Speaker Change: Our operating loss margin also significantly narrowed to 525% in the second quarter of four compared with plenty of Photoshop for the same here on velocity.

Feng Zhou: Children primarily by RTA, real-time API, and domestic KOL's ongoing robust performance, with RTA revenue more than doubling year-rearing future.

Speaker Change: [noise] for the same quarter of 'twenty 'twenty four we narrowed our net loss attributable to ordinary shareholders too.

Speaker Change: B 99.5 minutes or less dollar 13 point Southern Plains haven't made it compared with RMB $299 2 million for the same period last year.

Feng Zhou: Furthermore, as large language models rapidly advance in the market, the demand for promoting these models and their applications among tech companies has searched.

Speaker Change: Net loss attributable to the ordinary shareholders for second quarter was RMB $96 million subsequent to a minute compared with RMB $283 6 million for the same here over the last year.

Feng Zhou: Our team sees this opportunity and is helping leading players like Biden's football, Liverpool, and Baidu Ernie in this area to grow their products in Q2. Nevervenews from AI tools and investment grew by more than 100% quarter over quarter. Additionally, our advertising collaboration with NETI school has been advancing smoothly and demonstrating synergy. On one hand, Udau's data application significantly enhances the traffic monetization rate on a number of NETI's assets by over 100% in Q2.

Feng Zhou: Our team sees this opportunity and is helping leading players like Biden, Stobal, TruPoo, and Baidu Ernie in this area to grow their products in Q2.

Peng Su: Basic and diluting net loss with ADS attributable to the ordinary shareholders for the same quarter of 2024 was R&B 0.85, or US dollar 0.12. NONCAP basic and diluting net loss attributable to the ordinary shareholders for the same quarter was R&B 0.2, or US Dollar 0.11. Our net cash, provided by the operating activity, was R&B 250.2 million for US dollar 34.4 million for the same quarter. Looking at our balance sheet, as of June 30, 2024, our contract liability, which mainly consists of the deferred revenue generated from our net services, R&B 1 billion, US dollar, 142.9 million, compared with R&B 1.1 billion as of December 31, 2023.

Speaker Change: Basic and diluted net loss play E D S attributable to ordinary shareholders for the second quarter of 'twenty 'twenty four with RMB 0.50 U S dollar Euro playing one two.

Feng Zhou: Nevervenews from AI tools and investment grew by more than 100% quarter over quarter.

non-GAAP basic and diluted net loss per ads attributable to ordinary shareholders for the same quarter was RMB the old plant into a U S dollar euro going along well.

Feng Zhou: Additionally, our advertising collaboration with NETI's group has been advancing smoothly and demonstrating synergy. On one hand, Yodau's data application significantly enhances the traffic monetization rate on a number of NETI's assets by over 100% in Q2.

Speaker Change: Our net cash provided by operating activity.

Speaker Change: It's RMB 252 minutes will get smaller it's critical acclaim for me to put a fine quarter.

Speaker Change: That helped balance sheet.

Feng Zhou: On the other hand, our improved advertising performance has attracted more netizens' product teams to use our service. In the second quarter, the percentage of our total advertising revenue from many as our clients increased around 3 percentage points quarter over quarter. It is still less than 10 percent of our total ad revenue, indicating significant future growth potential.

Speaker Change: That's after June 30 timeframe for all contract liabilities, which are mainly consist of 34 revenue generate from old and new services.

Speaker Change: Can be lumpy and it was below $142 9 million compared with RMB 1.1 billion, absolutely sound for 31st the pantry and sweet.

Peng Su: At the end of the period, our cash, cash equivalent, current and the non-current with 3 cash, time deposit and short-term investment total R&B 268.5 million, or US dollar, 78.2 million.

At the end of the period, our cash cash equivalents current and non current restrict cash term deposits and short term investment totaled RMB 568 25 minutes.

Speaker Change: 78 2 million.

Feng Zhou: Providing the smart devices segment, the net revenues were RMB 166.7 million in Q2, done 25 percent every year.

Feng Zhou: Providing the smart devices segment, the net revenues were RMB166.7 million in Q2, done 25 percent every year. The decline was in large part due to unfavorable product mix. In Q1, we updated our entry-level concern pain, so these reached record unit sales in Q2. In the meantime, our high end products were from last year and reached the latter part of their life cycle in Q2. So high end products had relatively lower sales.

Peng Su: This concludes our prepared remarks. Thank you for your attention.

Speaker Change: This concludes our prepared remarks, some people's attention, we would now like to open the call to your questions. Operator. Please go ahead.

Operator: We would now like to open the call to your questions.

Operator: Operator, please go ahead. Thank you.

Speaker Change: Thank you we will now begin the question and answer session.

Feng Zhou: The decline was in large part due to unfavorable product mix.

Operator: We will now begin the question in the answer session. To ask a question, you may press stars and one on your touchcam phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If you would throw your question, please press star, then two.

Feng Zhou: In Q1, we updated our entry-level concern pain, so these reached record unit sales in Q2.

Speaker Change: Good question you May Press Star then one on your Touchtone phone if you are using a speaker phone.

Speaker Change: Please pickup your handset before pressing the keys.

Feng Zhou: In the meantime, our high-end products were from last year and reached the latter part of their life cycle in Q2. So high-end products had relatively lower sales. These factors negatively impacted total device revenue and also average unit price for Q2. We expect Q2 to be the low-point operationally for the device business this year, as we are currently ramping up high-end products for the new school year.

Speaker Change: It was strong as your question. Please press Star then two at this time, we will pause for amendment to assemble our roster.

Operator: At this time, we will pause for a moment to assemble our roster.

Feng Zhou: These factors net negatively impacted total device revenue and also average unit price for Q2. We expect Q2 to be the low point operationally for the device business this year. As we are currently ramping up high end products for the new school year. In fact, UDXNR pain was again the category top seller on JD.com during the June 18th shopping festival for the fifth consecutive year. And Q2 unit sales show a year-over-year increase of over 50 percent, broadening our brand's reach.

Brian Gong: Our first question today will come from Brian Gomb of City. Please go ahead. Thanks, Management, for picking that question.

Speaker Change: Our first question today will come from Brian Gong of Citi. Please go ahead.

Speaker Change: Thanks management for taking my question.

Brian Gong: I have a question regarding our strategy education sector. So, as we observed, competitors are working out their investment in the whole sector, right? Education sector, given the inclusive body competition, what is our strategy? Thank you.

Brian Gong: I have a question regarding our strategy.

Speaker Change: Patient sector, so well absorbed competitors are ramping up there in Washington in the whole sector right under patient sector, even though it can be quite a cup of tea.

Feng Zhou: In fact, Yido Dixinary Pain was again the category top seller on JD.com during the June 18th shopping festival for the fifth consecutive year.

What is our strategy. Thank you.

Feng Zhou: In Q2, unit sales show a year-over-year increase of over 50 percent, broadening our brand's reach.

Peng Su: Thank you, Brian. This is the phone.

Speaker Change: Brian This is Paul I will handle the question first and before also questions I'd be all people very quick backhaul regarding arms are advocating a scenario in China.

Peng Su: I will hand over the question first. Before answering questions, I will give a quick background regarding the education scenario in China. If you see the number of candidates registered for the college entrance exam has been increased from roughly 10 minutes in 2019 to over 30 minutes in this year. is likely to keep increasing in the next decades as well. Also, the exam is getting more competitive. The overall college entrance exam score line has been shown as the upper trend. Taking the example as the intending, it has been increased by more than 70 points compared to the 2019.

Feng Zhou: More recently, we launched the new high-end Yido Dixinary Pain X7, large language model functions like AI translation and SPAI tutor, as already being now quietly welcomed by users.

Feng Zhou: More recently, we launched the new high end UDXNR pain X7, large language model functions like AI translation and SPAI tutor, has already been now widely welcomed by users. First month sales units double those of X6 Pro, the high end product really released. This week, we just released our top-of-the-line X7 Pro with a premium screen and a more advanced AI features. It is gaining a lot of interest.

Speaker Change: And if you'll see the numbers off the candidates we've got historical college entrance exam.

Has been increased from roughly 10 minutes in the 2019 or 30 minutes in this year.

Feng Zhou: First month, high-end products released. This week, we just released our top-of-the-line X7 Pro with a premium screen and a more advanced AI features. It is gaining a lot of interest.

Speaker Change: Likely it will keep increasing in the next decades.

Speaker Change: Also the exam is getting more competitive so overall college entrance exam score line has been neutral as the upward trend picking.

Speaker Change: Sticking to.

Feng Zhou: We're looking at our business as a whole.

Feng Zhou: Looking at our business as a whole, in the first half of this year, we executed on our overload strategy of AI plus education and made a significant progress in our journey. We focused our resources on three called businesses, digital content services, especially the dollar. Sure, online marketing services and AI-driven subscription services. All three areas show good growth, healthy economics, our unique competitiveness and long future runways. And more importantly, they are key actors in our mission of helping every person learn more effectively.

Speaker Change: <unk> in Tianjin It has been increased by more than 770 points 70 points compared to the 2019.

Feng Zhou: In the first half of this year, we executed on our overload strategy of AI plus education, and made a significant progress in our journey. We focused our resources on three call businesses, digital content services, especially the Dalgonshire online marketing services, and AI-driven subscription services. All three areas show good growth, healthy economics, our unique competitiveness and long future runways.

Peng Su: So we think about the demand for the college entrance exam preparations; we are continuing to rise.

Speaker Change: So we think of all the demand for the college entrance exam preparation they'll continue to rise.

Peng Su: If we go back to questions, we do see the competition intensify moderately for the pre-colleid learning services in this year. That's understandable given the current market conditions. I believe we have the necessary means to continue to invest to be still keeping to the speed, living player here and benefit from the more dynamic market. The first thing we do is we will continue to drive the customer satisfaction and retention. We have already have the industry leading satisfaction and retention rate. During the first half of this year, our retention rate is very high in Q2, exceeding about 70 percent and representing a year-over-year increase of over 10 percent.

Speaker Change: But if you go back go back to a question we do FIFA.

Speaker Change: It's a combination of intensifying moderately for the pre call it running services in this year.

That's understandable given the current market conditions I believe we have to and that's what we managed to continuously about visa to visa.

Feng Zhou: And more importantly, they are key in our mission of helping every person learn more effectively.

Speaker Change: Two to be still people keeping keeping into the suite, leading play out here and the benefit problems, but more dynamic markets.

Speaker Change: So first thing we do we do we should we will still continue to drive customer satisfaction and retention will have already have the industry, leading satisfaction and retention rates.

Feng Zhou: In the meantime, financially, we worked hard to drive towards sustainable profitability, which we believe is the foundation for our next phase of growth.

Feng Zhou: In the meantime, financially, we worked hard to drive towards sustainable profitability, which we believe is the foundation for our next phase of growth. I am pleased with the team's progress and solid execution. Our operational and financial metrics showed increased the competitiveness of our business. For example, in addition to the numbers I shared at the beginning, the ratio of sales and marketing expenses to net revenues was 35.8 percent in the first half of this year, done by approximately 13 percentage points here over here.

Feng Zhou: I am pleased with the team's progress and solid execution.

Speaker Change: During the first half of this year or we'd have to reach would be shocked if you recall in Q2 exceeding about 70% and representing a year over year increase after all of our 10%.

Feng Zhou: Our operational and financial metrics showed increased competitiveness of our business. For example, in addition to the numbers I shared at the beginning, the ratio of sales and marketing expenses to net revenues was 35.8 percent in the first half of this year, done by approximately 13 percentage points here over here.

Peng Su: Asking the death matrix is a testament to the users' recognizations of our products and services. Secondly, we think we will continue to produce outstanding learning results as long as we have already helped the students get the good results and get into their dream university and school. Most students will come to us, and they will look at our results from the last year and this year. We are almost more than double the number of the students getting into the top schools and universities in this year. I think that is the important thing that can help us to build up our reputations in the market.

Speaker Change: Asking but that's matrix test them are testaments to the users recommendations after all products I'm sorry, Richard.

Speaker Change: Secondly, we think we will continue to produce outstanding learning results. That's what all has to be.

Speaker Change: I'd already helps students Gaslog was the result of trying to get into the <unk> University in school.

Feng Zhou: A very good improve.

Feng Zhou: A very good improve. I'm looking ahead, borrowing unexpected market changes. We expect the business to achieve four-year positive operating income in the near future. Youdao's strength lies in our unique ability to advance AI empowerment across business lines, combining technical strength with operational excellence. The rapid development of our online marketing and AI subscription services will continue to drive our course. Our online courses underpinned by high-quality content differentiated services and unique ways of leverage in AI are another pillar of our future goals.

Speaker Change: Most people don't have you all come.

Speaker Change: Come to us and <unk>.

Speaker Change: Look at how our results from the last year and this year.

Speaker Change: We are almost more than doubled the number of students get into the top schools and universities in this year.

I think that that's it's the important thing that's going to help us to build up all our reputation in the market.

Jeffrey Wang: [inaudible] Wang.

