Youdao Inc (DAO) 2024 Q2 法說會逐字稿

Good day and welcome to the Youdao 2024 second-quarter earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jeffrey Wang, Investor Relations Director of Youdao. Please go ahead.

大家好，歡迎參加有道 2024 年第二季財報電話會議。今天的會議正在錄製中。這次我想把會議交給有道投資者關係總監王傑先生。請繼續。

Thank you, operator. Please note the discussion today will contain forward-looking statements, related to the future performance of the company, which are intended to qualify for the Safe Harbor from liability, as established by the US Private Securities Litigation Reform Act. Such statements are not guarantees of the future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.

謝謝你，接線生。請注意，今天的討論將包含與公司未來業績相關的前瞻性陳述，這些陳述旨在符合美國私人證券訴訟改革法案規定的免責安全港的資格。此類陳述並非對未來績效的保證，並受到某些風險和不確定性、假設和其他因素的影響。其中一些風險超出了公司的控制範圍，可能導致實際結果與今天的新聞稿和本次討論中提到的結果有重大差異。

A general discussion of the risk factors that could affect Youdao's business and financial results is included in certain company filings with the US Securities and Exchange Commission. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures, for comparison purposes only.

可能影響有道業務和財務績效的風險因素的一般討論包含在某些公司向美國證券交易委員會提交的文件中。除法律要求外，本公司不承擔更新此前瞻性資訊的任何義務。在今天的電話會議上，管理階層還將討論某些非公認會計準則財務指標，僅供比較之用。

For the definitions of non-GAAP financial measures, and reconciliations of GAAP to non-GAAP financial results, please see the 2024 second quarter financial results news release issued earlier today. As a reminder, this conference is being recorded. A webcast replay of this conference call will be also available on Youdao's corporate website at ir.youdao.com.

有關非 GAAP 財務指標的定義以及 GAAP 與非 GAAP 財務業績的調整表，請參閱今天早些時候發布的 2024 年第二季度財務業績新聞稿。提醒一下，本次會議正在錄製中。本次電話會議的網路直播重播也將在有道公司網站 ir.youdao.com 上提供。

Joining us today on the call from Youdao's Senior Management are Dr. Feng Zhou, our Chief Executive Officer; Mr. Lei Jin, our President; Mr. Peng Su, our VP of Strategy and Capital Markets; and Mr. Wayne Li, our VP of Finance. I will now turn the call over to Dr. Zhou to review some of our recent highlights and strategic direction.

今天參加有道高階管理層電話會議的是我們的執行長週峰博士；我們的總裁雷進先生；蘇鵬先生，我們的策略與資本市場副總裁；以及我們的財務副總裁 Wayne Li 先生。我現在將電話轉給週博士，回顧我們最近的一些亮點和戰略方向。

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 Renminbi, unless otherwise specifically stated. In the second quarter of 2024, net revenues reached RMB1.3 billion, growing 9.5% year-over-year. Operating cash inflow reached record level of RMB250.2 million, an increase of 88.2% year-over-year. Loss from operations was RMB72.6 million as Q2 is typically seasonally weak in the bottom line, and it narrowed by 74.9% year-over-year.

謝謝你，傑弗裡。感謝大家參加今天的電話會議。在開始之前，我想提醒大家，除非另有說明，所有數字均以人民幣為單位。2024年第二季度，淨收入達到人民幣13億元，較去年同期成長9.5%。經營現金流入創歷史新高，達人民幣2.502億元，較去年成長88.2%。由於第二季獲利通常呈現季節性疲軟，營運虧損為 7,260 萬元，較去年同期收窄 74.9%。

In the first-half of 2024, net revenues reached RMB2.7 billion, marking an increase of 14.5% year-over-year. Loss from operations was RMB42.6 million, narrowing 91.2% year-over-year. Operating cash outflow was reduced to RMB140.8 million, reflecting an improvement of 53.7% year-over-year. The financial performance was in line with our plan. Now, let's review the major developments across our business lines in the second quarter.

2024年上半年，淨收入達人民幣27億元，年增14.5%。經營虧損為人民幣4,260萬元，較去年收窄91.2%。經營現金流出減少至人民幣140.8百萬元，較去年同期改善53.7%。財務業績符合我們的計劃。現在，讓我們來回顧一下第二季各業務線的主要進展。

Net revenues from learning services were RMB643.8 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 RMB403.3 million, up 6.8% year-over-year. Operating cash inflows generated by digital content services exceeded RMB200 million. Youdao Lingshi continued to drive product upgrades and customer satisfaction.

學習服務淨收入為人民幣6.438億元，較去年同期小幅下降5.5%。數位內容服務維持健康成長軌跡，實現淨收入人民幣4.033億元，年增6.8%。數位內容服務產生的經營現金流入超過人民幣2億元。有道靈石持續推動產品升級和顧客滿意度。

Firstly, in Q2 we released over 400 new carefully-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, Lingshi pioneered the approach of personalized pre-recorded video learning.

首先，第二季我們為不同級別的學生發布了超過400個精心校準的全新分層學習影片。我們也大幅升級了基於課堂的學習體驗，以獲得更好的動機和背景。正如我們之前討論的，靈石開創了個人化預錄影片學習的方法。

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 week-end live consultation with our experienced staff members. These are all key to the high effectiveness of our products and we keep improving them every year.

在這個包含數千個高品質影片的龐大庫的基礎上，我們提供了一系列重要的服務，包括自動診斷學生當前的學習水平、基於課堂的數位學習、個人化測驗生成以及與我們經驗豐富的週末即時諮詢工作人員。這些都是我們產品高效的關鍵，我們每年都在不斷改進。

Second, in terms of application of AI and growth initiatives, we upgrade our college admission consultation services to the all-new AI College Admission Advisers AI (spoken in foreign language) in Q2. 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 page views, rising by 30% year-over-year, making it a key asset in attracting new students and parents.

其次，在人工智慧的應用和成長舉措方面，我們在第二季將升學諮詢服務升級為全新的AI升學顧問AI（外語）。AI Advisor利用大語言模型，有效地討論和指導學生的大學申請過程，幫助他們選擇大學和專業。自新版本發布以來，該服務的頁面瀏覽量接近 300 萬次，年增 30%，成為吸引新生和家長的關鍵資產。

Continuous product and service upgrades significantly boosted the retention rate of Youdao Lingshi, reaching over 70% in the second quarter, a record high and an increase of more than 10 percentage points year-over-year. In addition, as for Youdao Literature, we offered nearly 40,000 high-quality AI writing refinements in the second quarter, improving our retention rate by approximately 10 percentage points on a year-over-year basis.

產品與服務的持續升級，顯著提升了有道靈石的留存率，第二季達到70%以上，創歷史新高，較去年同期成長超過10個百分點。此外，有道文學第二季提供近4萬個優質AI寫作精修，留存率年增約10個百分點。

Next in learning services segment is our AI-driven subscription services. In the second quarter, our AI-driven subscription services maintained rapid growth, with total sales surpassing RMB60 million, marking a nearly 200% year-over-year increase and over 30% quarter-over-quarter growth. Moreover, this represents the six consecutive quarter of over 50% year-over-year growth.

