United States securities and exchange commission logo
February 1, 2022
Feng Zhou
Chief Executive Officer
Youdao, Inc.
No. 399, Wangshang Road
Binjiang District, Hangzhou 310051
People s Republic of China
Re: Youdao, Inc.
Form 20-F for the
Year Ended December 31, 2020
Filed April 28,
2021
Form 6-K filed
August 19, 2021
File No. 001-39087
Dear Dr. Zhou:
We have reviewed your October 22, 2021 response to our comment
letter and have the
following comments. In some of our comments, we may ask you to provide
us with information
so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your response to these comments, we may have
additional
comments. Unless we note otherwise, our references to prior comments are
to comments in our
September 23, 2021 letter.
Correspondence dated October 22, 2021
Item 3, Key Information, page 1
1. We note your proposed
disclosure in response to comment 4 that the VIE structure is
"designed to replicate
substantially the same economic benefits as would be provided by
direct ownership." We
note, however, that the structure provides contractual exposure to
foreign investment in
such companies rather than replicating direct ownership. Please
revise accordingly.
2. We note your proposed
disclosure in response to comments 4 and 7. Any references to
control that accrue to
you because of the VIE should be limited to a clear description of
Feng Zhou
FirstName LastNameFeng Zhou
Youdao, Inc.
Comapany1,NameYoudao,
February 2022 Inc.
February
Page 2 1, 2022 Page 2
FirstName LastName
the conditions you have satisfied for consolidation of the VIE under
U.S. GAAP.
Additionally, your disclosure should clarify that you are the primary
beneficiary of the
VIE for accounting purposes. Please also disclose, if true, that the
VIE agreements have
not been tested in a court of law. Provide a cross-reference to the
specific risk factor
discussing the risks facing the company as a result of this structure,
as opposed to the risk
factor section as a whole.
3. We note your proposed disclosure in response to comment 4. We note
your
acknowledgement of the recent statements and regulatory actions by
China s government,
such as those related to the use of variable interest entities and
data security or anti-
monopoly concerns, however, you have not disclosed whether and how
they have or will
impact the company s ability to conduct its business, accept foreign
investments, or list on
a U.S. or other foreign exchange. Please also disclose whether your
auditor is subject to
the determinations announced by the PCAOB on December 16, 2021 and how
the
Holding Foreign Companies Accountable Act and related regulations will
affect your
company, here and in the risk factor you reference in response to
comment 12.
4. We note your proposed disclosure in response to comment 7. Please also
provide this
disclosure under "Key Information," including any diagram of your
organizational
structure. Also, please add disclosure regarding the uncertainties
regarding the status of
the rights of the Cayman Islands holding company with respect to its
contractual
arrangements with the VIE, its founders and owners, and the challenges
the company may
face enforcing these contractual agreements due to uncertainties under
Chinese law and
jurisdictional limits.
5. We note your proposed disclosure in response to comment 9. Please also
provide this
disclosure under "Key Information." Also, revise to describe the
consequences to you and
your investors if you, your subsidiaries, or the VIEs: (i) do not
receive or maintain such
permissions or approvals, (ii) inadvertently conclude that such
permissions or approvals
are not required, or (iii) applicable laws, regulations, or
interpretations change and you are
required to obtain such permissions or approvals in the future.
6. We note your proposed disclosure in response to comment 10. Provide
cross-references
to the condensed consolidating schedule and the consolidated financial
statements.
Item 3D. Risk Factors, page 1
7. We note your proposed disclosure in response to comment 3. Please
update your response
to acknowledge and address that new rules will go into effect on
February 15 that require
internet companies holding the data of more than 1 million users to
undergo a network
security review before listing overseas. Elaborate upon whether and
how these rules
impact you and your operations.
General
8. We note your response to comment 13 and your Form 6-K furnished on
September 30,
Feng Zhou
Youdao, Inc.
February 1, 2022
Page 3
2021. Please revise your disclosure to update investors on the status
of your divestment of
your Academic AST Business and/or whether you have complied with the
requirement to
re-register as a non-profit, as you were obligated to do by the end of
2021. Discuss the
ramifications of failing to do so.
You may contact Amy Geddes at 202-551-3304 or Lyn Shenk at 202-551-3380
if you
have questions regarding comments on the financial statements and related
matters. Please
contact Mara Ransom at 202-551-3264 with any other questions.
FirstName LastNameFeng Zhou Sincerely,
Comapany NameYoudao, Inc.
Division of
Corporation Finance
February 1, 2022 Page 3 Office of Trade &
Services
FirstName LastName