Peng Su: I think this is possible because I think you are not ensuring pioneers format of our classes, the AI plus content and the comprehensive service models. I think that is pretty innovative and creative, and the proven learning methodologies for the college entrance exam preparation and the others. Third, we think we are applying more AI technology or business such as the segments that have been mentioned previously, like the AI queries recommendation and the AI-based college admissions advice. Services. In Q2, our AI college application advisor generates nearly 60,000 applications for roughly a 30% increase over year. Positioning, I think we believe that this will be the leading one in the market in this year.

Speaker Change: I think that that's Oh this is possible because I think you're the only true pioneers format helpful cautious.

Speaker Change: POS content and the comprehensive your service model I think that's pretty innovative creative and approved problems or learning methodologies for the college entrance exam preparation.

Feng Zhou: In the long term, the future of AI plus education looks incredibly bright, and we will strive to lead the charge.

Speaker Change: And the others.

Speaker Change: So how do we think so we are applying a more technology in our business.

Speaker Change: As the.

Peng Su: With that, I will turn the call over to Supon to provide you with more detailed insights into our financial performance. Thank you. Thank you, Dr. Zhou, and hello, everyone.

Speaker Change: The settlements that have been mentioned in the previously.

Speaker Change: Previously previously liked the yeah. It creates a recommendation and yeah basically college admissions at wise.

Speaker Change: Services.

Speaker Change: In Q2, our Air College application adviser generates nearly 60000.

Peng Su: Today, I will be presenting some financial highlights around the second quarter of 2024, where you can calculate which were requested these years earlier today for further details. The second quarter, total net revenue will R&B 1.3 billion, or your dollar 181.9 million, representing a 9.5% increase from the same period of the 20th century. Net revenue from our online services will R&B 640.8 million, or US dollar 88.6 million, representing a 5.5% decrease from the same period of 20th century.

Application pool.

Speaker Change: Roughly 40% increase year over year.

Speaker Change: Positioning I think we'd be the eve with athletes.

Speaker Change: He is a leading world leading one in the market in this year.

Peng Su: I think that shows the AI can bring us the privilege over the market.

Speaker Change: I think that shows the kind of what's causing that can bring us the privilege or the market.

Peng Su: The first one we think we will keep innovating and advancing in the market as well. We will continue to strengthen our market channels and branding development, providing a veteran integrated experience for the users through our online and offline coordination. This year, through the months of such as each other video accounts, the vision should be in hot. We have enhanced the localized life, broadcast, and the operators, the operators to provide the users with a range of localization services, and the highly customer services in the different stages. We will fully leverage our teaching strengths and IT operational experience to enhance our online customer acquisitions.

Speaker Change: The first one so first of all we think we've got to keep innovating and investing in the market terrestrial.

Speaker Change: We will continue to strengthen our market channels and our branding developed much providing a battery integrated experience for the users so well online and offline coordination.

Peng Su: Net revenue from our smart devices will R&B 166.7 million, or US dollar 22.9 million, down 25% from the same period of 20th century, which was mainly attributable to the decreased unit price due to the change of the product mix. Net revenue from our online marketing services will R&B 512.2 million, or US dollar 70.3 million, representing a 68.4% increase from the same period of 20th century. The increase was primarily due to the increased sales of the performance based advertisement, to the third-party internet properties, which were driven by our continuing investment in the cutting edge AI technology.

Speaker Change: D. C are so it was a mess all such as what we try to we do our comps so vision Chapin Hall.

Speaker Change: Hence the localized for life Brookhouse and operates.

Speaker Change: The operator will provide users with a range of localization services.

Speaker Change: The highly customer services.

In the different cities.

Speaker Change: Maybe I'll fully elaborate trial with teaching strengths and operational experience and enhance our online customer acquisition.

Jeffrey Wang: Thank you, Mr. Wang.

Peng Su: Competitors, and the reduced customer acquisition cost, I think as well we will persist in exploring offline service and opportunities, and looking for the better chance to invest into their market.

Speaker Change: Competitive and reduce customer acquisition costs.

I think as well, we will assist us in exploring offline for risks and opportunities and are looking for the better chance to invest into that market.

Peng Su: For the second quarter, our total gross profit was R&B 636.8 million, or US dollar 87.6 million, representing a 12.3% increase from the second quarter of 20th century. [inaudible] For second quarter, we reduced our total operating expense to R&B 699.3 million, or US dollar 97.6 million. Compare with R&B 856.3 million for the same period of last year. Looking at our expense in more detail, sales and marketing expense declined to the R&B 515.7 million. Compare with R&B 587.7 million in the second quarter of 20th century. Research and theoretical expense were decreased to R&B 153 million. Or compared with R&B 251.1 million in the same quarter of 20th century.

Peng Su: I think above all, and we think that we are confident about the future of the online service and service. We think in the long run, definitely the high quality products will always be the answer for the competitive market. I think that.

Speaker Change: I think above all.

Speaker Change: Absolutely.

Speaker Change: If you didn't have a few charging off the Australian dollar tree business not service with maintains a longwall definitely its a high quality products with all of this will be the answer for the for the for the competitive market.

Jeffrey Wang: [inaudible] Wang.

That's it.

Peng Su: Thank you.

Speaker Change: Thank you.

Feng Zhou: Yeah, let me add a point. So I think what's the most important thing is the product. In the end, it's about how well you understand the customers and how to best satisfy the customers' needs. We think our teams are very good at this, because things are, and it's a previous, it's a predecessor. I have been a long-running business at your DAW. I've been doing it for eight years already. And within the process, we actually innovated several times, so the current AI plus prerecorded video plus comprehensive service model, it was introduced in 2021, so it was a big change.

Speaker Change: Yeah.

Speaker Change: Let me add a point or so.

Speaker Change: I think the what's the most important thing is the product in.

Speaker Change: And it's about how well you understand the customers and then.

Jeffrey Wang: Thank you, Mr. Wang.

Speaker Change: How to best to satisfy the customers' needs. So we think we're our teams are very good at this.

Because things here and there.

Speaker Change: Previous it's criticized sure.

Wayne Lee: [inaudible] Or Pritin Lo Smaritan, also significantly narrower to 5.5% in the second quarter of 2024, compared with 24% for the same period of last year.

Speaker Change: I've been a long running business not to adopt <unk> been doing it for.

Speaker Change: Two years already yeah, so and we.

Speaker Change: Within the process, we actually innovated several times so.

Speaker Change: The current.

Speaker Change: Plus pre recorded its if you do plus comprehensive service model.

Speaker Change: Was introduced in.

Speaker Change: 2021, so it was a big change but.

Feng Zhou: But if you think about it, it really makes a lot of sense, because for students preparing for college entrance exam, what they really lack is they lack a lot of free time. So the traditional life course format is not such a good fit, so the team has actually been preparing for the change for a year at that time, and the market condition in 2021 pushed the team to make the leap, and that's why we've been able to grow the business several times since then. So I think that proves the innovation capability of our teams, and I expect the links to team to keep innovating and keep loving what they do.

Speaker Change: If you think about it it really makes a lot of sense.

Peng Su: Wang, Feng Zhou, Jeffrey Wang, Dapeng Gong, Wang, Dapeng Gong, Wang, Dapeng Gong, Wang, Dapeng Wang, Dapeng Gong,[inaudible] Wang Wang Wang Wang is likely to keep increasing in the next decades as well. Also, the exam is getting more competitive. The overall college entrance exam score line has been shown as the upper trend. Taking the example as the intending, it has been increased by more than 70 points compared to the 2019. So we think about the demand for the college entrance exam preparations we are continuing to rise.

Speaker Change: Four.

Speaker Change: For students preparing for college entrance exam.

Wayne Lee: For the same quarter of the 2024, we narrow our net loss attributable to other net share holders to RMB 99.5 million, or US dollar, 13.7 million, compared with RMB 299.2 million for the same period of last year. Nungcap net loss attributable to the ordinary share holders for the second quarter was RMB 96 million, or US dollar, 13.2 million, compared with RMB 283.6 million for the same period of last year.

Speaker Change: What the.

Speaker Change: What they really like is the lack of a lot of free time so.

Speaker Change: Traditional life Cos format.

Speaker Change: <unk> is not such a good fit so that the team.

Speaker Change: Hum.

Speaker Change: Actually you had actually been preparing for the change for for a year at that time and that the.

Speaker Change: The market condition in 'twenty, two one pushed the team to make the leap and that's why we've been able to grow the business cycle times since since since then so.

Wayne Lee: Basic and diluting net loss with EDS attributable to the ordinary share holders for the second quarter of 2024 was RMB 0.85, or US dollar 0.12.

Speaker Change: I think that's.

Speaker Change: Proves the innovation capability of our teams.

Wayne Lee: Nungcap basic and diluting net loss attributable to the ordinary share holders for the same quarter was RMB 0.2, or US dollar 0.11.

Speaker Change: I expect to the leadership team to keep innovating and keep loving what they do.

Wayne Lee: Our net cash, provided by the operating activity, was RMB 250.2 million, or US dollar 34.4 million, for the same quarter.

Feng Zhou: That is what the net ease and your DAW culture is, and what makes up good at making high quality content. So I think that's the most important thing; we'll keep improving the product and serve the customer better.

Speaker Change: Yeah that is.

Speaker Change: The.

Speaker Change: Net eased in your dog culture.

Speaker Change: Piece and what makes up good at.

Wayne Lee: Looking at our balance sheet, as of the 2030-2024, or contract eligibility, which mainly consists of the different revenue generated from our net services, who are RMB 1 billion, US dollar, 142.9 million, compared with RMB 1.1 billion as of December 31, 2023. At the end of the period, our cash, cash equivalent, current and the non-current with street cash, time deposit and short-term investment total RMB 268.5 million, or US dollar 78.2 million.

Speaker Change: <unk> high quality content so.

Speaker Change: I think that's the most important thing, we'll keep Uh huh.

Speaker Change: Improving the product and serve the customer better.

Feng Zhou: Thank you.

Speaker Change: Thank you.

Feng Zhou: Thank you, Zobo.

Speaker Change: Thank you.

Li Peng Zhao: The next question will come from Li Peng Zhao of CICC.

The next question will come from Liping Zhao TICC. Please go ahead.

Li Peng Zhao: Please go ahead.

Li Peng Zhao: Good evening, Dr. Zhou. Steps for taking my questions. Your online marketing business, so very strong, revenue growth in the first half of the year. Could you please tell what's the outlook of this business in the second half of the year?

Speaker Change: Good evening, Dr. Joseph <unk>.

Liping Zhao: For taking my question.

Speaker Change: Online marketing business saw very strong revenue growth in the first half of the year.

Wayne Lee: This concludes our prepared remarks.

Wayne Lee: Thank you for your attention.

Operator: We would now like to open to call to your questions.

Speaker Change: Can we I could.

Operator: Our creator, please go ahead.

Speaker Change: Could you please.

So what's the outlook.

Operator: Thank you.

Operator: We will now begin the question in the answer session.

Speaker Change: Business in second half of the year. Thank you.

Lei Jin: Thank you.

Operator: To ask a question, you may press stars and ones on your touch phone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.

Speaker Change: Okay.

Lei Jin: Hi, this is Lei Jin. For the second half of the year, our outlook for online marketing services remains positive. They have seen a net revenue growth; they could discriminate from around the R&B 200 million per quarter to over R&B 500 million in total of this year. This marks seven consecutive cultures of year-over-year net revenue growth exceeding 50%. Alongside continuous improvement in profitability, they cited year-over-year revenue growth to continue through the second half of this year.

Lincoln: Hi, This is Lincoln.

Speaker Change: For the second half of the year, our auto Mughal for online marketing and services remains positive.

Operator: You would throw your question, please press star then two.

Speaker Change: They haven't seen a nice revenue growth it gives us far more around the RMB 200 million Paul called her.

Operator: At this time, we will pause for a moment to assemble our roster.

To over RMB 500 million in Q2 of this year. This is marvin for seven consecutive quarters of year over year revenue growth exceeding 50%.

Brian Gong: Our first question today will come from Brian Gomm of City.

Speaker Change: Alongside a continuous.

Brian Gong: Please go ahead.

Speaker Change: The improvement in profitability.

Brian Gong: Thanks, management for picking up questions.

Speaker Change: The year over year revenue growth to continue through the second half of this year.

Brian Gong: I have a question regarding our strategy education sector.

Peng Su: So as we observed, competitors are wrapping up their new washrooms in the whole sector, right?

Lei Jin: Several key sectors are trading; this is the sustainable growth. First, our R&B data accumulation, advanced AI algorithms and deeper understanding of customer demand, from the congress stones of our long-term competitive needs. Actually, continuously collecting the speed data into our data management platform, the MP. We achieved more accurate production, better decision-making, and more refined online marketing services tailored to your needs.

Several key factors driving this growth.

Speaker Change: First our member data accumulation of the lungs.

And deep understanding of customer demand.

Speaker Change: The Congress sponsor our longtime a common type of neighborhood.

Peng Su: Education sector.

Speaker Change: That's the way you continuously collect honestly the data you can talk about this amendment amended up asphalt the empty.