學習服務領域的下一個是我們的人工智慧驅動的訂閱服務。第二季度，我們的人工智慧訂閱服務維持快速成長，總銷售額突破6,000萬元，較去年同期成長近200%，較上季成長超過30%。此外，這代表連續六個季度同比增長超過 50%。

Product wise, in June, we launched a major new mobile app, Mr. (inaudible) AI Tutor, the first all-subject AI tutor in China and it received positive feedback from users after its initial integration into Youdao Dictionary Pen earlier this year. Second, AI translation in Youdao Desktop Translation now supports languages other than English and Chinese. There is also new support for term databases and multi-modal document input. These upgrades pushed AI translation usage to exceed 30 million times in Q2.

產品方面，6月份，我們推出了一款重要的新行動應用程式——（聽不清楚）AI導師，這是中國第一個全學科AI導師，今年早些時候首次整合到有道字典筆後，得到了用戶的正面回饋。其次，有道桌面翻譯中的AI翻譯現已支援英文和中文以外的語言。還提供了對術語資料庫和多模式文件輸入的新支援。這些升級推動第二季人工智慧翻譯使用量超過 3,000 萬次。

Third, in collaboration with NetEase Cloud Music, Youdao Dictionary introduced a music sentence feature in the second quarter, helping users learn vocabulary while listening to music. Last but not least, Hi Echo introduced Children Mode, offering tailored topics for children, child-friendly digital avatars, and generating exclusive post-conversation reports to aid 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.

第三，有道字典與網路易雲音樂合作，在第二季推出了樂句功能，幫助使用者在聽音樂的同時學習詞彙。最後，Hi Echo推出了兒童模式，為兒童提供量身定制的主題、適合兒童的數位化身，並產生獨家對話後報告，幫助孩子提高英語口語能力。我們也很高興地看到，兒童模式的平均使用時間是其他模式的近兩倍，凸顯了其在吸引和留住用戶以及提高用戶英語水平方面的有效性。

Our online marketing services segment maintained a strong growth trajectory in Q2, with net revenues reaching RMB511.2 million, hitting a record high and representing an increase of 68.4% year-over-year. This marks the seventh consecutive quarter of over 50% year-over-year growth, driven mainly by RTA, Real-Time API, and domestic KOLs' ongoing robust performances, with RTA revenues more than doubling year-over-year in Q2.

第二季度，我們的線上行銷服務部門保持強勁成長勢頭，淨收入達到人民幣5.112億元，創歷史新高，年增68.4%。這標誌著連續第七個季度同比增長超過 50%，主要得益於 RTA、Real-Time API 和國內 KOL 持續強勁的表現，第二季度 RTA 收入同比增長了一倍多。

Furthermore, as large language models rapidly advance in the market, the demand for promoting these models and their applications among tech companies has surged. Our team seized this opportunity and is helping leading players like ByteDance, Doubao, Zhipu and Baidu ERNIE in this area to grow their products.

此外，隨著大型語言模式在市場上的迅速發展，在科技公司中推廣這些模型及其應用的需求激增。我們的團隊抓住了這個機會，正在幫助字節跳動、豆寶、知普、百度ERNIE等該領域的領先企業發展他們的產品。

In Q2, net revenues from AI tools advertisement grew by more than 100% quarter-over-quarter. Additionally, our advertising collaboration with NetEase Group has been advancing smoothly and demonstrating synergy. On one hand, Youdao's data application significantly enhanced the traffic monetization rate on a number of NetEase assets by over 100% in Q2.

第二季度，AI工具廣告淨收入較上季成長超過100%。此外，我們與網易集團的廣告合作進展順利，並發揮了綜效。一方面，有道的數據應用使得網易多項資產第二季流量變現率大幅提升超過100%。

On the other hand, our improved advertising performance has attracted more NetEase product teams to use our service. In the second quarter, the percentage of our total advertising revenue from NetEase as our client increased around 3 percentage points quarter-to-quarter, it is still less than 10% of our total ad revenue, indicating significant future growth potential. Regarding the smart devices segment, the net revenues were RMB166.7 million in Q2, down 25% year-over-year. The decline was in large part due to unfavorable product mix. In Q1, we updated our entry-level dictionary pens, so these reached record unit sales in Q2.

另一方面，我們改進的廣告效果吸引了更多網易產品團隊使用我們的服務。第二季度，網易作為客戶的廣告收入占我們總廣告收入的比例環比上升了約3個百分點，但仍低於我們廣告總收入的10%，未來成長潛力巨大。智慧型設備板塊第二季淨收入為人民幣1.667億元，較去年同期下降25%。下降很大程度上是由於不利的產品結構。在第一季度，我們更新了入門級字典筆，因此在第二季度達到了創紀錄的銷售量。

In the meantime, our high-end products were from last year and reached the later part of their life cycle in Q2. So high-end products had relatively lower sales. These factors negatively impacted total devices revenues 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. In fact, Youdao Dictionary Pen was again the category top seller on JD.com during the June 18, Shopping Festival for the fifth consecutive year. And Q2 unit sales showed a year-over-year increase of over 50%, broadening our brand's reach.

同時，我們的高端產品是去年的產品，在第二季度進入了生命週期的後期。因此高端產品的銷售量相對較低。這些因素對第二季的設備總收入和平均單價產生了負面影響。我們預計第二季將成為今年設備業務的營運低點，因為我們目前正在為新學校增加高端產品。事實上，在6月18日購物節期間，有道字典筆再次成為京東類別最暢銷的產品。第二季銷售量年增超過 50%，擴大了我們的品牌影響力。

More recently, we launched the new high-end Youdao Dictionary Pen X7. Large Language Model functions like AI translation and Mr. P AI Tutor have already been widely welcomed by users. First-month sales units doubled those of the X6 Pro, the high-end product released last summer. This week we just released our top-of-the-line X7 Pro, with a premium screen and more advanced AI features, it is gaining a lot of interest.

最近，我們推出了新款高階有道字典筆X7。AI翻譯、P先生AI導師等大型語言模型功能已經受到使用者的廣泛歡迎。去年夏天發表的高階產品X6 Pro首月銷量翻了一番。本週我們剛發布了頂級的 X7 Pro，擁有優質的螢幕和更先進的 AI 功能，引起了許多人的興趣。

Looking at our business as a whole, in the first-half of this year, we executed on our overall strategy of AI plus education and made significant progress in our journey. We focused our resources on three core businesses: digital content services, especially Youdao Lingshi, 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 assets in our mission of helping every person learn more efficiently.

從整個業務來看，今年上半年，我們實踐了人工智慧+教育的整體策略，並取得了重大進展。我們將資源集中在三個核心業務：數位內容服務（特別是有道靈石）、線上行銷服務和人工智慧驅動的訂閱服務。這三個領域都顯示出良好的成長、健康的經濟、我們獨特的競爭力和長遠的未來跑道。更重要的是，它們是我們幫助每個人更有效學習這項使命的關鍵資產。

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 show 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% in the first-half of this year, down by approximately 13 percentage points year-over-year, a very good improvement.

