NetEase Inc (NTES) 2014 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the NetEase, Inc. first quarter 2014 earnings call. During today's presentation, all participants will be in a listen only mode. Following the presentation, the conference will be open for questions. (Operator instructions) As a reminder, today's conference is being recorded.

女士們、先生們，感謝你們的支持。歡迎來到網易公司。2014 年第一季財報電話會議。在今天的演講中，所有參與者將處於僅聆聽模式。演講結束後，會議將開放提問。（操作員指示）提醒一下，今天的會議正在被錄音。

At this time, I'd like to turn the conference over to Brandi Piacente. Please go ahead ma'am.

現在，我想將會議交給布蘭迪·皮亞森特 (Brandi Piacente)。女士，請繼續。

Thank you operator. Please note the discussion today will contain forward-looking statements relating to future performance of the Company, and 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 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.

謝謝接線生。請注意，今天的討論將包含與公司未來業績有關的前瞻性陳述，旨在符合美國私人證券訴訟改革法案所規定的免於承擔責任的安全港規定。此類聲明並非對未來績效的保證，且受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 NetEase's business and financial results is included in certain filings of the Company with the Securities and Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligations to update this forward-looking information except as required by law. As a reminder, this conference is being recorded. In addition, a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com.

有關可能影響網易業務和財務業績的風險因素的一般性討論包含在公司向美國證券交易委員會提交的某些文件中，包括其 20-F 表年度報告。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。提醒一下，本次會議正在錄製中。此外，本次電話會議的網路直播將在網易公司網站ir.netease.com上提供。

I will now turn the conference over to Mr. Onward Choi, acting Chief Financial Officer, who will read the prepared remarks on behalf of Mr. William Ding, Chief Executive Officer of NetEase.

現在，我將會議交給代理財務長崔安華先生，他將代表網易執行長丁磊先生宣讀準備好的演講稿。

Thank you Brandi. Before I begin, please note that for the purposes of this discussion, all percentages are based on renminbi.

謝謝你，布蘭迪。在我開始之前，請注意，為了本次討論的目的，所有百分比均基於人民幣。

The market for traditional and mobile Internet in China continues to expand, and introductions of our high-quality games, products and services is helping to build this growth. During the first quarter, we grew our top line by 11.6% with advancements across each of our three core segments. Our online games businesses increased by 6.3% and advertising services increased by 47.9% year-over-year.

中國傳統互聯網和行動互聯網市場持續擴大，我們推出的優質遊戲、產品和服務正助力這一增長。第一季度，我們的營業收入成長了 11.6%，三大核心部門都取得了進步。我們的網路遊戲業務年增6.3%，廣告服務年增47.9%。

Our third segment, which we have renamed e-mail, e-commerce and others, also played an increasing role in our revenue contributions. Revenue from this business increased 81.4% in the first quarter, compared with last year as we saw rapid growth in our e-commerce services from third party lottery and insurance products.

我們的第三部分，已更名為電子郵件、電子商務及其他業務，也在我們的收入貢獻中發揮越來越重要的作用。由於第三方彩券和保險產品的電子商務服務快速成長，該業務第一季的營收與去年相比成長了 81.4%。

Looking first at our online games segment, our games provide users with innovative gameplay and superior services for both our self-developed and licensed games. During the first quarter, we officially launched Blizzard Entertainment's free-to-play digital strategy card game Hearthstone: Heroes of Warcraft, followed by an iPad version of this game in April. Hearthstone has proven to be extremely popular with players and its iPad version quickly became the top grossing app and top free download in Apple's China iPad app store.

首先來看我們的線上遊戲部門，我們的遊戲為使用者提供創新的遊戲玩法和優質的服務，包括自主研發的遊戲和授權的遊戲。第一季度，我們正式推出了暴雪娛樂的免費數位策略卡牌遊戲《爐石戰記：魔獸英雄傳》，並於 4 月推出了遊戲的 iPad 版本。事實證明，《爐石戰記》極受玩家歡迎，其 iPad 版本迅速成為蘋果中國 iPad 應用商店最暢銷的應用程式和最免費下載的應用程式。

Our self-developed games also continue to increase in popularity as we make exciting enhancements that attract favorable attention from our loyal and growing community. During the first quarter, we launched new expansion packs for Fantasy Westward Journey II, New Fly for Fun, and New Westward Journey Online III. Each of these games performed well for the period, as did New Westward Journey Online II supported by a series of successful promotional activities.