Speaker Change: They are achieved a more accurate prediction better decision, making and a more refined online marketing and services tailored to their needs.

Peng Su: Given the inclusive body competition, what is our strategy?

Lei Jin: Second, our extension to an overseas advertising has been a significant growth driver. We offer to claim comprehensive and personalized international advertising services, including grant communication, global KRL marketing, overseas AD placement, and live streaming commerce. Leveraging our deep understanding of climate needs, we have a accelerated development of international advertising infrastructure. At the end of the Q2, our international KRL database has received a 7 million year-over-year increase of over 200%. Based on Q2 natural revenue from international performance-based advertising to nearly R&B 100 million, a growth rate of about 30 percentage points higher than in Q1. In this second half, we will continue to capitalize on the growing demand from Chinese companies, looking to expand internationally.

Speaker Change: Second our expansion pool.

Speaker Change: These are the words.

Peng Su: Thank you.

Skyler: Hi, there hasn't been a figured independent girl Skyler.

Speaker Change: They offer the client comprehensive and personalized with the international advertising services, including Glenda communication Globo carry out marketing overseas ATM placement nine live streaming e-commerce.

Peng Su: Thank you, Brian.

Peng Su: This is the poem.

Peng Su: I will hand over the question first.

Speaker Change: Leveraging our deep understanding of client needs.

Speaker Change: Oh, sorry, Oh consolidate the development.

Peng Su: And before answering questions, I will give a quick background regarding the education scenario in China.

Speaker Change: The national advertising in that structure.

Speaker Change: The end of Q2, our international choral database hi.

Peng Su: If you see the number of candidates registered for the college entrance exam, has been increased from roughly 10 minutes in 2019 to over 30 minutes in this year, is likely to keep increasing in the next decades as well.

Speaker Change: You see either.

Speaker Change: 7 million a year over year increase of over 200%.

Peng Su: Also, the exam is getting more competitive.

Speaker Change: They stopped Q2.

Speaker Change: Revenue from international performance based advertising into nearly RMB 100 million a growth rate of about 330 percentage points higher than in July.

Peng Su: The overall college entrance exam score line has been shown as the upper trend.

Speaker Change: In this second half.

Speaker Change: We will continue to come to light.

Speaker Change: The growing demand from Chinese companies looking to expand in fact internationally.

Peng Su: Taking the example as the intending, it has been increased by more than 70 points compared to the 2019.

Lei Jin: First, the sustainable development of our international advertising efforts. Third, our collaboration with 90 schools has been mutually beneficial. In Q2, your data application significantly improved the management of advertising in the rate by over 100% of 90 schools started. In return, netizens will provide us with more comfortable and predictable traffic resources. Moving forward, we will keep upgrading our algorithm and BMP platform to enhance our AI-driven data capabilities, improve advertising efficiency, and boost revenues.

Peng Su: During the first half of this year, our retention rate is very high in Q2 exceeding about 70 percent and representing a year-over-year increase of the over 10 percent. Asking the death matrix is a testament to the users' recognizations of our products and services. Secondly, we think we will continue to produce outstanding learning results as long as we have already helped the students get the good results and get into their dream university and school.

First in the sustainable development of our Internet.

Speaker Change: Otherwise tightening efforts.

Speaker Change: Third although collaboration with Nike school has to be mutually beneficial.

<unk> you would have data that says that they can give you.

Speaker Change: They might not have been reduced by over 100% of traffic.

Peng Su: So, we think about the demand for the college entrance exam preparations will continue to rise.

Speaker Change: Traffic.

Speaker Change: Nothing.

Speaker Change:

Speaker Change: More comfortable on the predictable type.

Speaker Change: This office.

Speaker Change: Moving forward, maybe I'll keep them out of leading all while I was in line with the MTA platform tool you know hamzah, our AI driven data capabilities.

Peng Su: Most students will come to us and they will look at our results from the last year and this year. We are almost more than double the number of the students getting into the top school and universities in this year. I think that is the important thing that can help us to build up our reputations in the market. I think this is possible because I think you are not ensuring pioneers format of our classes, the AI plus content and the comprehensive service models.

Peng Su: If we go back to questions, we do see the competition intensify moderately for the pre-colleid learning services in this year.

Speaker Change: Improved advertising dependency and that boosted revenue.

Peng Su: As understandable given the current market conditions, I believe we have the necessary means to continue to invest, to be still be keeping into the sweet living player here and benefit from the more dynamic markets.

Lei Jin: Well, we are mindful of the increasing risk of traffic or competition. We are committed to seeking opportunities to assist Chinese companies in their global expansion, at the same time leveraging our trends in customer relations, AI, and the data. We are gradually establishing our own exclusive AD network. This will help to the sustainable and the health development of our AD business.

Speaker Change: Well, we are mindful of the increasing risk of tropical computation.

Speaker Change: We are committed to see the opportunities towards it.

Speaker Change: It's kind of a combination they are global expansion as in time, leveraging our strength in customer relations AI and their data.

Speaker Change: Gradually establishing our own exclusive network this wheel hub for.

Peng Su: I think that is pretty innovative and creative and the proven learning methodologies for the college entrance exam preparation and the others. Third, we think we are applying more AI technology or business such as the segments that have been mentioned previously, previously, like the AI queries recommendation and the AI based college admissions advice. Services. In Q2, our AI college application advisor generates nearly 60,000 applications for roughly 30% increase over year. Positioning, I think we believe that this will be the leading one in the market in this year.

Our sustainable in the healthy development of our Adi business. Thank you.

Lei Jin: Thank you.

Thomas Chong: Our next question today will come from Thomas Chong of Jeffries. Please go ahead. Hi, good evening. Thank you very much for taking my question. May I ask about our AI-driven subscription services? We are actually seeing the subscription services from here today. What is the commercialization part for me? Thank you.

Speaker Change: Our next question today will come from Thomas Chong of Jefferies. Please go ahead.

Hi, Good evening management My question I'm going to ask about <unk>.

Speaker Change: So.

Speaker Change: Actually yeah.

Speaker Change: But this could be a good thing.

Speaker Change: What is the commercialization path.

Speaker Change: Yeah.

Speaker Change: Thank you.

Thomas Chong: Hi, Thomas.

Speaker Change: Hi, Thomas this is fun.

Thomas Chong: The key thing here is the user scenario. Youdao, we focus a lot on user scenarios. And Mr. P serves the home learning scenario, which we believe is the number one or number two of all consumer learning scenarios for students. So it is very important and not served well by current products. So we think Mr. P fits this scenario very well.

Speaker Change: The key thing here is to use this scenario.

Peng Su: I think that shows the AI can bring us the privilege over the market. The first one we think we will keep innovating and advancing in the market as well. We will continue to strengthen our market channels and branding development, providing a veteran integrated experience for the users through our online and offline co-ordination. This year, through the months of such as each other video accounts, the vision should be in hot. We have enhanced the localized life, broadcast, and the operators, the operators to provide the users with a range of localization services, and the highly customer services in the different stages.

Speaker Change: We focused a lot on their use of scenarios.

Speaker Change: Mr. P serves the our home learning scenario.

Which we believe is the number one or number two.

Speaker Change: Or.

Speaker Change: Consumer learning scenarios.

Speaker Change: For students. So it is a very important and.

Not served well by current products. So so we think Mr. P. Fitch does.

Speaker Change: Scenario with very well.

Thomas Chong: In terms of the product and our learnings, and also the commercialization path, as you asked, I have several points to share. The first one is the initial feedback for the app is very positive. The recent release of Mr. P is what we call a broad release for us. So in the app form factor and in the X7 and X7 Pro dictionary pants. In its first month on the market, users engage with Mr. P of AI tutor for nearly two million times, ranking it actually has the second most used feature of the X7 dictionary pants. Only after word, look up and translation, which is kind of the basic function of the device.

Speaker Change: In terms of the product and our learnings and also the commercialization, perhaps as you asked so I have a several points to shoot.

Speaker Change: The first one is the initial feedback for the App is a very positive. The recent release of Mr. Peakes is our what we call a broader release for us.

Peng Su: We will fully leverage our teaching strengths and IT operational experience to enhance our online customer acquisitions. Competitors, and the reduced customer acquisition cost, I think as well we will persist in exploring offline service and opportunities, and looking for the better chance to invest into their market. I think above all, and we think that we are confident about the future of the online service and service. We think in the long run, definitely the high quality products will always be the answer for the competitive market. I think that.

Speaker Change: So in the App form factor I'm doing in <unk>.

Speaker Change: Seven of Nyx, seven pro Dictionary pants.

Speaker Change: In its first months on the market.

Speaker Change: Users engage with must be off.

Air tutor for nearly 2 million times.

Speaker Change: Ranking it actually is the second most used the feature.

Speaker Change: The <unk> Dictionary pen.

Speaker Change: Only after word lockup in translation, which is kind of the basic.

Speaker Change: A function of the device. So it is already number two.

Feng Zhou: Thank you. Yeah, let me add a point, so I think what's the most important thing is the product. In the end, it's about how well you understand the customers and how to best satisfy the customers needs. We think our teams are very good at this, because things are, and it's a previous, it's a predecessor. I have been a long-running business at your DAW, I've been doing it for eight years already. And within the process, we actually innovated several times, so the current AI plus prerecorded video plus comprehensive service model, it was introduced in 2021, so it was a big change.

Thomas Chong: So it is already a number two. So it's surpassed the previous favorite features like William and Jingjiang. So I think that proves its popularity.

Speaker Change: Surpassed.

Speaker Change: Previous favorite features like William.

Peng Su: The first thing we do is we will continue to drive the customer satisfaction and retention.

William: William when Jean Jacques.

William: So I think that proves its popularity.

Thomas Chong: The second point I want to share is Mr. P is quite unique and leading product in the markets in terms of functionality. It is the first all subject that's nine in total. KT12 AI learning companion app with high quality results. Some of our peer companies focused on one or two subjects. Others, the product doesn't yet deliver high-quality results. So our engineering and the research team has developed a key set of technologies that make Mr. P possible and are now working hard to keep improving it. So obviously we're still in the early days. So, we expect experience to become much better over time, and we believe this technology holds a lot of promise.

William: The second point I want to share is Mr.

Speaker Change: Mr. <unk> is a quite unique.

William: Uh huh.

William: Leading products in the markets.

William: In terms of functionality.

William: It is the first all subject.

William: Nine in total.

William: <unk> learning companion App.

William: With a high quality results some of our peer companies focused on one or two subjects others are there product doesn't yet deliver high quality results.

William: So our engineering and our research team.

It has developed a key set of technology start.

Mike Mr P possible and.

William: And are working hard to keep improving it so well.

William: Obviously, we're still in the early days.

William: So we expect the experience to become a much better overtime and we believe this technology holds a lot of promise.

Thomas Chong: So, I think every family in China with students meets this company. So, yeah, think about it. So, either in apps form or in hardware devices or other forms, actually not only in China, but in other countries as well. So, that's how we look at it.

Speaker Change: Uh huh.

Speaker Change #100: Yeah, I would think.

Speaker Change #101: Every family in.

Speaker Change #101: China.

Speaker Change #102: With students.

Needs.

Speaker Change #101: Panic.

Speaker Change #101: So think about it.

Speaker Change #103: So either in our apps form or in hardware devices for other firms are.

Speaker Change #104: Actually not only in China, but in other countries as well.

Speaker Change #104: So that's how we look at.

Feng Zhou: So I think that proves the innovation capability of our teams, and I expect the links to team to keep innovating and keep loving what they do. That is what the net ease and your DAW culture is, and what makes up good at making high quality content. So I think that's the most important thing, we'll keep improving the product and serve the customer better. Thank you.

Thomas Chong: Third point is that regarding monetization and commercialization, we think subscription fees are a very scalable way of monetizing. Monetizing generative way of technology and obviously we also look at other ways like smart devices, B2B licensing, and also international markets. So, I do not want to talk too much about our concrete plans, but you can look at our existing products to get some ideas. For example, Hayako is already a significant contributor to our overall AI subscription sales, which in total we just shared reach over RMB 60 million in Q2, and the group nearly 200% over year.

The third point is that.

Speaker Change #104: Regarding monetization and commercialization.

Speaker Change #104: No.

Speaker Change #104: We think our subscription subscription fees are a very scalable way you monetize.

Speaker Change #104: Monetizing generative AI technology and.

Speaker Change #104: Obviously, we also look at other ways like smart devices VW licensing and also international markets. So I do not want to talk too much about our concrete plans, but.

Speaker Change #104: You can look at our existing products to get some ideas for example.

Feng Zhou: Thank you, Zobo.

<unk> is already <unk>.

Li Peng Zhao: The next question will come from Li Peng Zhao of CICC. Please go ahead. Good evening, Dr. Zhou.

Speaker Change #104: A significant contributor.

A contributor to our overall subsea.

Speaker Change #105: Subscription sales, which in total we just shared reached over RMB 60 million in Q2 and grew nearly 200% year over year.

