网易有道上市IPO招股书.pdf

g29g10g14g3g14g3g47g1Ag1Ag14g1Ag14g13g47g49g14g11g4Bg57g50g3g29g32g35g30g3g29g10g14g37g44g45g4Fg48g3g52g49g3g26g52g51g57g48g51g57g56As filed with the Securities and Exchange Commission on September 30, 2019.Registration No. 333- g63g63g63g63 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549g63 g63FORM F-1REGISTRATION STATEMENTUNDERTHE SECURITIES ACT OF 1933g63 g63Youdao, Inc.(Exact name of Registrant as specified in its charter)g63g63Not Applicable(Translation of Registrants name into English)g63g63g63Cayman Islands 8200 Not Applicable(State or other jurisdiction ofincorporation or organization) (Primary Standard IndustrialClassification Code Number) (I.R.S. EmployerIdentification Number) No. 399, Wangshang Road, Binjiang DistrictHangzhou 310051, Peoples Republic of China+86 0571-8985-2163(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)g63 g63COGENCY GLOBAL INC.10 E. 40th Street, 10th floorNew York, NY 10016+1 800-221-0102(Name, address, including zip code, and telephone number, including area code, of agent for service)g63g63Copies to:g63 Li He, Esq.Davis Polk (ii) Dr. Feng Zhou, our Chief Executive Officer and director; and (iii) certainindividual minority shareholders who are our employees will beneficially own all of our issued Class B ordinary shares and will be able to exercise % of the total voting power of our issued and outstanding share capital immediately following the completion of this offering, assuming theunderwriters do not exercise their option to purchase additional ADSs, and the issuance and sale of Class A ordinary shares in connection withconcurrent private placements to certain investment funds managed by Orbis Investment Management Limited (collectively, “Orbis”). Holders ofClass A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share isentitled to one vote and each Class B ordinary share is entitled to three votes. Each Class B ordinary share is convertible into one Class A ordinary shareat any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon anysale, transfer, assignment or disposition of any Class B ordinary shares by a holder thereof to any non-affiliate of such holder, each of such Class Bordinary shares will be automatically and immediately converted into one Class A ordinary share. See “Description of Share Capital.”Immediately following the completion of this offering and the concurrent private placements to Orbis, we will be a “controlled company” withinthe meaning of the New York Stock Exchange corporate governance rules because NetEase will beneficially own % of the total voting power ofour then issued and outstanding ordinary shares, assuming the underwriters do not exercise their option to purchase additional ADSs. See “PrincipalShareholders.”Neither the United States Securities and Exchange Commission nor any state securities commission has approved or disapproved of thesesecurities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.We are an “emerging growth company” under the US federal securities laws and will be subject to reduced public company reportingrequirements. Investing in the ADSs involves risks. See “Risk Factors” beginning on page 19 of this prospectus.g63 Per ADS Total Public offering price US$ US$ Underwriting discounts and commissions(1) US$ US$ Proceeds, before expenses, to us US$ US$ g63(1) For a description of the compensation payable to the underwriters, see “Underwriting.”The underwriters expect to deliver the ADSs against payment in U.S. dollars in New York, New York on , 2019.g63g63g63Citigroup Morgan Stanley(in alphabetical order)g63CICC Credit Suisse HSBC(in alphabetical order)g63 g63The date of this prospectus is , 2019.g37g44g45g4Fg48g3g52g49g3g26g52g51g57g48g51g57g56g63g37g44g45g4Fg48g3g52g49g3g26g52g51g57g48g51g57g56g37g44g45g4Fg48g3g52g49g3g26g52g51g57g48g51g57g56TABLE OF CONTENTSg63g63g63Page Prospectus Summary 1 Our Corporate Information 8 Implications of Being an Emerging Growth Company 8 Conventions which Apply to this Prospectus 9 The Offering 11 Our Summary Consolidated Financial Data and Operating Data 14 Risk Factors 19 Cautionary Statement Regarding Forward-Looking Statements 68 Use of Proceeds 69 Dividend Policy 71 Capitalization 72 Dilution 74 Enforceability of Civil Liabilities 76 Our History and Corporate Structure 78 Our Relationship with NetEase 84 Selected Consolidated Financial Data 88 Managements Discussion and Analysis of Financial Condition and Results of Operations 91 Industry Overview 122 Business 127 Regulation 153 Management 172 Principal Shareholders 179 Related Party Transactions 182 Description of Share Capital 185 Description of American Depositary Shares 196 Shares Eligible for Future Sale 204 Taxation 206 Underwriting 212 Expenses Relating to this Offering 224 Legal Matters 225 Experts 226 Where You Can Find Additional Information 227 Index to the Consolidated Financial Statements F-1 Unless otherwise indicated or the context otherwise requires, all references in this prospectus to “Youdao, Inc.” or the “Company,” “we,” “our,”“ours,” “us” or similar terms refer to Youdao, Inc., together with its subsidiaries and, in the context of describing its operations and consolidatedfinancial information, its consolidated variable interest entities, or VIEs.g63g63We have not authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus preparedby or on behalf of us or to which we may have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any otherinformation that others may give you. We and the underwriters have not authorized any other person to provide you with different or additionalinformation. Neither we nor the underwriters are making an offer to sell the ordinary shares in any jurisdiction where the offer or sale is not permitted.This offering is being made in the United States and elsewhere solely on the basis of the information contained in this prospectus. You should assumethat theg63 