Consumer Discretionary Author: Hu Bi May 26, 2022 10:26 PM (GMT+8)

The firm's net revenue surged by 26.6% to CNY 1.2 billion, a sign of continued growth despite the termination of K9 subject training business.

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Educational services firm Youdao (Chinese: 网易有道, DAO:NYSE) posted a net income of CNY 1.2 billion (USD 178 million), up 26.6% year-over-year, according to results from the first quarter report. 

The latest fiscal report published on May 24 did not include the K9 subject training business, which was terminated at the end of December 2021.

Meanwhile, the company's operating loss improved significantly in the first quarter, decreasing to CNY 125 million from CNY 214 million in the same period of 2021.

 Given the cessation of K-9 academic AST business at the end of December 2021 as a result of the implementation of China's "double reduction" policy, the firm had reshaped its major businesses into smart devices, STEAM education, adult and vocational education and lastly, education digitalisation solutions.

In the first quarter, net income from learning services was CNY 826 million, down 17.3% from the same period last year, which still included K9 subject training business revenue. The pillar of smart hardware generated net revenue of CNY 253 million, up 25.4% year-on-year.

Besides, online marketing services only booked a net income of CNY 121 million, down 12.7% due to a reduction in clients' advertising budgets. For the segment of quality education, sales from the chess business increased by over 170% year-over-year.

In terms of the gross profit margin, it was 53.5% in the first quarter, up 1.1% from the same period last year. Specifically, the gross margins of learning, smart hardware and online marketing services were 63.9%, 33.7% and 23.7% respectively.

Total operating expenses for the first quarter of 2022 were CNY 767 million, with research and development expenses increasing by 59% year-on-year to CNY 203 million. It was primarily due to the recruitment of high-end technical talents and investment in smart devices and education digitalization solutions sectors, said Youdao.