Lei Jin: Steps for taking my questions. Your online marketing business, so very strong, revenue growth in the first half of the year. Could you please tell what's the outlook of this business in the second half of the year? Thank you.

Peng Su: We have already have the industry leading satisfaction and retention rates. During the first half of this year, our retention rate is very high in Q2 exceeding about 70% and representing a year-over-year increase of the over 10%.

Thomas Chong: And the world for Hayako comes from several things: continuous product improvements, positive word of mouth, and a lot of the user to user refers. So, we expect Mr. P to follow a similar path. So, we also did some projects for Hayako on the B2B front. Hayako has entered over 100 schools nationwide. We also focused on partnerships. Hayako became an official partner of the British Council's IELTS test. So, I believe this is also our sprint. It has a long history of working effectively with international companies and institutions.

Speaker Change #104: And.

And the.

The growth of or higher coal comes from several things are continuous product improvements positive word of mouth and there are a lot of we use it to use the referrals. So we expect to Mr. Pete to follow a similar path. So.

Peng Su: Asking the death matrix is a testament to the users' recognizations of our products and services.

Lei Jin: Hi, this is Lei Jin. For the second half of the year, our outlook for online marketing services remains positive. They have seen a net revenue growth, they could discriminate from around the R&B 200 million per quarter to over R&B 500 million in total of this year. This marks seven consecutive cultures of year-over-year net revenue growth exceeding 50%. Alongside continuous improvement in profitability, they cited year-over-year revenue growth to continue through the second half of this year.

Speaker Change #104: We also did some projects for higher co on the <unk> front.

Speaker Change #106: <unk> has entered.

Speaker Change #107: Over 100 schools nationwide. We also are focused on the partnership's higher co became an official partner.

Speaker Change #108: Of the British consoles.

Speaker Change #109: Yes test.

Speaker Change #108: So I believe that this is <unk>.

Speaker Change #108: So our strengths that <unk> has a long history of working effectively.

With international companies and institutions of higher.

Thomas Chong: Hayako was also recently featured on the Apple App Store homepage, which is a testimony of its quality and popularity. So, overall we found that AI apps are popular among users, and we have a lot of ideas. Our team has a lot of ideas to how to commercialize them, and we expect this year and next year to be a very good time period, time window to grow and monetize these AI apps. So, we will focus on them. Yeah, thank you.

Speaker Change #108: <unk> was also recently featured on the App store.

Lei Jin: Several key sectors are trading this is the sustainable growth. First, our R&B data accumulation, advanced AI algorithms and deeper understanding of customer demand, from the congress stones of our long-term competitive needs. Actually, continuously collecting the speed data into our data management platform, the MP. We achieved more accurate production, better decision-making and more refined online marketing services tailored to your needs. Second, our extension to an overseas advertising has been a significant growth driver.

Apple App store homepage.

Speaker Change #108: As.

Speaker Change #108: A testimony of its quality and popularity. So overall, we fund that.

Peng Su: Secondly, we think that we will continue to produce outstanding learning results, as long as we have already helped the students get the good results and get into their dream university and school.

Yes.

Speaker Change #108: Our popular among users and.

Speaker Change #108: We have.

A lot of ideas are achieved and has a lot of ideas to how to commercialize them and we expect this.

Speaker Change #108: This year and next year.

Speaker Change #108: To be a very good time periods of time window to grow and monetize DSR AI ops. So.

Speaker Change #108: So we will focus on them.

Speaker Change #108: Okay.

Howard Tan: Thank you. Our next question today will come from Howard Tom of McQuarry. Please go ahead.

Thank you.

Speaker Change #108: Yeah.

Speaker Change #108: Our next question today will come from Howard Chen of Macquarie. Please go ahead.

Lei Jin: We offer to claim comprehensive and personalized international advertising services, including grant communication, global KRL marketing, overseas AD placement and live streaming commerce. Leveraging our deep understanding of climate needs, we have a accelerated development of international advertising infrastructure. At the end of the Q2, our international KRL database has received a 7 million year-over-year increase of over 200%. Based on Q2 natural revenue from international performance based advertising to nearly R&B 100 million, a growth rate of about 30 percentage points higher than in Q1.

Howard Tan: Good evening, and thank you for taking my question. My question is about the non-academic tutoring market. So, I'd like to know more about your company's progress in student courses and whether you will accelerate investment in the future. Thank you.

Speaker Change #110: Hi, Good evening and thank you for taking my question.

Howard Chen: My question is about the non academic tutoring market. So I'd like to know more about your company's progress in scheme of courses.

And whether you will accelerate investments in the future. Thank you.

I think this is Paul and I will handle the questions and in.

Peng Su: This is Peng. I will kind of the questions. And in the second quarters, we made some progress in our non-academic courses. Although our language training and logic-sinking courses are in their early stage, but in terms of the course feelings, both have like experience a year over year, course over 100%, 100%. As in English, our communication and the other skill-based training has always been the strength of your dog. As you know, and in power by the AI, we can now provide the users with very comprehensive services and the highly customer services during before and after classes.

Speaker Change #112: In the second quarter, we made some progress in our non academic courses, although our language training and a.

Speaker Change #113: Hello takes a lot of thinking process in there they are early stage.

Speaker Change #114: In terms of the course variants both have experienced a year over year growth over 100% to a 100%.

Speaker Change #115: As an English law communication out any of the other skills based training has always been to spend something with all as you know and empowered by the AI now provides the users with a very comprehensive services and highly customer service at the end.

Lei Jin: In this second half, we will continue to capitalize on the growing demand from Chinese company, looking to expand internationally. First, the sustainable development of our international advertising efforts. Third, our collaboration with 90 schools has been mutually beneficial. In Q2, your data application significantly improved the management of advertising in the rate by over 100% of 90 schools started. In return, netizens will provide us with more comfortable and predictable traffic resources. Moving forward, we will keep upgrading our algorithm and BMP platform to enhance our AI driven data capabilities, improve advertising efficiency and boost revenues.

Speaker Change #115: During before and after classes.

Peng Su: On the other hand, we have already have the very strong equity and high quality content to provide the excellence in class services to the users.

Speaker Change #115: On the other hand.

Speaker Change #116: On the other hand, we have already helped us very strong faculty at HEICO high quality content to provide excellence in class services to the users.

Peng Su: Most children will come to us and they will look at our results from the last year and this year.

Peng Su: This is very developed in the author, if I could even subscribe to services. And we can also access the users in personalizations and post-classes in our real team. They are listening and speaking capabilities. For example, as we mentioned, was in the last several quarters, the higher I call all allow users to engage in oral communication anytime and anywhere. And they generate a personalized analysis report to correct the issues related to speech and a grammar during the conversations. For logic-sinking courses, it is highly demanded by the users. Parents always hope to the death kind of through the courses, I think they are children-sinking abilities.

Speaker Change #116: With the rapid development of the Iraq, Libya, and subscription services and a weak household existence of users in personalization and the post classic scenario they are listening and speaking of capabilities.

Peng Su: We are almost more than double the number of the students getting to the top school and universities in this year.

Speaker Change #116: For example, as we mentioned.

Speaker Change #117: In the last several quarters the hard calls all allow users to engage in the oral communication anytime and anywhere and they generate that personalized analysis reports correctly issues related to speech and a grandma during the conversation.

Speaker Change #118: So a lot of thinking quarters. It is it has a highly demanded by the users has always hope to the fast.

Peng Su: I think that is the important thing that can help us to build up our reputation in the market.

Lei Jin: Well, we are mindful of the increasing risk of traffic or competition. We are committed to seeking opportunities to assist Chinese companies in their global expansion, at the same time leveraging our trends in customer relations, AI and the data. We are gradually establishing our own exclusive AD network. This will help to the sustainable and the health development of our AD business.

Lei Jin: Thank you.

Speaker Change #119: That's kind of through the quarter. So I think they are children thinking abilities, we are continuously improved.

Peng Su: We are continuously improved. Our product meets the needs of the parents. And additionally, when the students encounter the problem after classes, as Dr. Tomenshin and Mr. P, AI tutors can help them to answer the questions, and I think with a different way. And we didn't just like Dr. Tomenshin; the mentors directly give them the answers, but just try to lead them to think about all the path. We think that will be the kind of innovation and that will be really neat from the family education scenarios. Looking ahead, we will continue to emphasize the high-quality development of the non-pedemic courses.

Speaker Change #120: Our products meet the needs of parents and additionally, when students in Congress a problem. After classes asked also to mention that Mr. P.

Speaker Change #119: Yeah.

Speaker Change #121: <unk> can help them to answer the questions and the.

Speaker Change #121: With.

Speaker Change #121: So I think with a different way and we didn't just like automation that sometimes the Massachusetts.

Speaker Change #122: It gives them the answers, but I was just trying to try to leading them to think about all the path we are.

Thomas Chong: Our next question today will come from Thomas Chong of Jeffries. Please go ahead. Hi, good evening. Thank you very much for taking my question. May I ask about our AI driven subscription services? We are actually seeing the subscription services from here today. What is the commercialization part for me? Thank you.

Speaker Change #122: That's what will be the kind of innovation and that's what we'll be really neat family education and scenarios.

Peng Su: I think that this is possible because I think you are not ensuring pioneers, format of our classes, the AI plus, content and comprehensive services models.

Looking ahead, we will continue to emphasize the high quality development after knocked that make process. If we identify the clear opportunities we are exploring.

Peng Su: If we identify the clear opportunities, we are ensuring the health and offer of business. We will consider increasing the investment in the non-pedemic courses.

The health and of our business, we will consider increasing the investments in the naphtha <unk> and Cortez.

Thomas Chong: Hi, Thomas. The key thing here is the user scenario. Youdao, we focus a lot on user scenarios. And Mr. P serves the home learning scenario, which we believe is the number one or number two of all consumer learning scenarios for students. So it is very important and not served well by current products. So we think Mr. P fits this scenario very well.

Peng Su: Thank you.

Speaker Change #123: Thank you.

Peng Su: I think that is pretty innovative and creative and the proven learning methodologies for the college entrance exam preparation and the others.

Feng Zhou: I think you need to choose which courses to provide very carefully to be successful. So it is particularly important for non-epidemic learning because they can be very wide in terms of a topic. So you can choose from a very wide set of topics. But you have to choose very, very carefully. Because parents, they may initially be interested in different topics; they may want to try it. But in the end, they choose the courses that are really helpful for their kids in the long term. Only those. I think those courses will become popular for the long term, so you need to choose carefully.

I think you'd need to choose which causes to provide a very carefully to be successful. So it is particularly.

Speaker Change #124: Particularly important for non academic.

Speaker Change #125: Learning because they can be.

Speaker Change #125: Very wide.

In terms of our topic. So you can you can choose from a very wide set of topics.

Speaker Change #125: But.

You have to choose very very carefully.

Speaker Change #127: Uh huh.

Speaker Change #127: Because parents they may initially be interested in and different topics. They may want to try it but in the end.

Thomas Chong: In terms of the product and our learnings and also the commercialization path, as you asked, I have several points to share. The first one is the initial feedback for the app is very positive. The recent release of Mr. P is what we call a broad release for us. So in the app form factor and in the X7 and X7 Pro dictionary pants. In its first month on the market, users engage with Mr. P of AI tutor for nearly two million times, ranking it actually has the second most used feature of the X7 dictionary pants.

Speaker Change #127: They are.

Speaker Change #127: They choose the closest that's really helpful.

Speaker Change #127: For their kids in the long term.

Speaker Change #127: Only those.

Speaker Change #127: Closest will become popular for the long term, so you need to choose carefully.

Feng Zhou: So that's what we focus on for non-academic courses. For example, we believe Chinese literature abilities are very, very important for kids. Being able to grasp the power of language is one of the key abilities that benefits a person's whole life. So this course has proven successful in the last several years, so we will keep improving. And also one other thing we think that's really important is computing skills. Everyone knows that it's key for future careers. So our competitive programming course, Yodong, Little Turing, has been running for six years. So we had our first national NOI Gold Medalist for this year.

Speaker Change #128: So that's that's what we focus on for non academic courses for example, we believe.

Speaker Change #128: Chinese literature abilities are very very important for kids being able to.

Speaker Change #129: Glass the power of language is one of the.

Speaker Change #129: Our capabilities that's benefits a person's life. So so that that <unk> proven successful with Apple and so.

Thomas Chong: Only after word, look up and translation, which is kind of the basic function of the device. So it is already a number two. So it's surpassed the previous favorite features like William and Jingjiang. So I think that proves its popularity.

Speaker Change #129: In the last several years.

Speaker Change #129: So we will keep improving.

Speaker Change #129: And also one other thing we think that's really important is computing skills.

Speaker Change #129: Everyone knows that it's key for future future careers. So so are.

Thomas Chong: The second point I want to share is Mr. P is quite unique and leading product in the markets in terms of functionality. It is the first all subject that's nine in total. KT12 AI learning companion app with high quality results. Some of our peer companies focused on one or two subjects. Others, the product doesn't yet deliver high quality results. So our engineering and the research team has developed a key set of technologies that make Mr. P possible and are now working hard to keep improving it.