同時，我們在財務上努力推動永續獲利，我們相信這是我們下一階段成長的基礎。我對團隊的進步和紮實的執行力感到滿意。我們的營運和財務指標顯示我們業務的競爭力不斷增強。例如，除了我一開始分享的數字外，今年上半年銷售和行銷費用佔淨收入的比例為35.8%，年減了約13個百分點，這是一個非常低的數字。

Looking ahead, barring unexpected market changes, we expect the business to achieve full-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 proves this and will continue to drive our growth.

展望未來，除非市場出現意外變化，我們預期該業務將在不久的將來實現全年正營業收入。有道的優勢在於我們獨特的能力，將技術實力與卓越營運相結合，推動跨業務線的人工智慧賦能。我們的線上行銷和人工智慧訂閱服務的快速發展證明了這一點，並將繼續推動我們的成長。

Our online courses, underpinned by high-quality content, differentiated services and unique ways of leveraging AI, are another pillar of our future growth. In the long-term, the future of AI plus education looks incredibly bright and we will strive to lead the charge. With that, I will turn the call over to Su Peng to provide you with more detailed insights into our financial performance. Thank you.

我們的線上課程以高品質的內容、差異化的服務和利用人工智慧的獨特方式為基礎，是我們未來成長的另一個支柱。從長遠來看，人工智慧+教育的未來看起來非常光明，我們將努力引領這股潮流。接下來，我將把電話轉給蘇鵬，為您提供有關我們財務表現的更詳細的見解。謝謝。

Thank you, Dr. Zhou, and hello everyone. Today I will be presenting some financial highlights from the second quarter of 2024. We encourage you to read through our press release issued earlier today for further details.

謝謝週醫生，大家好。今天，我將介紹 2024 年第二季的一些財務亮點。我們鼓勵您閱讀我們今天早些時候發布的新聞稿以了解更多詳細資訊。

For the second quarter, total net revenues were RMB1.3 billion or USD181.9 million, representing a 9.5% increase from the same period of 2023. Net revenues from our learning services were RMB643.8 million, or USD88.6 million, representing a 5.5% decrease from the same period of 2023. Net revenues from our smart devices were RMB166.7 million, or USD22.9 million, down 25% from the same period of 2023, which was mainly attributable to the decreased unit price due to the change of product mix.

第二季淨收入總額為13億元人民幣（1.819億美元），較2023年同期成長9.5%。學習服務淨收入為人民幣 6.438 億元（8,860 萬美元），較 2023 年同期下降 5.5%。我們的智慧設備淨收入為人民幣1.667億元（合2,290萬美元），較2023年同期下降25%，主要是因為產品結構變化導致單價下降。

Net revenues from our online marketing services were RMB511.2 million, or USD70.3 million, representing a 68.4% increase from the same period of 2023. The increase was primarily due to increased sales of the performance-based advertisements through third parties' internet properties, which was driven by our continued investments in cutting-edge AI technology.

我們的網路行銷服務淨收入為人民幣 5.112 億元（7,030 萬美元），較 2023 年同期成長 68.4%。這一成長主要是由於我們對尖端人工智慧技術的持續投資推動了透過第三方網路資產的效果廣告銷售額的增加。

For the second quarter, our total gross profit was RMB636.8 million, or USD87.6 million, representing a 12.3% increase from the second quarter of 2023. Gross margin for learning services was 60% for the second quarter of 2024, compared with 57.4% for the same period of 2023. Gross margin for smart devices was 30.3% for the second quarter of 2024, compared with 35.8% for the same period of 2023. Gross margin for online marketing services was 39.1% for the second quarter of 2024, compared with 31.9% for the same period of 2023.

第二季度，我們的總毛利為人民幣 6.368 億元（約 8,760 萬美元），較 2023 年第二季成長 12.3%。2024 年第二季學習服務毛利率為 60%，而 2023 年同期為 57.4%。2024年第二季智慧型設備毛利率為30.3%，而2023年同期為35.8%。2024年第二季網路行銷服務毛利率為39.1%，而2023年同期為31.9%。

For the second quarter, we reduced our total operating expenses to RMB709.3 million, or USD97.6 million, compared with RMB856.3 million for the same period of last year. Looking at our expenses in more details. Sales and marketing expenses declined to RMB515.7 million, compared with RMB587.7 million in the second quarter of 2023. Research and development expenses were decreased to RMB153 million, compared with RMB205.1 million in the second quarter of 2023.

第二季度，我們將總營運費用減少至 7.093 億元（合 9,760 萬美元），而去年同期為 8.563 億元。更詳細地查看我們的支出。銷售和行銷費用下降至人民幣 5.157 億元，而 2023 年第二季為人民幣 5.877 億元。研發費用減少至人民幣1.53億元，2023年第二季為人民幣2.051億元。

Our operating loss margin also significantly narrowed to 5.5% in the second quarter of 2024, compared with 24% for the same period of last year. For the second quarter of 2024, we narrowed our net loss attributable to ordinary shareholders to RMB99.5 million, or USD13.7 million, compared with RMB299.2 million for the same period of last year. Non-GAAP net loss attributable to ordinary shareholders for the second quarter was RMB96 million, or USD13.2 million, compared with RMB283.6 million for the same period of last year.

2024 年第二季度，我們的營運虧損率也大幅收窄至 5.5%，去年同期為 24%。2024年第二季度，我們將歸屬於普通股股東的淨虧損縮小至人民幣9,950萬元（合1,370萬美元），而去年同期為人民幣2.992億元。第二季非美國通用會計準則歸屬於普通股股東的淨虧損為 9,600 萬元（約 1,320 萬美元），而去年同期為 2.836 億元。

Basic and diluted net loss per ADS attributable to ordinary shareholders for the second quarter of 2024 was RMB0.85, or USD0.12. Non-GAAP basic and diluted net loss per ADS attributable to ordinary shareholders for the second quarter was RMB0.82, or USD0.11. Our net cash provided by operating activities was RMB250.2 million, or USD34.4 million, for the second quarter.

2024 年第二季歸屬於普通股股東的每股美國存託股基本及稀釋淨虧損為 0.85 元人民幣（約 0.12 美元）。第二季歸屬於普通股股東的非美國通用會計準則每股美國存託股基本及攤薄淨虧損為 0.82 元（約 0.11 美元）。第二季經營活動提供的淨現金為 2.502 億元（約 3,440 萬美元）。

Looking at our balance sheet, as of June 30, 2024, our contract liabilities, which mainly consist of deferred revenue generated from our learning services, were RMB1 billion, or USD142.9 million, compared with RMB1.1 billion as of December 31, 2023. At the end of the period, our cash, cash equivalents, current and non-current restricted cash, time deposits, and short-term investments totaled RMB568.5 million, or USD78.2 million.

從我們的資產負債表來看，截至2024 年6 月30 日，我們的合約負債（主要包括學習服務產生的遞延收入）為10 億元人民幣（1.429 億美元），而截至12 月31 日為11 億元人民幣。期末，我們的現金、現金等價物、流動和非流動限制性現金、定期存款和短期投資總計人民幣5.685億元（折合7,820萬美元）。

This concludes our prepared remarks. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

我們準備好的演講到此結束。感謝您的關注。我們現在想開始回答您的問題。接線員，請繼續。

(Operator Instructions)

（操作員說明）

Brian Gong, Citi.