ig37g44g45g4Fg48g3g52g49g3g26g52g51g57g48g51g57g56information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus, regardless of the time of delivery of thisprospectus or any sale of the ADSs representing our Class A ordinary shares. Our business, financial condition and results of operations may havechanged since the date on the front cover of this prospectus.Until , 2019 (the 25th day after the date of this prospectus), all dealers that buy, sell or trade the ADSs, whether or notparticipating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectuswhen acting as underwriters and with respect to their unsold allotments or subscriptions.g63iig37g44g45g4Fg48g3g52g49g3g26g52g51g57g48g51g57g56PROSPECTUS SUMMARYThe following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financialstatements and the related notes appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectuscarefully, especially the risks of investing in the ADSs discussed under “Risk Factors,” “Business,” and information contained in “ManagementsDiscussion and Analysis of Financial Condition and Results of Operations” before deciding whether to buy the ADSs. Investors should note thatdue to the restrictions on foreign investment in companies that engage in certain businesses under the PRC law, a significant portion of ourbusinesses in the PRC described in this prospectus are operated through our VIEs. Investors should also note that Youdao, Inc. became ourultimate holding company recently through a series of transactions initiated by our controlling shareholder, NetEase, and has a limited operatinghistory on a consolidated basis. See “Our History and Corporate Structure” and “Risk Factors Risks Related to Our Business and IndustryWe have a limited history in operating on a consolidated basis and, particularly, operating certain of our products and services. This may make itdifficult to evaluate our future prospects and the risks and uncertainties associated with these products and services.” NetEase is expected tocontinue to control us following this offering. For more information about NetEase and our relationships with NetEase, See “Our Relationship withNetEase.”Our BusinessWhat is YoudaoYoudao makes learning happen.For over a decade, Youdao has developed and used technologies to provide learning content, applications and solutions to users of all ages.Were the leading intelligent learning company in China with over 100.0 million average total MAUs* in the first half of 2019. Starting fromonline knowledge tools, we currently offer a comprehensive suite of learning products and services that are accessible, reliable and trustworthy.Today, for tens of millions of people, Youdao is the go-to destination for looking up a word, translating a foreign language, preparing for anexam, and picking up a new skill. Through technology, we enrich the lives of people of all ages every day, guiding them on their journey ofpursuing knowledge and sharing ideas.What Youdao OffersYoudao was founded in 2006 as part of NetEase, a leading internet technology company in China, dedicated to providing online servicescentered around content, community, communication and commerce. In 2007, we launched our flagship Youdao Dictionary, which is Chinasnumber one language app in terms of MAUs in the first half of 2019, according to Frost & Sullivan. Youdao Dictionary had 51.2 million averageMAUs in the first half of 2019.g63* See “Conventions Which Apply to This Prospectus” for the definition of average total MAUs.g63 1g37g44g45g4Fg48g3g52g49g3g26g52g51g57g48g51g57g56The early success of Youdao Dictionary has enabled us to attract a massive user base, build a strong brand, and expand into a broad range ofproducts and services addressing lifelong learning needs of pre-school, K-12 and college students as well as adult learners, including:g63Lets start with our online knowledge toolsa collection of dictionary, translation and writing tools empowered by leading technologies. Ourtools are convenient, smart and powerful. We offer most of them for free, but monetize their massive user bases mainly through advertising. Asthese tools become ubiquitous in peoples lives, theyve also helped drive organic user traffic to our online courses and other products and services.Building on the popularity of our online knowledge tools, we set out to offer online courses, including Youdao Premium Courses, ourflagship online course brand, with a strategic focus on K-12 students, as well as NetEase Cloud Classroom and China University MOOC. Wedeliver our Youdao Premium Courses in “dual-teacher” large classes through live streaming. We adopt this format because it allows us to make thebest use of our teaching resources while maximizing flexibility and interaction for both our instructors and students. Our course designers,instructors and engineers work together to expertly create course materials covering a wide range of subjects, making sure theyre interesting,relevant and engaging.We also offer a variety of interactive learning apps that enable students to study math, English and other subjects with a virtual teacher ontheir mobile devices. These fun and effective apps incorporate AI teaching to particularly cater to the learning habits of our students. Throughsocial media such as Weixin/WeChat, users may access these apps and share their activities with friends. Moreover, our interactive learning appsprovide an abundance of gamified features that help significantly increase younger students interest levels and drive their engagement.We began to invest in building smart devices that further enhance users learning experience and efficiency. Thats how we invented YoudaoSmart Pen, Youdao Dictionary Pen and Youdao Pocket Translator. Our approach to such devices is a seamless integration of AI algorithms anddata processing into hardware devices that supplement our online knowledge tools and online courses.g63 2