Speaker Change #129: Competitive programming course, Utah Little Turing has been running for six years and so so we are.

Speaker Change #129: We had our first national NOI gold medals for this year.

Feng Zhou: Yeah, so the key thing is that if we start some course, some non-academic course, we will make sure that we choose carefully, and we want it to be successful for many years to come. Yeah, so I think that's important.

Speaker Change #129: So.

Speaker Change #130: Uh huh.

Speaker Change #130: So the key thing is that if we start some course.

Speaker Change #130: non-GAAP academic course, we will make sure that we choose carefully and we want to be successful for many years to come so I think that's important.

Bob Shaan: Our next question today will come from Bob Shaan of High-Tie Securities. Please go ahead. Hello, John. Your phone is on; your line is open. Hello. Can you hear me? Your line is live. Yes, thank you.

Speaker Change #130: Our next question today will come from Sean.

Thomas Chong: So obviously we're still in the early days. So, we expect experience to become much better over time and we believe this technology holds a lot of promise. So, I think every family in China with students meets this company. So, yeah think about it. So, either in apps form or in hardware devices or other forms, actually not only in China, but in other countries as well. So, that's how we look at it.

Sean: Hi types of Kennedy. Please go ahead.

Sean: Okay.

Right.

Sean: Hello, John.

John Your line is open.

Sean: Hello.

Sean: Your line is live.

Speaker Change #132: Yes. Thank you.

Bob Shaan: Thank you for taking my question, and congratulations on the strong performance stage culture. I have a question regarding Smart Life. We saw the revenue from the smart device is still decreasing.

Speaker Change #133: Thank you management for taking my question and congratulations on the strong.

Speaker Change #134: Performance this quarter I have a question regarding smart life. They saw their revenue from the smart device is still decreasing <unk> Shankar on strategy for you without it so many times.

Peng Su: Third, we think that we are applying more AI technology or business, such as the segments that have been mentioned previously, previously, like the AI quiz recommendation and the AI based college admissions advice services.

Thomas Chong: Third point is that regarding monetization and commercialization, we think subscription fees are a very scalable way of monetizing. Monetizing generative way of technology and obviously we also look at other ways like smart devices, B2B licensing and also international markets. So, I do not want to talk too much about our concrete plans, but you can look at our existing products to get some ideas. For example, Hayako is already a significant contributor to our overall AI subscription sales, which in total we just shared reach over RMB 60 million in Q2 and the group nearly 200% over year.

Feng Zhou: Could you share some kind of strategy for Yodong's return for the second half of the year and the average? Of course, thank you. For the last few quarters, we've reorganized our device sales channels as we communicated in the last several quarters. We also focused our products to be, again, around our core dictionary paying category. This year, we've released the four dictionary pens from the mid-year ASX Pro to flagships X7 and X7 Pro. The good thing is users have told us that they really like these new products. Yodong's dictionary paying is ranked the number one seller in the category during the June 18th shopping festival on JD.com for five years; yes, exactly.

Speaker Change #134: For the second half of the year and the appetite for.

Speaker Change #135: Sounds good.

Speaker Change #136: Now for the last few quarters.

Speaker Change #136: We've reorganized our.

Speaker Change #136: Device sales channels as we communicated in the last six months the civil source.

Speaker Change #136: We also focused our products to be.

Speaker Change #136: Again around our core dictionary pen category.

Speaker Change #136: This year, we've released four dictionary patents from the mid tier Asics Pro <unk> Pro two flagships at seven and seven.

Peng Su: In Q2, our AI college application advisor generates nearly 60,000 applications for roughly 30% increase over a year.

Speaker Change #136: So.

Speaker Change #136: Yeah.

Speaker Change #136: The good thing is users have told us that they really like these new products. So.

Speaker Change #136: So they are.

Peng Su: Positioning, I think we believe that this will be the leading one in the market in this year.

Thomas Chong: And the world for Hayako comes from several things, continuous product improvements, positive word of mouth and a lot of the user to user refers. So, we expect Mr. P to follow a similar path. So, we also did some projects for Hayako on the B2B front. Hayako has entered over 100 schools nationwide. We also focused on partnerships. Hayako became an official partner of the British Council's IELTS test. So, I believe this is also our sprint. It has a long history of working effectively with international companies and institutions. Hayako was also recently featured on the Apple App Store homepage, which is a testimony of its quality and popularity.

The Euro Dictionary pen is ranked the number one seller.

Speaker Change #136: Category during the June 18th shopping festival on JD Com for five years.

Speaker Change #136: Consecutively, so reflecting their users preference for our brand X.

Feng Zhou: We're reflecting their users' preference for our brand. X7. In its first month on the market, generated twice the revenue of last year's flagship, X-6 Pro, as I just talked about during the preparation marks.

Peng Su: I think that shows what kind of AI can bring us, the privilege over the market.

Speaker Change #136: Seven.

In its first months on the market generated twice the revenue of last year's flagship at six.

Speaker Change #137: We just as I, just talked about Oh jewelry in our prepared remarks so.

Feng Zhou: So these good news tell us that our overall strategy of focusing on core products and channel efficiency is correct. So what we need now is we need to continue to focus on our key products, many different things, and use strong sales capability and efficient channels. At the same time, another good thing is that the device business and the financial performance has improved after they're refocusing. So that set up a good foundation for the business to build on.

Speaker Change #137: The good.

Speaker Change #138: Good news tell us that our overall strategy of focusing on core products in China efficiency are all correct.

Speaker Change #138: So what we need to do now is we need to.

Speaker Change #138: Continue to focus on our key products, mainly to shrink and be a strong sales capability and efficient.

Speaker Change #138: Channels.

Speaker Change #138: At the same time.

Speaker Change #138:

Thomas Chong: So, overall we found that AI apps are popular among users and we have a lot of ideas. Our team has a lot of ideas to how to commercialize them and we expect this year and next year to be a very good time period, time window to grow and monetize these AI apps. So, we will focus on them. Yeah, thank you. Thank you.

Speaker Change #138: Another good thing is that.

Speaker Change #138: Device business and financial performance has improved after the refocusing.

Peng Su: The first one we think we will keep innovating and advancing in the market as well.

Speaker Change #139: So what.

Peng Su: We will continue to strengthen our market channels and branding development, providing a better integrated experience for the users. So we are online and offline coordination.

Does that set up a good foundation for the business to build on.

Feng Zhou: So here are a few more kind of points about the dictionary pins. So the first one is about the high-end products. So these are our strengths, and our first large language model application were on our high-end products. So in July, we launched the dictionary pin X7 and last week X7 Pro, both the carry large language model features including Mr. P and AI translation. So, as we just shared, Mr. P is the number two most popular function, and AI translation is also very popular. So that's really encouraging for us because only our products have these features right now.

Speaker Change #139: So here are a few a few more kind of points about the dictionary pen.

Speaker Change #139: Oh.

Speaker Change #139: So the first one is about the high end products. So these are our strengths and our first large language model application where on our high end products. So in July we launched a dictionary pen seven.

Howard Tan: Our next question today will come from Howard Tom of McQuarry. Please go ahead. Good evening and thank you for taking my question. My question is about the non-academic tutoring market. So, I'd like to know more about your company's progress in student courses and whether you will accelerate investment in the future. Thank you.

Speaker Change #139: Last week <unk> probes, both them carry large language model features.

Peng Su: This year, through the months or such as each other's video accounts, the vision should be in hot.

Mr P: <unk> Mr P and.

Speaker Change #139: Translation.

Speaker Change #139: So.

Speaker Change #141: So as we just shared Mr. P is the number two most popular function and transmission is also very popular so so that's really encouraging for us because.

Peng Su: This is Peng, I will kind of the questions. And in the second quarters, we made some progress in our non-academic courses. Although our language training and logic-sinking courses are in their early stage, but in terms of the course feelings, both have like experience a year over year, course over 100%, 100%. As in English, our communication and the other skill-based training has always been the strength of your dog. As you know, and in power by the AI, we can now provide the users with very comprehensive services and the highly customer services during before and after classes.

Peng Su: We have enhanced the localize, the life, broadcast, and the operators.

Speaker Change #141: Because because only our products have these features right now.

Feng Zhou: Second point I want to share is regarding price point. So last year, we expanded into the mid-range market with the launch of the SNA series, aiming to serve a broader audience and meet diverse user needs in Q2. So one of the result is dictionary pin unit sales grew by over 50 percent year over year. And in addition, net revenue from dictionary pins increased nearly 10 percent year over year. So unit growth growth 50 percent, revenue growth 10 percent. So that means the strategy of not going for a very low price is correct. We didn't go for price, so our cheapest product, A6 Pro, is still 50 or 100 to ran higher, more expensive than our peers.

Speaker Change #141: Second the point I want to share is regarding price point so.

Speaker Change #141: Last year, we expanded into the mid range market.

Speaker Change #141: With the with the launch of the S H series.

To serve a broader audience.

Speaker Change #141: And meet diverse user needs in Q2.

Peng Su: The operators who provide the users with a range of localization services and the highly customer services in the different cities.

Speaker Change #141: So so one of the result is a dictionary pen unit sales grew by over 50% year over year.

Peng Su: We will fully leverage our teaching strengths and IT operational experience, who enhance our online customer acquisitions, competitive and reduce customer acquisition costs.

Peng Su: On the other hand, we have already have the very strong equity and high quality content to provide the excellence in class services to the users. This is very developed in the author, if I could even subscribe to services. And we can also access the users in personalizations and post-classes in our real team. They are listening and speaking capabilities. For example, as we mentioned was in the last several quarters, the higher I call all allow users to engage in oral communication anytime and anywhere.

Speaker Change #141: And.

Speaker Change #141: In addition, our net revenue.

Speaker Change #141: From dictionary pains increased nearly 10% year over year.

Speaker Change #141: So.

The unit unit grow growth, 50% revenue growth, 10% so.

Speaker Change #141: So that means the <unk>.

Speaker Change #142: Strategy of not going for a very low price is correct. We didn't go for price war, so our GPS product to a six point, it's 250 or 102 in higher.

Speaker Change #142: More expensive than our peers. So we believe that's a that's a good balance to strike so achieving allowed us to achieve both unit growth and revenue growth. So I think that's a good trend.

Peng Su: And they generate a personalized analysis report to correct the issues related to speech and a grammar during the conversations. For logic-sinking courses, it is highly demanded by the users. Parents always hope to the death kind of through the courses, I think they are children-sinking abilities. We are continuously improved. Our product meets the needs of the parents. And additionally, when the students encounter the problem after classes, as Dr. Tomenshin and Mr. P, AI tutors can help them to answer the questions and I think with a different way.

Feng Zhou: So we believe that's a good balance to strike. So achieving allowed us to achieve both unit growth and revenue growth. I think that's a good trend. Yeah.

Speaker Change #142: Yes.

Feng Zhou: The third point is regarding growth margin ratio because this is something that people look at carefully. So in Q2, our growth margin ratio for smart devices was a bit low at 30 percent. Again, that was mostly due to the product mix, as we just discussed. So, more mid-tier products, fewer high-end products. However, as we ramp up on the high-end product in Q3 and Q4, we have a good feature differentiation, a lot of AI features, and the hardware is much stronger with AI cameras the first time this year, and with much better screens that users really like.

Speaker Change #142: The third point is regarding gross margin ratio because this is something that people look at carefully.

Speaker Change #142: In Q2, our gross margin ratio for smart devices was a bit lower at 30%.

Sure.

Speaker Change #142: Again that was mostly due to product mix as I as we just discussed so more mid.

Speaker Change #143: Mid tier product.

Peng Su: And we didn't just like Dr. Tomenshin, the mentors directly give them the answers, but just try to lead them to think about all the path. We think that will be the kind of innovation and that will be really neat from the family education scenarios.

Speaker Change #142: Gosh.

Speaker Change #142: Sure Hi.

Speaker Change #142: Our high end product.

Speaker Change #142: However, as we ramp up on Ohio.

Speaker Change #142: And product in Q3 and Q4, so we are still targeting 40% gross margin ratio as before.

Peng Su: Looking ahead, we will continue to emphasize the high-quality development of the non-pedemic courses. If we identify the clear opportunities, we are ensuring the health and offer of business. We will consider increasing the investment in the non-pedemic courses. Thank you.

Speaker Change #142: So we have.

Speaker Change #142: Good feature differentiation.

Speaker Change #142: A lot of AI features.

Peng Su: As in as well, we will persist in exploring the offline service and the opportunities and looking for the better chance to invest into their market.

The hardware is much stronger.

Peng Su: I think above all, and we think that we are confident about the future of the online business and service.

Cameras are the.

Speaker Change #142: First time, this year and with much better screams that users really like so.

Peng Su: We think in the long run, definitely the high-quality products will always be the answer for the competitive market.

Feng Zhou: I think you need to choose which courses to provide very carefully to be successful. So it is particularly important for non-epidemic learning because they can be very wide in terms of a topic. So you can choose from a very wide set of topics. But you have to choose very, very carefully. Because parents, they may initially be interested in different topics, they may want to try it. But in the end, they choose the courses that are really helpful for their kids in the long term.