布萊恩·龔，花旗銀行。

Thanks, management, for picking that question. I have a question regarding our strategy on education sector. So as we observed, competitors are wrapping up their investment in the whole sector, right, education sector. Given the intensified competition, what is our strategy? Thank you.

謝謝管理層提出這個問題。我對我們的教育部門策略有疑問。正如我們所觀察到的，競爭對手正在結束對整個產業的投資，沒錯，就是教育產業。面對激烈的競爭，我們的策略是什麼？謝謝。

Thank you, Brian. This is Peng. I will handle the question first. And before answering the question, I will give a very quick background regarding the education scenario in China. And if you see the numbers of the candidates registered for the college entrance exam has been increased from roughly 10 million in 2019 to over 30 million in this year. It's likely to keep increasing in the next decades as well.

謝謝你，布萊恩。這是彭。我先處理一下這個問題。在回答問題之前，我將先簡單介紹一下中國的教育狀況。你看，高考報名人數已經從2019年的1000萬左右增加到今年的3000萬以上。未來幾十年它也可能繼續增加。

Also the exam is getting more comparative. The overall college entrance exam scoreline has been shown as the upward trend. Taking the example as the -- in Tianjin, 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 will continue to rise.

考試也變得越來越具有比較性。高考整體成績呈現上升趨勢。以天津為例──比起2019年，提升了70多分。所以我們認為高考備考的需求會持續上升。

If you go back to questions, we do see the competition intensify moderately for the pre-college 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 keeping to the leading player here and benefit from the more dynamic markets.

如果你回到問題上來，我們確實看到今年大學預科學習服務的競爭適度加劇。考慮到當前的市場狀況，這是可以理解的。我相信我們有必要的手段繼續投資，以保持領先地位並從更有活力的市場中受益。

The first thing we do is we will still continue to drive the customer satisfaction and the retentions. We have already passed industry-leading satisfaction and retention rates. During the first-half of this year, our retention rates reached a historical high in Q2 exceeding about 70% and representing a year-over-year increase of over 10%. I think that metric is a testament to the user's recognitions of our products and services.

我們要做的第一件事是我們仍將繼續提高客戶滿意度和保留率。我們已經達到了行業領先的滿意度和保留率。今年上半年，我們的留存率在第二季達到歷史新高，超過70%左右，年增超過10%。我認為這個指標證明了用戶對我們的產品和服務的認可。

Secondly, we think we will continue to produce outstanding learning results. As long as we had already helped the students get the good results and get into their dreaming university and school, most students will come to us and if you look at our results from the last year and this year, we almost more than doubled the number of the students getting to the top school and universities in this year. I think that is important thing that can help us to build up our reputations in the market.

其次，我們認為我們將繼續取得優異的學習成果。只要我們已經幫助學生取得了好成績，進入了他們夢想的大學和學校，大多數學生都會來找我們，如果你看看我們去年和今年的結果，我們的數量幾乎增加了一倍多今年進入頂尖學校和大學的學生人數。我認為這很重要，可以幫助我們在市場上建立聲譽。

I think that this is possible, because I think you don't ensure 10-years format of our classes, the AI plus content and the comprehensive service models. I think that's pretty innovative and creative and the proven learning methodologies for the college entrance exam preparation and the others.

我認為這是可能的，因為我認為你不保證我們的課程10年的形式，AI+內容和綜合服務模式。我認為這是非常創新和有創意的，並且是經過驗證的高考準備和其他學習方法。

Third, we think we are applying more AI technology in our business, such as the segment we have been mentioning previously, like the AI Quiz recommendation and the AI-based college admissions advice services. In Q2, our AI College application advisors generate nearly 60,000 application form, roughly 30% increase year-over-year. Positioning, I think we believe that is -- will be the leading one in the market in this year. I think what AI can bring us the privilege over the market.

第三，我們認為我們正在將更多的人工智慧技術應用到我們的業務中，例如我們之前提到的細分領域，例如人工智慧測驗推薦和基於人工智慧的大學招生諮詢服務。第二季度，我們的 AI 學院申請顧問產生了近 60,000 份申請表，年增約 30%。我認為我們相信定位是——將成為今年市場的領先定位。我認為人工智慧可以為我們帶來市場上的優勢。

The fourth one we think we will keep innovating and investing in the market as well. We will continue to strengthen our market channels and the branding development, providing a better integrated experience for the users through online and offline coordination. This year, through the month of -- such as the WeChat video accounts, (spoken in foreign language), we have enhanced the localized live broadcast and operate to provide the users with a range of localization services and highly customer services in the different cities.

第四，我們認為我們也將繼續創新並投資市場。我們將持續加強市場通路和品牌建設，透過線上線下協同，為用戶提供更好的一體化體驗。今年，我們透過微信視訊號碼等微信視訊號碼（外語）加強本地化直播和運營，為不同城市的用戶提供一系列的本地化服務和高度的客戶服務。

We will fully leverage our teaching strengths and IT operational experience to enhance our online customer acquisitions, competitive and reduce customer acquisition cost. I think as we will persist in exploring offline services and opportunities and looking for the better chance to invest into that market.

我們將充分發揮我們的教學優勢和IT營運經驗，增強我們的線上獲客競爭力，降低獲客成本。我認為我們將堅持探索線下服務和機會，並尋找更好的機會投資該市場。

I think above all, we think that's what we are confident about future development of the Youdao interest business and service. We think in the long run, definitely the high quality products always will be the answer for the competitive market.

我認為最重要的是，我們認為這就是我們對有道興趣業務和服務未來發展的信心。我們認為，從長遠來看，高品質的產品絕對是競爭市場的答案。

Yes, thank you.

是的，謝謝。

Yes. 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 customer's needs. So we think our teams are very good at this, because Feng Zhou and its predecessor have been a long running business at Youdao. We've been doing it for 80-years already, yes. So and within the process we actually innovated several times. So the current AI plus pre-recorded video plus comprehensive service model, it was introduced in 2021. So it was a big change.

是的。讓我補充一點。所以我覺得最重要的是產品。歸根結底，是關於你對客戶的了解程度以及如何最好地滿足客戶的需求。所以我們認為我們的團隊在這方面非常擅長，因為週鋒及其前身在有道是一個長期運作的業務。是的，我們已經這樣做了 80 年。因此，在這個過程中，我們實際上進行了多次創新。所以現在的AI+預錄影片+綜合服務的模式，是2021年推出的。所以這是一個很大的改變。

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 that the team had 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.

但如果你仔細想想，這確實很有道理。因為對於準備高考的學生來說，他們真正缺乏的是缺乏大量的空閒時間。所以傳統的生命歷程模式不太適合。所以當時團隊其實已經為變革準備了一年。而2021年的市場狀況推動團隊實現了飛躍。這就是為什麼從那時起我們的業務能夠多次成長的原因。

So I think that proves the innovation capability of our teams and I expect the Lingshi team to keep innovating and keep loving what they do. That is what the NetEase and Youdao culture is and what makes us good at making high quality content. Yeah, so I think that's the most important thing. We'll keep improving the product and serve the customer better.

所以我認為這證明了我們團隊的創新能力，我希望靈石團隊能夠持續創新，並繼續熱愛他們所做的事情。這就是網易和有道的文化，也是我們擅長製作高品質內容的原因。是的，所以我認為這是最重要的。我們將不斷改進產品，更好地為客戶服務。

Thank you.

