What is driving Youdao Inc – ADR (NYSE: DAO) stock

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Youdao Inc – ADR (NYSE: DAO) stock rose over 2.4% in the pre-market session of 20th May, 2020 (as of 5:10 am GMT-4; Source: Google finance) after the company in the first quarter of FY 20 has reported 139.8% rise in the total net revenues to RMB541.4 million (US$76.5 million). The company posted 345.6% increase in the gross profit for the first quarter of 2020 to RMB235.7 million (US$33.3 million) from RMB52.9 million for the same period of 2019. Gross margin expanded to 43.5% for the first quarter of 2020 from 23.4% for the same period of 2019. The company posted the loss from operations for the first quarter of 2020 of RMB176.0 million (US$24.9 million), compared to RMB79.1 million for the same period in 2019. The company has reported Non-GAAP net loss attributable to Youdao’s ordinary shareholders for the first quarter of 2020 of RMB161.9 million (US$22.9 million), compared to RMB101.2 million for the same period of last year. At the end of March, 2020, the company’s cash, cash equivalents, time deposits and short-term investments of total RMB1.7 billion (US$236.8 million), compared to RMB1.6 billion as of December 31, 2019. The increase was on the back of an increased amount of gross billing received from the operation. For the first quarter of 2020, the company generated net cash provided by operating activities of RMB49.7 million (US$7.0 million) and capital expenditures were of total RMB4.7 million.

Moreover, net revenues from learning services and products grew 226.4% to RMB442.1 million (US$62.4 million) for the first quarter of 2020, from RMB135.5 million for the same period of 2019. The growth from learning services was mainly due to the increased revenues generated from online courses, which rose due to strong growth in both K-12 paid student enrollments and gross billing per paid student enrollments of Youdao Premium Courses on a year-over-year basis. K-12 paid student enrollments rose by 358.7% year-over-year to 152,800 in the first quarter of 2020. The gross billings per paid student enrollments of Youdao Premium Courses grew 158.2% year-over-year to RMB1,619 in the first quarter of 2020. The revenue generated from Youdao’s intelligent learning products rose by 188.7% year-over-year in the first quarter of 2020, mainly due to a significant rise in sales volume of Youdao Dictionary Pen launched in August 2019. Net revenues from online marketing services rose 9.9% to RMB99.3 million (US$14.0 million) for the first quarter of 2020 from RMB90.3 million for the same period in 2019.

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