Feng Zhou: So, and we also improved our supply chain a lot over the last year. So, that lowered our supply cost.

Speaker Change #142: We also improved our supply chain a lot over the last year.

Peng Su: I think that.

Feng Zhou: Only those. I think those courses will become popular for the long-term, so you need to choose carefully. So that's what we focus on for non-negademic courses. For example, we believe Chinese literature abilities are very, very important for kids. Being able to grasp the power of language is one of the key abilities that benefits a person's whole life. So that course has proven successful in the last several years, so we will keep improving.

Speaker Change #142: So that lowered our.

Speaker Change #142: All of our supply.

Speaker Change #142: The supply curve.

Feng Zhou: So, we think 40% growth margin ratio is a reasonable and feasible growth target to shoot for. So, I think all the more, as we said, we expect Q2 to be the low point operationally for the hardware business. So, we're looking forward to its future performance.

Speaker Change #144: Yeah. So so we think.

Speaker Change #145: The 40% gross margin ratio is a reasonable and feasible growth target to shoot for so and so I think the only more.

Speaker Change #145: And as we said, we expect Q2 to be the low point operationally for the hardware business. Yes. So so we're looking forward to.

Peng Su: Thank you.

Feng Zhou: Let me add a point.

Speaker Change #145: Its future.

Speaker Change #145: Future performance.

Speaker Change #145: Yeah.

Speaker Change #145: Yes.

Feng Zhou: Thank you.

Feng Zhou: I think what's the most important thing is the product.

Speaker Change #145: Thank you.

Feng Zhou: In the end, it's about how well you understand the customers and how to best satisfy the customer's needs.

Howard Tan: Our next question today will come from the icon, Jay. Oh, six. Please go ahead with your question. Evening management, thank you for taking that question. My question is about the profits. Will we achieve profitability this year? And if so, will we be able to sustain profitability in the future? Thank you.

Speaker Change #145: Our next question today will come from the icon Zhang.

Please go ahead with your question.

Zhang: Good evening management. Thank you for taking my question. My question, it's about the profits we achieved profitability this year and if so will we be able to sustain profitability in the future. Thank you.

Wayne Lee: Thank you for your question. This is Wayne. I will take your question.

Speaker Change #147: Thank you for your question. This is when I was taking a question.

Wayne Lee: We have fully committed to improving the overall health and achieving three-year positive operating income in the future. For the past year, we have successfully reduced operating loss on a year-over-year basis, especially in the first half of this year. Where operating loss were reduced by over 90% a year, year to approximately 40 million. The historical data indicates that, due to seasonal factors, typically higher operating income in the second half of the year compared to the first half of the year.

Speaker Change #148: We have fully committed to improving the overall health and achieving full year positive operating income.

Feng Zhou: And also one other thing we think that's really important is computing skills. Everyone knows that it's key for future careers. So our competitive programming course, Yodong, Little Turing, has been running for six years. So we had our first national NOI gold medalist for this year. Yeah, so the key thing is that if we start some course, some non-negademic course, we will make sure that we choose carefully, and we want it to be successful for many years to come. Yeah, so I think that's important.

Speaker Change #147: Yeah feature or.

Speaker Change #149: Over the past year, we have successfully reduced operating loss on a year over year basis, especially in the first half of this year.

Speaker Change #149: Operating loss were reduced by over 90% year over year too.

Speaker Change #149: <unk> <unk> 40 million.

Speaker Change #149: It's always a data indicates that due to seasonal factors typically higher operating income in the second half year.

Speaker Change #149: To the first half year.

Wayne Lee: Given our confidence in achieving positive operating income for the four-year of 2024, despite intense competition and various opportunities, we believe that this possibility is expected to be sustainable a four-year basis in the future due to the following reasons. John Perfability in three-core areas. Digital content services, online marketing services, and the AI-driven three-action services have been identified as our key strategic focus areas. We allocate more without this two-use areas, which has resulted in profitability and will continue to do so. Our online marketing services feel used by our RTA technology, data capability, and the precise understanding of user needs have achieved over 50% year-over-year net value growth for seven consecutive quarters, driving profitability.

Okay.

Confidence.

Speaker Change #149: In achieving positive operating income for the full year.

Speaker Change #149: 'twenty 'twenty four despite intense competition and various uncertainties.

Speaker Change #149: We believe that this profitability is intended to be sustainable on a full year basis in the future due to the following reasons.

Bob Shaan: Our next question today will come from Bob Shaan of High-Tie Securities. Please go ahead. Hello, John, your phone is on, your line is open. Hello. Can you hear me? Your line is live. Yes, thank you.

Speaker Change #149: John profitability in three core areas.

Speaker Change #149: Digital content services online marketing services and AI driven.

Speaker Change #149: Reach and services have been identified as our key strategic focus area.

Speaker Change #149: We allocate more resources to these areas, which has resulted in.

Speaker Change #149: Profitability and we'll continue to do so.

Feng Zhou: Thank you for taking my question, and congratulations on the strong performance stage culture. I have a question regarding smart life. We saw the revenue from the smart device is still decreasing. Could you share some kind of strategy for Yodong's return for the second half of the year and the average? Of course, thank you. For the last few quarters, we've reorganized our device sales channels as we communicated in the last several quarters.

Speaker Change #149: Our online marketing services fueled by our RTA technology data capability and precise understanding of user needs.

Feng Zhou: We think our teams are very good at this, because things are good.

Feng Zhou: It's a predecessor.

Speaker Change #149: We have achieved over 50% year over year net revenue growth of four seven.

Feng Zhou: I have been a long-running business at your DAW. I've been doing it for eight years already. Within the process, we actually innovated several times.

Speaker Change #149: Consecutive quarters driving profitability.

Feng Zhou: The current AI plus prerecorded video plus comprehensive service model.

Wayne Lee: Through leveraging AI technology and high-quality content, our digital content services, especially links, should have improved learning efficiency and effectiveness for our users. In social leading products and the services have been pivotal in driving revenue and the profit growth. AI-driven subscription services, a key aspect of our AI commercialization efforts, have experienced strong sales growth, and we have confidence in future profitability.

Speaker Change #149: Leveraging AI technology.

Speaker Change #149: Technology and high quality content, our digital content and services.

Feng Zhou: It was introduced in 2021. It was a big change, but if you think about it, it really makes a lot of sense.

Speaker Change #149: Sure.

Speaker Change #149: Have improve the learning efficiency and effectiveness for our users.

Feng Zhou: For students preparing for college entrance exam, what they really lack is they lack a lot of free time.

Feng Zhou: We also focused our products to be, again, around our core dictionary paying category. This year, we've released the four dictionary pens from the mid-year ASX Pro to flagships X7 and X7 Pro. The good thing is users have told us that they really like these new products. Yodong's dictionary paying is ranked the number one seller in the category during the June 18th shopping festival on JD.com for five years, yes, exactly. We're reflecting their users' preference for our brand.

Speaker Change #150: He insisted leading products and services and helping pivotal in driving revenue and profit growth.

Feng Zhou: The traditional life-course format is not such a good fit.

Yeah, Hi, driven subscription fee devastated a key aspect of our AI commercialization effort.

Speaker Change #151: Experienced disjunct sales growth and we have confidence in future profitability.

Feng Zhou: The team had actually been preparing for the change for a year at that time. The market condition in 2021 pushed the team to make the leap.

Speaker Change #150: Yeah.

Speaker Change #150: Second enhance the financial performance in non core business.

Speaker Change #150: The noncore businesses, such as smart about it and non digital content and services.

Speaker Change #150: Have implemented strict health department, focusing on higher <unk> metrics and the labor efficiency.

Speaker Change #150: This has resulted in the temporary decline in overlapping skill.

Feng Zhou: X7. In its first month on the market, generated twice the revenue of last year's flagship, X-6 Pro as I just talked about during the preparation marks. So these good news tell us that our overall strategy of focusing on core products and channel efficiency are correct. So what we need now is we need to continue to focus on our key products, many different things and use strong sales capability and efficient channels. At the same time, another good thing is that the device business and the financial performance as improved after they're refocusing. So that set up a good foundation for the business to build on.

Speaker Change #150: But has significantly improved the health of this business and to reduce the losses.

Wayne Lee: Third, operational efficiency improvement through AI technology and the content innovation. To achieve profitability, we are continuously striving to improve marketing efficiency through innovation and enhance the user experience through the creation of our premium learning content. We explore various innovations such as diversifying marketing channels and leveraging advanced AI technology to optimize marketing efficiency and mitigate challenges like the rising acquisition cost due to intense compilation. By innovating premium content such as our position from traditional living stream online classes to improve content embedded with AI technology, like adaptive question bank, we address user concerns such as in flexible schedules and provide a personal life learning experience.

Speaker Change #150: Sure.

Speaker Change #150: Operational efficiency improvement.

Speaker Change #150: <unk> and the content innovation.

Feng Zhou: That's why we've been able to grow the business several times since then.

Speaker Change #150: Well achieve profitability, we are continuously striving to improve marketing efficiency through innovation and to enhance the user experience.

Speaker Change #150: Through the creation of our premium learning content.

Feng Zhou: I think that proves the innovation capability of our teams, and I expect the links to team to keep innovating and keep loving what they do.

Speaker Change #150: We explored various innovations such as diversified marketing channels, and leveraging advanced technology to optimize marketing efficiency and mitigate challenges like rising acquisition costs due to intense competition.

Feng Zhou: That is what the net ease and your DAW culture is, and what makes up good at making high quality content.

Speaker Change #150: By innovating premium content.

Speaker Change #150: Our transition from traditional living screen online classes to proven content embedded lease.

Feng Zhou: I think that's the most important thing.

Speaker Change #150: Technology like adaptive question Bank.

Feng Zhou: So here are a few more kind of points about the dictionary pins. So the first one is about the high end products. So these are our strengths and our first large language model application were on our high end products. So in July, we launched the dictionary pin X7 and last week X7 Pro, both the carry large language model features including Mr. P and AI translation. So as we just shared, Mr. P is the number two most popular function and AI translation is also very popular. So that's really encouraging for us because only our products have these features right now.

Feng Zhou: We'll keep improving the product and serve the customer better.

Jeff user consent concerns such as in fluff bull schedules and to provide the personnel that lies the learning experience.

Feng Zhou: Thank you.

Wayne Lee: This premium content has exhibit strong user engagement with over 70 percent of attention rates in Q2.

This premium content has because it is.

Feng Zhou: Thank you, Joe Bo.

Speaker Change #150: Strong user engagement with over 70% of retention rate in Q2.

Crystal Lee: In summary, our strategic focus and the in-native approaches have resulted in the continued improvement in our operating margins, giving us confidence in to expand the possibility of our business in the future. Thank you. Our next question today will come from Crystal Lee of China Merchant Security. Please go ahead. Oh, hi, I thank you for taking my question and congratulations on the strong results. I just want to know how should we integrate the recent opinions on promoting the high quality development of service consumption and particularly regarding the education and training consumption. Thank you Thank you We have noted that earlier this month the state councillors issue the opinions and promoting the high quality development of services consumption which emphasize the meeting the diverse and the personalized learning needs of the general public and the promoting the social training institutions to enhance the service quality in response to the public demands.

Speaker Change #152: In summary, our jetty Jake focus and in no team approaches.

Li Peng Zhao: The next question will come from Li Peng Zhao of CICC.

Speaker Change #152: Have resulted in continued improvement in our <unk>.

Speaker Change #152: Operating margins, giving us.

Speaker Change #152: Confidence in the profitability of our business in the future.

Li Peng Zhao: Please go ahead.

Speaker Change #152: Yeah.

Li Peng Zhao: Good evening, Dr. Zhou.

Speaker Change #152: Our next question today will come from Christopher Lee of China Merchants Securities. Please go ahead.

Li Peng Zhao: Steps for taking my questions.

Oh, Hi, Alex announcements for taking my question.

Feng Zhou: Second point I want to share is regarding price point. So last year, we expanded into the mid-range market with the launch of the SNA series aiming to serve a broader audience and meet diverse user needs in Q2. So one of the result is dictionary pin unit sales grew by over 50 percent year over year. And in addition, net revenue from dictionary pins increased nearly 10 percent year over year. So unit growth growth 50 percent, revenue growth 10 percent.

Lei Jin: Your online marketing business, so very strong, revenue growth in the first half of the year.

Christopher Lee: Congratulations on the strong about I just want to know how should we interpret it.

Lei Jin: Could you please tell what's the outlook of this business in the second half of the year?

Speaker Change #154: Okay, promoting our high quality development of service consumption, and particularly regarding the education and training.

Lei Jin: Thank you.

Speaker Change #155: Yeah, we have noticed that earlier.

Lei Jin: Hi, this is Lei Jin.

Speaker Change #156: Earlier this month sort of stayed the counselor.

Speaker Change #157: Okay, Nance and promoting the high quality develop not cirrhosis consumptions, we should emphasize the meetings that I've heard of sending personalized learning needs of the general public and the promotions of social training institutions.