謝謝。

Thank you.

謝謝。

[Peng Zhao, ICC].

[趙鵬，國際商會]。

Good evening, Dr. Zhou, Feng Zhou. Thanks for taking my questions. Your online marketing business saw very strong revenue growth in the first-half of the year. Could you please tell what's the outlook of this business in second-half of the year? Thank you.

晚上好，週醫生，週峰。感謝您回答我的問題。今年上半年，你們的網路行銷業務收入成長非常強勁。請您介紹一下下半年這個業務的前景如何？謝謝。

Hi, this is Lei Jin. For the second-half of the year, our outlook for online marketing services remains positive. We have seen net revenue growth significantly from around RMB200 million per quarter to over RMB500 million in Q2 of this year. This marks seventh consecutive quarters of year-over-year net revenue growth, exceeding 50%, alongside continuous improvement in profitability. We excited year-over-year revenue growth to continue through the second-half of this year.

嗨，我是雷金。下半年，我們對網路行銷服務的前景仍然樂觀。我們看到淨收入大幅成長，從每季 2 億元人民幣左右增長到今年第二季的 5 億元以上。這標誌著連續第七個季度淨收入年增超過 50%，同時獲利能力持續改善。我們對今年下半年營收持續成長感到興奮。

Several key factors are driving this sustainable growth. First, our robust data accumulation, advanced AI algorithms, and a deep understanding of customer demand, form the cornerstones of our long-term competitiveness. As we continuously collect and feed data into our data management platform, DMP, we achieved more accurate prediction, better decision-making, and more refined online marketing services tailored to user needs.

有幾個關鍵因素正在推動這種永續成長。首先，強大的數據累積、先進的人工智慧演算法以及對客戶需求的深刻理解，構成了我們長期競爭力的基石。隨著我們不斷收集數據並將其輸入數據管理平台DMP，我們實現了更準確的預測、更好的決策以及更精細的針對用戶需求的線上行銷服務。

Second, our expansion to overseas advertising has been a significant growth driver. We offer the client comprehensive and personalized international advertising services, including brand communication, global KOL marketing, overseas AD placement, and live streaming commerce. Leveraging our deep understanding of client needs, we have accelerated the development of international advertising infrastructure.

其次，我們向海外廣告的擴張是重要的成長動力。我們為客戶提供全面、個人化的國際廣告服務，包括品牌傳播、全球KOL行銷、海外廣告投放、直播商務等。憑藉對客戶需求的深刻理解，我們加快了國際廣告基礎設施的發展。

By the end of Q2, our international carrier database has exceeded 7 million, a year-over-year increase of over 200%. This drops Q2 net revenue from international performance based advertising to nearly RMB100 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. First thing, the sustainable development of international advertising efforts.

截至第二季末，我們的國際營運商資料庫已突破700萬條，年增超過200%。這使得第二季國際效果廣告淨收入降至近億元人民幣，成長速度比第一季高出約30個百分點。下半年，我們將繼續利用尋求國際擴張的中國企業不斷增長的需求。首先，國際廣告持續發展的努力。

Third, our collaboration with NetEase Group has been mutually beneficial. In Q2, Youdao data adaptation significantly improved monetization rate by over 100% of NetEase Group's traffic. In return, NetEase Group provides us with more controllable and predictable traffic resources. Moving forward, we will keep upgrading our algorithm and the [BMP] platform to enhance our AI-driven data capabilities, improve advertising efficiency, and boost revenue.

第三，我們與網易集團的合作是互利共贏的。第二季度，有道數據適配大幅提升網易集團流量變現率超100%。作為回報，網易集團為我們提供了更可控、可預測的流量資源。未來，我們將持續升級演算法和【BMP】平台，增強AI驅動的數據能力，提高廣告效率，增加收入。

Well, we are mindful of the increasing risk of traffic computation. We are committed to receiving opportunities to assist Chinese companies in their global expansion. At the same time, leveraging our strength in customer relations, AI and the data. We are gradually establishing our own exclusive AD network. This will help for the sustainable and help development of our AD business. Thank you.

嗯，我們注意到流量計算的風險不斷增加。我們致力於尋找機會協助中國企業進行全球擴張。同時，利用我們在客戶關係、人工智慧和數據方面的優勢。我們正在逐步建立自己的專屬廣告網路。這將有助於我們AD業務的永續發展。謝謝。

Thomas Chong, Jefferies.

托馬斯莊，杰弗里斯。

Hi, good evening. Thanks, management, for taking my question. May I ask about AI-driven subscription services? We're actually seeing the subscription services continue to expand. What is the commercialization part for Mr. [P] AI Tutor? Thank you.

嗨，晚上好。謝謝管理層回答我的問題。我可以問一下人工智慧驅動的訂閱服務嗎？我們實際上看到訂閱服務繼續擴展。[P]AI導師先生的商業化部分是什麼？謝謝。

Hi Thomas. Yes, this is Feng. The key thing here is the user scenario. In Youdao we 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. So we think Mr. P fits this scenario very well.

嗨托馬斯。是的，這就是馮。這裡的關鍵是使用者場景。在有道，我們非常關注用戶場景。而P先生服務的是家庭學習場景，我們認為這是學生所有消費學習場景中排名第一或第二的。所以它非常重要，但目前的產品並不能很好地滿足這一需求。所以我們認為P先生非常適合這個場景。

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 that the initial feedback for the app is very positive. The recent release of Mr. P is our -- what we call broad release for us. So in the app form factor and in the X7 and X7 Pro dictionary pens. In its first month on the market, users engaged with Mr. P AI Tutor for nearly 2 million times, ranking it actually as the second most used feature of the X7 dictionary pen only after word lookup and translation, which is the basic function of the device. So it is already number two.

關於產品和我們的學習以及商業化路徑，正如你所問的，我有幾點可以分享。第一個是該應用程式的初步回饋非常積極。最近 P 先生的釋放是我們所謂的廣泛釋放。因此，在應用程式外形以及 X7 和 X7 Pro 字典筆中。In its first month on the market, users engaged with Mr. P AI Tutor for nearly 2 million times, ranking it actually as the second most used feature of the X7 dictionary pen only after word lookup and translation, which is the basic function of the裝置.所以它已經是第二名了。

So it surpassed previous favorite features like Wayne and Xinjiang, so I think that proves its popularity. The second point I want to share is Mr. P is quite unique and leading product in the market in terms of functionality. It is the first all subject, that's nine in total, K-12 AI learning companion app with high-quality results.

所以它超越了以前最喜歡的功能，例如韋恩和新疆，所以我認為這證明了它的受歡迎程度。我想分享的第二點是Mr. P在功能方面是非常獨特且領先市場的產品。這是第一個全科目（總共九個）的 K-12 AI 學習伴侶應用程序，具有高品質的結果。

Some of our peer companies focused on one or two subjects. Others, their product doesn't yet deliver high-quality results. So our engineering and research team has developed a key set of technologies that make Mr. P possible and are now working hard to keep improving it. Obviously, we're still in the early days. So we expect the experience to become much better over time. And we believe this technology holds a lot of promise. So I would think every family in China with students need this AI companion. So yeah, think about it. So either in apps form or in highway devices or other phones, actually, not only in China but in other countries as well. So that's how we look at it.