Lei Jin: For the second half of the year, our outlook for online marketing services remains positive.

Speaker Change #157: He has the service quality in response to the public demand.

Lei Jin: They have seen net revenue growth, they could disconnect from around the R&B 200 million per quarter to over R&B 500 million in total of this year.

Peng Su: First, I think I'm just making clear that Youdao is always consistently to embrace the policy and adhere to operating within the scope of the permit by policies, and by now it's still in the very early stage and we don't know we don't know any further and the detailed information like scope and category of the policy. First of the definitely we are waiting the following information related with the public regarding the detailed information and what we can what we can say now is about the strategy of Youdao is to consist of investing to the education sectors within the AI features. And if you see the dynamic of our products, they always be innovative and I've created to create a new format of our products following the policies. We think we will keep the updates and the existing product and provide the new services following the instruction of the existing policy and upcoming ones. Everything that will be the consistency to be delivered to deliver the message regarding on the policies and we can discuss more details right after we receive the more information from regarding on this piece of policy. Thank you. Thank you. At this time we will conclude the question and answer session. I'd like to turn the conference back over to management for any closing remarks. Thank you once again for many. I'll say if you have any further questions, please feel free to contact us at Youdao directly. We'll reach out to Pearson financial communications in China or the US. Have a great day. The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.

Speaker Change #157: We're assessing that just make it clear.

Lei Jin: This marks seven consecutive cultures of year-over-year net revenue growth exceeding 50%.

Speaker Change #157:

Feng Zhou: So that means the strategy of not going for a very low price is correct. We didn't go for price so our cheapest product, A6 Pro, is still 50 or 100 to ran higher, more expensive than our peers. So we believe that's a good balance to strike. So achieving allowed us to achieve both unit growth and revenue growth. I think that's a good trend. Yeah.

Speaker Change #158: You would always always consistently to embrace the policy and adhere to operating leasing for skol hops are permitted to buy policies.

Lei Jin: Alongside continuous improvement in profitability, they cited year-over-year revenue growth to continue through the second half of this year.

Speaker Change #159: And by now its still in the very early stage and we don't.

Lei Jin: Several key sectors are trading this is the sustainable growth.

Speaker Change #160: We don't know we don't know any further and the detailed information like scope on a category of the policy.

Lei Jin: First, our R&B data accumulation, advanced AI algorithms, and deep understanding of customer demand, from the congress stones of our long-term competitive needs.

Speaker Change #161: First is it definitely won't be tender is the following.

Lei Jin: Actually, continuously collecting the speed data into our data management platform, the MPs, we achieve the more accurate prediction, better decision-making and more defined online marketing services tailored to user needs.

Speaker Change #161: Inflammation related with Republic regarding all the detailed information.

Lei Jin: Second, our extension to an overseas advertising has been a significant growth driver.

Speaker Change #161: And what do we what are the kind of what we can see now say now it's about the strategy.

Lei Jin: We offer to climb comprehensive and personalized international advertising services, including grant communication, global KRL marketing, overseas AD placement, and live streaming commerce.

Lei Jin: Leveraging our deep understanding of climate needs, we have accelerated development of international advertising infrastructure.

Feng Zhou: The third point is regarding growth margin ratio because this is something that people look at carefully. So in Q2, our growth margin ratio for smart devices was a bit low at 30 percent. Again, that was mostly due to the product mix as we just discussed. So, more mid-tier product, fewer high-end products. However, as we ramp up on the high-end product in Q3 and Q4, so we have a good feature differentiation, a lot of AI features, and the hardware is much stronger with AI cameras the first time this year, and with much better screens that users really like.

Speaker Change #162: Is to consistently invest into the education sector, we've seen the features.

Lei Jin: At the end of the 22, our international KRL database hides in CD-7 million, a year-over-year increase of over 200%.

Speaker Change #163: And if you'll see the dynamic of our products will always be innovative and creative to create the new format helpful products. Following the policies. We think we will keep the updates and as our existing product and provides a new services. Following the instruction of the existing policy in upcoming months.

Speaker Change #164: And we think the basketball piece of conflicts of interest with universities are feeling about the message regarding on the policies and we can discuss more in detail. So that after we receive the more information from regarding all these detailed policy. Thank you.

Speaker Change #164: Okay.

Speaker Change #165: At this time, we will conclude the question and answer session I'd like to turn the conference back over to management for any closing remarks.

Speaker Change #166: Thank you once again for fantastic. If you have any further questions. Please feel free to contact us at.

Feng Zhou: So, and we also improved our supply chain a lot over the last year. So, that lowered our supply cost. So, we think 40% growth margin ratio is a reasonable and feasible growth target to shoot for. So, I think all the more, as we said, we expect Q2 to be the low-point operationally for the hardware business.

Speaker Change #167: <unk> dialed correctly, well reach out to a person financial communications in China or the U S have a great day.

Speaker Change #166: Yes.

Speaker Change #168: The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Lei Jin: Based on Q2 natural revenue from international performance based advertising to nearly R&B 100 million, a growth rate of about 30 percentage points higher than in Q1.

Yeah.

Speaker Change #168: [music].

Lei Jin: In this second half, we will continue to capitalize on the growing demand from Chinese company looking to expand internationally.

Feng Zhou: So, we're looking forward to its future performance. Thank you.

Lei Jin: First, the sustainable development of our international advertising efforts.

Lei Jin: Third, our collaboration with 90 schools has been mutually beneficial.

Wayne Lee: Our next question today will come from the icon, Jay. Oh, six. Please go ahead with your question. Evening management, thank you for taking that question. My question is about the profits. Will we achieve profitability this year? And if so, will we be able to sustain profitability in the future? Thank you. Thank you for your question. This is Wayne. I will take your question. We have fully committed to improving the overall health and achieving three-year positive operating income in the future.

Lei Jin: In Q2, your data adaptation significantly improved by over 100% of 90 schools started.

Wayne Lee: For the past year, we have successfully reduced operating loss on a year-over-year basis, especially in the first half of this year. Where operating loss were reduced by over 90% a year year to approximately 40 million. The historical data indicates that due to seasonal factors typically higher operating income in the second half of the year compared to the first half of the year.

Lei Jin: In return, netizens will provide us with more comfortable and predictable traffic resources.

Lei Jin: Moving forward, we will keep upgrading our algorithm and BMP platform to enhance our AI driven data capabilities, improve advertising efficiency and boost revenues.

Lei Jin: Well, we are mindful of increasing risk of traffic competition.

Lei Jin: We are committed to seeking opportunities to assist Chinese companies in their global expansion, at the same time, leveraging our trends in customer relations, AI and the data.

Lei Jin: We are gradually establishing our own exclusive AD network. This will help the sustainable and health development of our AD business.

Thomas Chong: Thank you.

Thomas Chong: Our next question today will come from Thomas Chong of Jeffries.

Thomas Chong: Please go ahead.

Wayne Lee: Our online marketing services feel used by our RTA technology, data capability, and the precise understanding of user needs have achieved over 50% year-over-year net value growth for seven consecutive quarters driving profitability. Through leveraging AI technology and high-quality content, our digital content services, especially links, should have improved learning efficiency and effectiveness for our users. In social leading products and the services have been pivotal in driving revenue and the profit growth. AI-driven subscription services, a key aspect of our AI commercialization efforts, have experienced the strong sales growth, and we have confidence in future profitability.

Thomas Chong: Hi, good evening.

Thomas Chong: Thanks for management for taking my question.

Feng Zhou: May I ask about our AI driven subscription services?

Wayne Lee: Second, enhance the financial performance in non-copiness. For non-copiness such as multivacism and non-digital content services, we have implemented the stricter health requirements focusing on higher our eye metrics and the label efficiency. This has resulted in a temporary decline in overall business skill but has significantly improved the health of this business and reduced the losses. Third, operational efficiency improvement through AI technology and the content innovation. To achieve profitability, we are continuously striving to improve marketing efficiency through innovation and enhance the user experience through the creation of our premium learning content.

Feng Zhou: We are actually seeing the subscription services from here today.

Feng Zhou: What is the commercialization part?

Feng Zhou: Or make the AI tutor?

Feng Zhou: Thank you.

Feng Zhou: Hi, Thomas.

Feng Zhou: This is Feng.

Wayne Lee: We explore various innovations such as diversifying marketing channels and leveraging advanced AI technology to optimize marketing efficiency and mitigate challenges like the rising acquisition cost due to intense compilation. By innovating premium content such as our position from traditional living stream online classes to improve content embedded with AI technology, like adaptive question bank, we address user concerns such as in flexible schedules and provide a personal life learning experience. This premium content has exhibit strong user engagement with over 70 percent of attention rates in Q2.

Feng Zhou: The key thing here is the user scenario.

Wayne Lee: In summary, our strategic focus and the in-native approaches have resulted in the continued improvement in our operating margins, giving us Confidence in to expand the possibility of our business in the future Thank you Our next question today will come from Crystal Lee of China Merchant Security Please go ahead Oh, hi, I thank you for taking my question and congratulations on the strong results. I just want to know how should we integrate the recent opinions on promoting the high quality development of service consumption and particularly regarding the education and training consumption.

Feng Zhou: Although we have focused a lot on user scenarios, and Mr. P serves the home learning scenario, which we believe is the number one or number two of all consumer learning scenarios for students. So it is very important and not served well by current products.

Feng Zhou: So we think Mr. P fits this scenario very well.

Wayne Lee: Thank you Thank you We have noted that earlier this month the state councillors issue the opinions and promoting the high quality development of services consumption which emphasize the meeting the diverse and the personalized learning needs of the general public and the promoting the social training institutions to enhance the service quality in response to the public demands.

Wayne Lee: First, I think I'm just making clear that Youdao is always consistently to embrace the policy and adhere to operating within the scope of the permit by policies and by now it's still in the very early stage and we don't know we don't know any further and the detailed information like scope and category of the policy first of the definitely we are waiting the following information related with the public regarding the detailed information and what we can what we can say now is about the strategy of Youdao is to consist of investing to the education sectors within the AI features and if you see the dynamic of our products they always be innovative and I've created to create a new format of our products following the policies we think we will keep the updates and the existing product and provide the new services following the instruction of the existing policy and upcoming ones everything that will be the consistency to be delivered to deliver the message regarding on the policies and we can discuss more details right after we receive the more information from regarding on this piece of policy thank you thank you at this time we will conclude the question and answer session I'd like to turn the conference back over to management for any closing remarks thank you once again for many I'll say if you have any further questions please feel free to contact us at Youdao directly we'll reach out to Pearson financial communications in China or the US have a great day the conference is now concluded thank you for attending today's presentation and you may now disconnect

Feng Zhou: In terms of the product and our learnings and also the commercialization path, as you asked, I have several points to share. The first one is the initial feedback for the app is very positive.

Feng Zhou: The recent release of Mr. P is what we call a broad release for Flash.

Feng Zhou: So in the app form factor and in the X7 and X7 Pro dictionary pants.

Feng Zhou: In its first month on the market, users engage with Mr. P of AI tutor for nearly two million times.

Feng Zhou: Ranking it actually has the second most used feature of the X7 dictionary pants.

Feng Zhou: Only after word look up and translation, which is kind of the basic function of the device.

Feng Zhou: So it is already a number two.

Feng Zhou: So it surpassed the previous favorite features like William and Jingjiang.

Feng Zhou: So I think that proves its popularity.

Feng Zhou: The second point I want to share is Mr. P is a quite unique and leading product in the markets in terms of functionality.

Feng Zhou: It is the first all subject that's lying in total.

Feng Zhou: [inaudible] So we expect the experience to become much better over time.

Feng Zhou: And we believe this technology holds a lot of promise.

Feng Zhou: So I think I would think every family in China with students meets this company.

Feng Zhou: So yeah think about it.

Feng Zhou: So either in apps form or in hardware devices or other forms actually not only in China, but in other countries as well.

Feng Zhou: So that's how we look at it.

Feng Zhou: Third point is that regarding monetization and commercialization, we think subscription fees are a very scalable way of monetizing.

Feng Zhou: Monetizing, generative way of technology.

Feng Zhou: And obviously we also look at other ways like smart devices, B2B licensing and also international markets.

Feng Zhou: So I do not want to talk too much about our concrete plans, but you can look at our existing products to get some ideas.

Feng Zhou: For example, Hayako is already a significant contributor to our overall AI subscription sales, which in total we just shared reach over RMB 60 million in Q2 and the group nearly 200% over year.

Feng Zhou: And the world for Hayako comes from several things, continuous product improvements, positive word of mouth, and a lot of the user to user refers.

Feng Zhou: So we expect Mr. P to follow a similar path.

Feng Zhou: So we also did some projects for Hayako on the B2B front.

Feng Zhou: Hayako has entered over 100 schools nationwide.

Feng Zhou: We also focused on partnerships. Hayako became an official partner of the British Council's IELTS test.

Feng Zhou: So I believe this is also our sprint.

Feng Zhou: It has a long history of working effectively with international companies and institutions.

Feng Zhou: Hayako was also recently featured on the Apple App Store homepage, which is a testimony of its quality and popularity.