我們的一些同行公司專注於一兩個主題。其他人則認為他們的產品尚未提供高品質的結果。因此，我們的工程和研究團隊開發了一套關鍵技術，使 P 先生成為可能，現在正在努力不斷改進它。顯然，我們仍處於早期階段。因此，我們預計隨著時間的推移，體驗會變得更好。我們相信這項技術具有廣闊的前景。所以我想中國每個有學生的家庭都需要這個AI伴侶。所以是的，考慮一下。因此，無論是應用程式形式，還是高速公路設備或其他手機，實際上，不僅在中國，而且在其他國家也是如此。這就是我們的看法。

Third point is that regarding monetization and commercialization, we think subscription fees are a very scalable way of monetizing generative AI 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, Hi Echo is already a significant contributor to our overall AI subscription sales, which in total, we just shared, reached over RMB60 million in Q2 and grew nearly 200% year-over-year.

第三點是，關於貨幣化和商業化，我們認為訂閱費是一種非常可擴展的人工智慧技術貨幣化方式。顯然，我們也關注其他方式，例如智慧型裝置、B2B 授權以及國際市場。所以我不想多談論我們的具體計劃，但是你可以看看我們現有的產品來獲得一些想法。例如，Hi Echo 已經對我們整體 AI 訂閱銷售額做出了重要貢獻，我們剛剛分享的第二季度銷售額總計超過 6000 萬元人民幣，同比增長近 200%。

And the growth for Hi Echo comes from several things, continuous product improvements positive word of mouth, and a lot of the users to use the referrals. So we expect Mr. P to follow a similar path. So we also did some projects for Hi Echo on the B2B front. Hi Echo, has entered over 100 schools nationwide. We also focused on partnerships.

Hi Echo 的成長來自於幾個因素，持續的產品改進、積極的口碑以及大量用戶的使用推薦。所以我們預計 P 先生也會走類似的路。所以我們也為 Hi Echo 做了一些 B2B 方面的專案。Hi Echo，已進入全國100多所學校。我們也注重合作夥伴關係。

Hi Echo became an official partner of the British consoles IELTS test. So I believe this is also our strength. It has a long history of working effectively with international companies and institutions. Hi Echo was also recently featured on the App Store -- Apple App Store homepage, which is a testimony of its quality and popularity.

Hi Echo成為英國控制台雅思考試官方合作夥伴。所以我相信這也是我們的優勢。它有著與國際公司和機構有效合作的悠久歷史。Hi Echo 最近也登上了 App Store——Apple App Store 主頁，這足以證明其品質和受歡迎程度。

So overall, we find that AI apps are popular online users, and we have a lot of ideas. Our team has a lot of ideas 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. We will focus on them. Yeah, thank you.

所以總的來說，我們發現人工智慧應用程式很受線上用戶歡迎，而且我們有很多想法。我們的團隊有很多如何將它們商業化的想法。我們預計今年和明年將是這些人工智慧應用程式成長和貨幣化的非常好的時間段、時間窗口。我們將重點關注他們。是的，謝謝。

Thank you.

謝謝。

Howard Ton, Macquarie.

霍華德·頓，麥格理。

Hi, 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 steam courses and whether you will accelerate investments in the future?

你好，晚上好，謝謝你回答我的問題。我的問題是關於非學術輔導市場的。所以我想了解貴公司在steam課程的進展以及未來是否會加快投資？

Thank you. This is Peng. I will handle the questions. And in the second quarter, we made some progress in our nonacademic process. Although our language screening and logic thinking courses are in their early stage. But in terms of the gross billings, both have experienced year-over-year growth over 100%.

謝謝。這是彭。我會處理這些問題。在第二季度，我們在非學術過程中取得了一些進展。雖然我們的語言篩選和邏輯思考課程還處於早期階段。但就總營收而言，兩者較去年同期成長均超過 100%。

As in English, our communication and the other skills-based training has always been the strength of as you know, and empowered by the AI, we can now provide the users with very comprehensive services and highly customer services during, before, and after classes. On the other hand, we have already had very strong faculties and high-quality content to provide excellent in-class services to the users.

就像英語一樣，我們的溝通和其他技能訓練一直是我們的強項，在人工智慧的賦能下，我們現在可以在課中、課前、課後為使用者提供非常全面的服務和高度的客戶服務。另一方面，我們已經擁有非常強大的實力和高品質的內容，可以為用戶提供優質的一流服務。

With the rapid development of our AI-driven subscription services, and we can also exist in the users in personalization and post-class scenario to their listening and speaking capabilities. For example, as we mentioned in the last several quarters, the higher cost allow users to engage in oral communication anytime and anywhere and generate personalized analysis report to correct the issues related to speech and grammar during the (inaudible).

隨著我們人工智慧驅動的訂閱服務的快速發展，我們還可以存在於用戶的個人化和課後場景中來了解他們的聽說能力。例如，正如我們在過去幾季所提到的，更高的成本讓使用者可以隨時隨地進行口語交流，並產生個人化的分析報告，以修正與語音和文法相關的問題。（聽不清楚）。

For logic thinking courses, it is highly demanded by the users. Clients always hope to that through the course, I think they are children thinking abilities will continuously improved. Our products meets the needs of the parents. And additionally, when the students encounter problem after classes, as Dr. Zhou mentioned, Mr. P AI Tutors can help them to answer the questions and I think it's a different way.

對於邏輯思考課程來說，使用者的需求量很大。客戶總是希望通過課程，我想他們孩子的思考能力會持續提升。我們的產品滿足了父母的需求。另外，當學生課後遇到問題時，正如周博士所提到的，P老師AI導師可以幫助他們解答問題，我認為這是一種不同的方式。

And we didn't just like a mentioned, semester is not directly give them the answers, but just to try to lead them to think about all the path. We think that will be the innovation, and that will be really need from the family education scenario. Looking ahead, we will continue to emphasize the high-quality development of the nonacademic process.

而我們不只是像前面提到的那樣，學期並不是直接給他們答案，而只是試圖引導他們思考所有的路徑。我們認為這將是創新，也是家庭教育場景真正需要的。展望未來，我們將繼續強調非學術高品質發展。

If we identify the clear opportunities, we are encoding the health and of our business. We will consider increasing the investments in the non-academic courses. Thank you.

如果我們發現了明確的機會，我們就正在編碼我們業務的健康狀況。我們會考慮增加對非學術課程的投入。謝謝。

I think you need to choose which causes to provide very carefully to be successful. So it is particularly important for nonacademic learning because they can be very wide in terms of 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.

我認為你需要非常仔細地選擇提供哪些事業才能獲得成功。因此，這對於非學術學習尤其重要，因為它們的主題可能非常廣泛。因此，您可以從非常廣泛的主題中進行選擇。但你必須非常非常謹慎地選擇，因為父母最初可能對不同的主題感興趣。

They may want to try it. But in the end, they choose the courses that's really helpful for their kids in the long term. Only those courses will become popular for the long-term. So you need to choose comfortably. So that's what we focus on for non-academic courses. Yeah, for example, we believe Chinese literature abilities are very, very important for kids.

他們可能想嘗試一下。但最終，他們選擇了從長遠來看對孩子真正有幫助的課程。只有那些課程才會長期流行。所以你需要選擇舒服的。這就是我們非學術課程的重點。是的，例如，我們認為中國文學能力對孩子來說非常非常重要。

Being able to grasp the power of language is one of the key abilities that benefits our persons of life. So that cost has proven successful with your double 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.

能夠掌握語言的力量是使我們的人生受益的關鍵能力之一。因此，在過去幾年中，您的雙倍成本已被證明是成功的。所以我們會不斷改進。而且，我們認為真正重要的另一件事是計算技能。每個人都知道這對未來的職業生涯至關重要。

So our competitive program, of course, Youdao Little Tooling has been running for six years. 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-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.

所以我們的競技計畫當然是有道小工具，已經運作了六年了。今年我們迎來了第一位國家 NOI 金牌得主。是的，所以關鍵是，如果我們開始一些課程，一些非學術課程，我們將確保我們仔細選擇，我們希望它在未來的許多年裡取得成功。是的，所以我認為這很重要。

Bo Zhang, Huatai Securities.

張波，華泰證券。

Thank you, manager, for taking my question. And congratulations on the strong performance this quarter. I have a question regarding Smart Life. We saw the revenue from the smart device is still decreasing. Could you share some color on strategy for your entire document plan for the second half of the year and average offers? Thank you.

謝謝經理回答我的問題。恭喜本季的強勁表現。我有一個關於智能生活的問題。我們看到智慧型設備的收入仍在下降。您能否分享一下下半年整個文件計畫的策略以及平均報價？謝謝。

For the last few quarters, we've reorganized our sales channels as we communicated in the last several quarters. We also focused our products to be, again, around our core fixed are paying category. This year, we've released four Dictionary Pens from the mid-tier X6 Pro, to flagships, X7 and X7 Pro.

在過去的幾個季度中，我們按照過去幾季的溝通重組了我們的銷售管道。我們也再次將產品重點放在我們的核心固定付費類別上。今年，我們發布了四款字典筆，從中端 X6 Pro 到旗艦產品 X7 和 X7 Pro。

So the good thing is, users have told us that they really like these new products. So the Youdao Dictionary Pens is ranked the number one seller in the category during the June 18, Shopping Festival on JD.com for five years consecutively, reflecting their users' preference for our brand. 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 prepared remarks.

好消息是，用戶告訴我們他們真的很喜歡這些新產品。因此，有道字典筆連續五年位居京東6月18日購物節品類銷售第一，體現了用戶對我們品牌的喜愛。正如我剛才在準備好的演講中談到的，X7上市第一個月的收入是去年旗艦X6 Pro的兩倍。

So this good news tell us that our overall strategy of focusing on core products and channel efficiency are correct. What we need to do now is we need to continue to focus on our key products, mainly Dictionary Pens and 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 the refocusing.

所以這個好消息告訴我們，我們要聚焦核心產品和通路效率的整體策略是正確的。我們現在要做的就是繼續專注於我們的重點產品，主要是字典筆，同時保持強大的銷售能力和高效的管道。另一個好消息是，重新聚焦後，設備業務和財務表現都得到了改善。

So that set up a good foundation for the business to build on. So here are a few more points about the Dictionary Pen. The first one is about high-end products. These are our strengths. And our first large language model applications were on our high-end products. So in July, we launched the Dictionary Pen X7 and last week, X7 Pro, both of them carry life language model features, including Mr. P and the AI translation. So as we just shared, Mr. P is the number two most popular function. And the AI translation is also very popular. So that's really encouraging for us because only our products have these features right now.

從而為企業的發展奠定了良好的基礎。那麼這裡再補充一下關於字典筆的幾點。第一個是關於高端產品。這些都是我們的優勢。我們的第一個大型語言模型應用程式是在我們的高端產品上。所以在7月份，我們推出了字典筆X7，上週又推出了X7 Pro，它們都帶有生活語言模型功能，包括P先生和AI翻譯。正如我們剛才分享的，P 先生是第二大最受歡迎的功能。AI翻譯也很受歡迎。這對我們來說確實令人鼓舞，因為目前只有我們的產品具有這些功能。

Second point I want to share is regarding price point. Last year, we expanded into the midrange market with the launch of the SNA series, aiming to serve a broader audience and meet diverse user needs. In Q2, one of the results is Dictionary Pen unit sales grew by over 50% year-over-year. And in addition, net revenue from Dictionary Pens increased nearly 10% year-over-year. So unit growth, 50%, revenue growth, 10%. So that means the strategy of not going for a very low price is correct. We didn't go for a price war. So our cheapest product, X6 Pro still RMB50 or RMB100 higher, more expensive than our peers. So we believe that's a good balance to strike. So it allowed us to achieve both unit growth and revenue growth. I think that's a good trend.

我想分享的第二點是關於價格點。去年，我們推出SNA系列，進軍中端市場，旨在服務更廣泛的受眾，滿足多樣化的用戶需求。第二季的成果之一是字典筆銷量年增超過 50%。此外，字典筆的淨收入較去年同期成長近10%。因此單位成長 50%，營收成長 10%。所以這意味著不追求非常低的價格的策略是正確的。我們沒有打價格戰。所以我們最便宜的產品X6 Pro還高出50元或100元，比我們的同行貴。所以我們相信這是一個很好的平衡。因此，它使我們能夠實現單位成長和收入成長。我認為這是一個好的趨勢。

The third point is regarding gross margin ratio because this is something that people look at carefully. So in Q2, our gross margin ratio for Smart Devices was a bit low at 30%. 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 higher-end product in Q3 and Q4, we are still targeting 40% gross margin ratio as before.

第三點是關於毛利率，因為這是人們很仔細看的問題。所以在第二季度，我們智慧型設備的毛利率有點​​低，為30%。同樣，這主要是由於我們剛才討論的產品組合造成的。因此，中端產品較多，高端產品較少。然而，隨著我們在第三季和第四季加大高端產品的投入，我們仍然像以前一樣以 40% 的毛利率為目標。

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. And we also improved our supply chain a lot over the last year. So that lowered our supply cost. Yeah, so we think 40% gross margin ratio is a reasonable and feasible growth target to shoot for. So I think, all in all, 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.

所以我們有很好的功能差異化，很多人工智慧功能。今年首次推出的人工智慧攝影機使硬體更加強大，螢幕也更加出色，深受用戶喜愛。去年我們的供應鏈也得到了很大改善。這樣就降低了我們的供應成本。是的，所以我們認為40%的毛利率是合理可行的成長目標。因此，我認為，總而言之，正如我們所說，我們預計第二季將成為硬體業務的營運低點。所以我們對它未來的表現充滿期待。

Thank you.

謝謝。

(inaudible) CITIC.

（聽不清楚）中信。

Good evening, management. Thank you for taking my question. My question is about the profit. Will we achieve profitability this year? And if so will we be able to sustain profitability in the future? Thank you.

晚上好，管理層。感謝您回答我的問題。我的問題是關於利潤。今年能實現盈利嗎？如果是這樣，我們未來能夠維持獲利嗎？謝謝。

Thank you for your question. This is Wayne. I will take your question. We have fully committed to improving the overall health and achieving full-year positive operating income in the near future. Over 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% year-over-year to approximately RMB40 million.