Feng Zhou: So overall we found that AI apps are popular among users.

Feng Zhou: And we have a lot of ideas. Our team has a lot of ideas to how to commercialize them, and we expect this year and next year to be a very good time period, time window to grow and monetize these AI apps.

Feng Zhou: So we will focus on them.

Feng Zhou: Yeah, thank you.

Howard Tan: Thank you.

Howard Tan: Our next question today will come from Howard Tom of Macquarie.

Howard Tan: Please go ahead.

Howard Tan: Hi, good evening, and thank you for taking my question.

Howard Tan: My question is about the non-academic tutoring market.

Peng Su: So I'd like to know more about your company's progress in student courses, and whether you will accelerate investment in the future.

Peng Su: Thank you.

Peng Su: Thank you, this is Peng, I will kind of the questions.

Peng Su: And in the second quarters, we made some progress in our non-academic courses, although our language training and logic-sinking courses are in their early stage, but in terms of the course feelings, both have like experience a year over year, course over 100%, 100%.

Peng Su: As in English, our communication and the other skill-based training has always been the strength of your dog.

Peng Su: As you know, and the empowered by the AI, we can now provide the users with very comprehensive services and the highly customer services during before and after classes.

Peng Su: On the other hand, we have already have the very strong equity and high quality content to provide the excellence in class services to the users.

Peng Su: There is a rapid development of our AI-driven subscription services, and we can also access the users' impersonalization and post-classic scenario between their listening and speaking capabilities.

Peng Su: For example, as we mentioned was in the last several quarters, the AI calls all allow users to engage in oral communication anytime and anywhere, and interact with users, related to speech and a grammar during the conversations.

Peng Su: For logic-sinking courses, it is highly demanded by the users.

Peng Su: Parents always hope to the death, death kind of through the courses, I think, that there are children-sinking abilities we are continuously improved.

Peng Su: Our product meets the needs of the parents, and additionally when the students in conference are part of an after-classes, as Dr. Tumanshin, Mr. P.

Peng Su: AI tutors can help them to answer the questions and I think with a different way, and we didn't just like Dr. Tumanshin, the mentors directly give them the answers, but they just try to lead in them to think about all the path.

Peng Su: We think that will be the kind of innovation and that will be really need from the family education scenarios.

Peng Su: Looking ahead, we will continue to emphasize the high-quality development of the not-ademic courses.

Peng Su: If we identify the clear opportunities, we are ensuring the health and offer of business.

Peng Su: We will consider increasing the investment in the not-ademic courses.

Peng Su: Thank you.

Feng Zhou: I think you need to choose which courses to provide very carefully to be successful.

Feng Zhou: It is particularly important for non-academic learning because they can be very wide in terms of a topic, so you can choose from a very wide set of topics, but you have to choose very carefully.

Feng Zhou: Because parents, they may initially be interested in different topics.

Feng Zhou: They may want to try it, but in the end, they choose the courses that are really helpful for their kids in the long term.

Feng Zhou: Only those.

Feng Zhou: I think those courses will become popular for the long term, so you need to choose carefully.

Feng Zhou: So that's what we focus on for non-necidemic courses.

Feng Zhou: For example, we believe Chinese literature abilities are very, very important for kids.

Feng Zhou: Being able to grasp the power of language is one of the key abilities that benefits of a person's whole life.

Feng Zhou: So that course has proven successful.

Feng Zhou: You'll double in the last several years.

Feng Zhou: So we will keep improving.

Feng Zhou: And also one other thing we think that's really important is computing skills.

Feng Zhou: Everyone knows that it's key for future careers.

Feng Zhou: So our competitive programming course, Youdao Little Turing, has been running for six years.

Feng Zhou: So we had our first national NOI Gold Medalist for this year.

Feng Zhou: So the key thing is that if we start some course, some non-necidemic course, we will make sure that we choose carefully, and we want it to be successful for many years to come.

Feng Zhou: Ya, so I think that's important.

Bob Jean: Our next question today will come from Bob Jean of High-Tie Securities.

Bob Jean: Please go ahead.

Bob Jean: Hello, Jean.

Bob Jean: Your line is open.

Bob Jean: Hello.

Bob Jean: Can you hear me?

Bob Jean: Your line is live.

Bob Jean: Yes, thank you.

Bob Jean: Thank you, Manager for taking my question and congratulations on the strong performance stage culture.

Feng Zhou: I have a question regarding smart life.

Feng Zhou: Based on the revenue from the smart device, it's still decreasing.

Feng Zhou: Could you share some cover of strategy for Youdao Dictionary 10 for the second half of the year and the average?

Feng Zhou: Of course.

Feng Zhou: Thank you.

Feng Zhou: For the last few quarters, we've reorganized our device sales channels as we communicated in the last step of course.

Feng Zhou: We also focused our products to be, again, around our core dictionary paying category.

Feng Zhou: This year, we've released the four dictionary pens from the mid-year A6 Pro to flagships X7 and X7 Pro.

Feng Zhou: The good thing is users have told us that they really like these new products.

Feng Zhou: Youdao Dictionary Payne is ranked the number one seller in the category during the June 18th shopping festival on JD.com.

Feng Zhou: For five years, yes, exactly.

Feng Zhou: We're reflecting their users' preference for our brand.

Feng Zhou: X7. In its first month on the market, generated twice the revenue of last year's flagship, X6 Pro, as I just talked about during the preparation marks. So these good news tell us that our overall strategy of focusing on core products and channel efficiency are correct.

Feng Zhou: So what we need now is we need to continue to focus on our key products, many different kinds, and view strong sales capability and efficient channels.

Feng Zhou: At the same time, another good thing is that the device business and financial performance has improved after they're refocusing. So that set up a good foundation for the business to build on.

Feng Zhou: So here are a few more kind of points about the dictionary pins.

Feng Zhou: So the first one is about the high end products.

Feng Zhou: So these are our strengths and our first large language model application were on our high end products.

Feng Zhou: So in July, we launched the dictionary pin X7 and last week X7 Pro, both the carry large language model features, including Mr. P and AI translation.

Feng Zhou: So as we just shared, Mr. P is the number two most popular function.

Feng Zhou: And AI translation is also very popular.

Feng Zhou: So that's really encouraging for us, because only our products have these features right now.

Feng Zhou: Second, the point I want to share is regarding price point.

Feng Zhou: So last year, we expanded into the mid-range market with the launch of the S&A series, aiming to serve a broader audience.

Feng Zhou: And meet diverse user needs in Q2.

Feng Zhou: So one of the result is dictionary pin unit sales grew by over 50% over here.

Feng Zhou: And in addition, net revenue from dictionary pins increased nearly 10% over here.

Feng Zhou: So unit growth growth 50%, revenue growth 10%.

Feng Zhou: So that means the strategy of what's going for a very low price is correct.

Feng Zhou: We didn't go for price walk.

Feng Zhou: So our cheapest product, A6 Pro, is 2, 50 or 100 to ran higher, more expensive than our peers.

Feng Zhou: So we believe that's that's a good balance to strike.

Feng Zhou: So achieving allowed us to achieve both unit growth and revenue growth.

Feng Zhou: I think that's a good trend.

Feng Zhou: Yeah.

Feng Zhou: The third point is regarding growth margin ratio, because this is something that people look at carefully. So in Q2, our growth margin ratio for my devices was a bit low out to 30%. Again, that was mostly due to the product mix as we just discussed. So, more mid-tier product, fewer high-end products.

Feng Zhou: However, as we ramp up on the high-end product in Q3 and Q4, so we are so we have a good feature differentiation, a lot of AI features, and the hardware is much stronger with AI cameras the first time this year, and with much better screens that users really like.

Feng Zhou: So, and we also improved our supply chain a lot over the last year. So, that lowered our supply cost.

Feng Zhou: So, we think 40% growth margin ratio is a reasonable and feasible growth target to shoot for.

Feng Zhou: So, I think all the more, as we said, we expect Q2 to be the point operationally for the hardware business.

Feng Zhou: Yeah, so, so we're looking forward to it's it's future future performance.

Feng Zhou: Thank you.

Yikong Oh: Our next question today will come from Yikong Oh, six.

Yikong Oh: Please go ahead with your question.

Yikong Oh: Evening management, thank you for taking that question.

Yikong Oh: My question is about the profit.

Wayne Lee: Will we achieve profitability this year?

Wayne Lee: And if so, will we be able to sustain profitability in the future?

Wayne Lee: Thank you.

Wayne Lee: Thank you for your question.

Wayne Lee: This is Wayne.

Wayne Lee: I will take you all question.

Wayne Lee: We have fully committed to improving the overall health and achieving full-year positive operating income in the future. For the past year, we have successfully reduced operating loss on a year-over-year basis, especially in the first half of this year. We are operating loss were reduced by over 90% year-year to approximately 40 million. The story of data indicates that due to seasonal factors, typically higher operating income in the second half year compared to the first half year.

Wayne Lee: Given our confidence in achieving positive operating income for the full year of 2024, despite intense competition and various uncertainties. We believe that this possibility is expected to be sustainable a full year basis in the future due to the following reasons.

Wayne Lee: First We have a strong probability in three-core areas.

Wayne Lee: Digital content services, online marketing services and the AI driven through exchange services have been identified as our key strategic focus areas.

Wayne Lee: We allocate more without this to this area, which has resulted in probability and will continue to do so.

Wayne Lee: Our online marketing services, filled by our RTA technology, data capability, and the precise and understanding of user needs, have achieved over 50% year-over-year network growth for seven consecutive quarters driving probability.

Wayne Lee: Through leveraging AI technology and high quality content, our digital content services, especially links, should have improved learning efficiency and effectiveness for our users.

Wayne Lee: The insurcerating products and the services have been pivotal in driving revenue and the profit growth.

Wayne Lee: AI driven subscription services, a key aspect of our AI commercialization efforts have experienced the strong sales growth and we have confidence in their future probability.

Wayne Lee: Second, enhance the financial performance in non-copiness.

Wayne Lee: For non-copiness such as my devices and non-digital content services, we have implemented the strict health requirements focusing on higher AI metrics and the label efficiency.

Wayne Lee: This has resulted in the temporary decline in over-opiness of skill, but has significantly improved the health of this business and the reduced losses.

Wayne Lee: Third, operational efficiency improvement through AI technology and the content innovation.

Wayne Lee: To achieve profitability, we are continuously striving to improve marketing efficiency through innovation and enhance the user experience through the creation of our premium learning content. We explore various innovations such as diversifying marketing channels and leveraging advanced AI technology to optimize marketing efficiency and mitigate challenges like driving acquisition costs due to intense compilation.

Wayne Lee: By innovating premium content such as our transition from traditional living stream online classes to prerecorded content embedded AI technology like adaptive question bank, we address user concerns such as in flexible schedules and provide personalized learning experience.

Wayne Lee: This premium content has a strong user engagement with over 70% of attention rates in Q2.

Wayne Lee: In summary, our strategic focus and the in-notive approaches have resulted in the continued improvement in our operating margins, giving us confidence in to expand the possibility of our business in the future.

Wayne Lee: Thank you.

Crystal Lee: Our next question today will come from Crystal Lee, a China merchant security.

Crystal Lee: Please just want to know how should we integrate the recent opinions on promoting the high quality development of service consumption, and particularly regarding the education and training consumption.

Crystal Lee: Thank you.

Feng Zhou: Ya, we have noted that earlier this month, the state councillors issue the opinions and promoting the high quality development of services consumption.

Feng Zhou: We shall emphasize the diverse and personalized learning needs of the general public, and promoting the social training institutions to enhance the service quality in response to the public demands.

Feng Zhou: First, I think that just making it clear, Yudou is always consistently to embrace the policy and adhere to operating within the scope of the permit by policies.

Feng Zhou: And by now, it's still in the very early stage, and we don't know any further, and the detailed information like scope and the category of the policy.

Feng Zhou: First of all, definitely we are waiting to follow information related with the public regarding the detailed information.

Feng Zhou: And what do we, what do we can, what do we can say now?

Feng Zhou: It's about the strategy of Yudou is to consist of investing into the education sectors within the AI features.

Feng Zhou: And if you see the dynamic of our products, they always be innovative and creative to create the new format of our products following the policies.

Feng Zhou: We think we will keep the updates and the existing product and provide the new services following the instruction of the existing policy and upcoming ones.

Feng Zhou: I think that will be the consistency to be delivered to the delivery message regarding on the policies.

Feng Zhou: And then we can discuss more details right after we receive the more information from regarding on this detailed policy.

Feng Zhou: Thank you.

Operator: At this time, we will conclude the question and answer session.

Feng Zhou: I'd like to turn the conference back over to management for any closing remarks.

Feng Zhou: Thank you.

Feng Zhou: Thank you once again for being out today.

Feng Zhou: If you have any further questions, please feel free to contact us at Yudou directly or reach out to Pearson financial communications in China or the US.

Operator: Have a great day.

Operator: The conference has now concluded.

Operator: Thank you for attending today's presentation.

And you may now disconnect.

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