謝謝你的提問。這是韋恩。我會回答你的問題。我們完全致力於在不久的將來改善整體健康狀況並實現全年正營業收入。過去一年，我們成功年比減少了經營虧損，特別是今年上半年，經營虧損年減了90%以上，達到約人民幣4,000萬元。

Historical data indicates that due to seasonal factors typically higher operating income in the second half year compared to the first-half year, giving us confidence in achieving positive operating income for the full-year of 2024 despite intense competition and various uncertainties. We believe that this profitability is expected to be sustainable on a full-year basis in the future due to the following reasons.

歷史數據顯示，由於季節性因素，下半年營業收入通常高於上半年，這讓我們有信心在競爭激烈和存在各種不確定性的情況下，2024年全年實現正營業收入。我們認為，由於以下原因，預計未來全年該盈利能力將持續。

First, strong profitability in three core areas. Digital content services, online marketing services, and AI-driven region services have been identified as our key strategic focus areas. We allocate more resources to these areas, which has resulted in profitability, and we will continue to do so. Our online marketing services fueled by our RTA technology, data capability, and precise understanding of user needs have achieved over 50% year-over-year net revenue growth for seven consecutive quarters driving profitability.

一是三大核心領域獲利能力強勁。數位內容服務、線上行銷服務和人工智慧驅動的區域服務已被確定為我們的策略重點領域。我們為這些領域配置了更多的資源，從而帶來了盈利，我們將繼續這樣做。憑藉著RTA技術、數據能力和對用戶需求的精準理解，我們的線上行銷服務已連續七個季度實現了超過50%的淨收入同比增長，推動了盈利能力。

Through leveraging AI technology and high-quality content, our digital content services actually have improved learning efficiency and effectiveness for our users. Lingshi is a leading products and services have been pivotal in driving revenue and 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 the future profitability.

透過利用人工智慧技術和優質內容，我們的數位內容服務實際上提高了用戶的學習效率和效果。靈石的領先產品和服務在推動收入和利潤成長方面發揮關鍵作用。人工智慧驅動的訂閱服務是我們人工智慧商業化努力的關鍵方面，其銷售成長強勁，我們對未來的獲利能力充滿信心。

Second, enhanced financial performance in non-core business. For non-core business, such as smart devices and nondigital content services, we have implemented stricter health requirements, focusing on higher ROI metrics and the labor efficiency. This has resulted in a temporary decline in overall business scale but has significantly improved the health of this business and reduce the losses.

二是非主業財務績效提升。對於非核心業務，例如智慧型裝置和非數位內容服務，我們實施了更嚴格的健康要求，並專注於更高的投資回報率指標和勞動效率。這導致整體業務規模暫時下降，但顯著改善了該業務的健康狀況並減少了損失。

Third, operational efficiency improvement through AI technology and content innovation. To achieve profitability, we are continuously striving to improve marketing efficiency through innovation and enhanced user experience through the creation of our premium learning content. We explore various innovations, such as diversified marketing channels and deleveraging advanced AI technology to optimize marketing efficiency and mitigate challenges like rising acquisition costs due to intense computation.

第三，透過人工智慧技術和內容創新提升營運效率。為了實現盈利，我們不斷努力透過創新來提高行銷效率，並透過創建優質學習內容來增強用戶體驗。我們探索各種創新，例如多元化的行銷管道和去槓桿化先進的人工智慧技術，以優化行銷效率並緩解因運算密集而導致的採購成本上升等挑戰。

By innovating premium content, such as our transition from traditional living stream online classes to provide content embedded with AI technology, like adaptive Question Bank, we address user concerns such as influx schedules and provide personal life learning experience. This premium content has exited strong user engagement with over 70% retention rate in Q2.

透過創新優質內容，例如從傳統的直播線上課程轉變為提供嵌入人工智慧技術的內容，例如自適應題庫，我們解決了用戶湧入時間表等問題，並提供個人生活學習體驗。該優質內容在第二季的用戶留存率超過 70%，表現出強勁的用戶參與度。

In summary, our strategic focus and the innovative approaches have resulted in continued improvement in our operating margins, giving us confidence in sustained profitability of our business in the future. Thank you.

總而言之，我們的策略重點和創新方法使我們的營業利潤率持續提高，使我們對未來業務的持續獲利能力充滿信心。謝謝。

Crystal Li, China Merchant Securities.

李晶，招商證券。

Hi, thanks management for taking my question. Congratulations on the strong results. I just want to know how should we interpret the recent opinions on promoting the high-quality development of service consumption, and particularly regarding the education and training consumption?

您好，感謝管理層回答我的問題。祝賀取得了優異的成績。我想知道最近關於推動服務消費特別是教育培訓消費高品質發展的意見應該如何解讀？

Thank you. Yeah, we have noted that earlier this month, the state counselors issue opinions and promoting the high-quality development of services consumptions, which emphasize the meetings of diverse and personalized learning needs of the general public and the promoting the social training institutions to enhance service quality in response to the public demands.

謝謝。是的，我們注意到，本月初，國務委員發表《促進服務消費高品質發展的意見》，強調滿足廣大人民群多多樣化、個性化的學習需求，推動社會培訓機構加強服務品質滿足大眾需求。

First I think I will just to make it clear, Youdao has always consistently to embrace the policy and adhere to operating within the scope of the permitted by policies. And by now, it's still in the very early stage, and we don't know any further on the detailed information like scope and the category of the policy.

首先我想先聲明一下，有道一直以來都堅持擁抱政策，堅持在政策允許的範圍內運作。目前還處於非常早期的階段，政策的範圍、類別等詳細資訊我們還不知道。

First, definitely we will wait the following information related with the public regarding the detailed information. And what we can say now is about the strategy of Youdao is to consist to invest into the education sector within the AI features. And if you see the dynamic of our products, we always be innovative and have creative to create a new format of our products following the policies.

首先，關於詳細信息，我們肯定會等待以下與公眾相關的信息。現在我們可以說的是，有道的策略就是投資人工智慧特色的教育領域。如果你看到我們產品的活力，我們總是創新並有創造力，按照政策創造我們產品的新格式。

We think we will keep the update on the existing product and provide new services following the instruction of the existing policy and upcoming ones. Everything that will be the consistent thing so we deliver to deliver the message regarding the policies. And we can discuss more in detail so that after we receive more information from regarding on the special policies. Thank you.

我們認為我們將根據現有政策和即將出台的政策的指示，保持現有產品的更新並提供新的服務。一切都將是一致的，因此我們傳遞有關政策的訊息。我們可以更詳細地討論，以便在我們收到更多有關特殊政策的資訊後。謝謝。

Thank you.

謝謝。

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.

至此，我們的問答環節就結束了。我想將會議轉回管理階層進行閉幕致詞。

Thank you again for joining us today. If you have any further questions, please feel free to contact us at Youdao directly or reach out to Piacente Financial Communications in China or the US have a great day.

再次感謝您今天加入我們。如果您還有任何疑問，請隨時透過有道直接聯繫我們，或聯絡中國或美國的 Piacente Financial Communications 祝您有美好的一天。

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

會議現已結束。感謝您參加今天的演示，您現在可以斷開連接了。