隨著我們做出令人興奮的改進，我們自主開發的遊戲也越來越受歡迎，吸引了我們忠誠且不斷成長的社群的青睞。第一季度，我們推出了《夢幻西遊2》、《新飛越歡樂谷》、《新西遊Online3》等新資料片。上述每款遊戲在該期間均表現良好，《新大話西遊2》在一系列成功的促銷活動的支持下也表現不俗。

In the coming months, we plan to introduce a number of new expansion packs for our exciting popular games such as Tianxia III, New Westward Journey Online III, and Legend of Fairy. Most recently, we launched an expansion pack for Ghost II in April. We have also received positive user feedback from initial small-group testing of Revelation, our 3-D oriental fantasy MMORPG. Later this year, we are also looking forward to introducing Crisis 2015, our first person shooter game. In addition, we recently announced that we are working closely with Blizzard Entertainment to bring Heroes of the Storm, a free-to-play, online team brawler game to China.

在接下來的幾個月裡，我們計劃為《天下三》、《新西遊記III》和《仙俠傳》等熱門遊戲推出一系列新資料片。最近，我們在 4 月推出了 Ghost II 的擴充包。我們也從我們的 3-D 東方幻想 MMORPG《啟示錄》的初步小組測試中收到了積極的用戶回饋。今年晚些時候，我們也期待推出第一人稱射擊遊戲《危機 2015》。此外，我們最近宣布，我們正在與暴雪娛樂密切合作，將免費線上團隊格鬥遊戲《風暴英雄》引入中國。

Mobile is playing an increasing role among our growing Internet portfolio of online games. These mobile games further diversify our offerings and complement our traditional online game business. For example, user feedback for the mobile versions of Fantasy Westward Journey II has been very encouraging. In the first quarter, we also launched Mini Westward Journey. This is our first mobile card battle game and user feedback has been very positive. We continue to build our mobile portfolio, and plan to introduce a number of new mobile apps and games this year, including several high quality licensed mobile games that further broaden our strong portfolio.

在我們不斷增長的網路線上遊戲組合中，行動遊戲正發揮著越來越重要的作用。這些手機遊戲進一步豐富了我們的產品線，並補充了我們傳統的線上遊戲業務。例如，《夢幻西遊2》手遊版的使用者回饋就非常令人鼓舞。第一季我們也推出了《小西遊》。這是我們的第一款手機卡牌戰鬥遊戲，用戶回饋非常正面。我們將繼續建立我們的行動產品組合，並計劃今年推出一些新的行動應用程式和遊戲，包括幾款高品質的授權行動遊戲，以進一步拓寬我們強大的產品組合。

YiChat is also performing well and attracting new users as we continue to integrate new features that optimize this enhanced social instant messaging platform. We have a number of exciting new features that we plan to roll out to enhance our users' experience, such as features that enable our users to log on to mobile games using their YiChat accounts, so that they can share the gaming experience and achievements with their friends.

隨著我們不斷整合新功能以優化這個增強型社交即時通訊平台，YiChat 也表現良好並吸引了新用戶。我們計劃推出一些令人興奮的新功能來增強用戶體驗，例如，讓我們的用戶使用他們的易信帳戶登入手機遊戲，以便他們可以與朋友分享遊戲體驗和成就。

Our advertising services delivered strong year-over-year growth in the first quarter, of which automobile, food and beverage, and financial services were the top performing sectors. Our online portal, comprehensive mobile applications and e-mail services continue to attract new users and expand our reach within our dedicated community. As of March 31, 2014, we had more than 650 million e-mail users and there were 240 million installations of our leading Mobile News applications. As part of our strategic initiative to build our brand awareness, we have been focusing on high profile sporting events that appeal to both users and advertisers. In line with this strategy, we will be broadcasting the upcoming 2014 World Cup in partnership with the national football teams of Brazil and Spain.

我們的廣告服務在第一季實現了強勁的同比增長，其中汽車、食品飲料和金融服務是表現最好的行業。我們的線上入口網站、綜合行動應用程式和電子郵件服務繼續吸引新用戶並擴大我們在專門社區內的影響力。截至 2014 年 3 月 31 日，我們擁有超過 6.5 億電子郵件用戶，我們領先的行動新聞應用程式的安裝量已達 2.4 億次。作為我們打造品牌知名度的策略舉措的一部分，我們一直專注於吸引用戶和廣告商的高端體育賽事。根據這項策略，我們將與巴西和西班牙國家足球隊合作轉播即將到來的2014年世界盃。

China's online market has undergone vast changes. We have been at the forefront of this Internet boom since the beginning, and always strive to reach new levels of success. In an increasingly competitive environment, knowing your audience is critical. We have a long history of this and continuously improve the user experience among our strong games and service offerings for our growing community.

中國的網路市場發生了巨大的變化。自從網路繁榮以來，我們一直處於前沿，並始終努力達到新的成功水平。在競爭日益激烈的環境中，了解你的受眾至關重要。我們在這方面有著悠久的歷史，並不斷改善我們強大的遊戲和服務產品中的使用者體驗，以服務我們不斷成長的社群。

Quality, diversification, and integration are key as we continue to expand our portfolio of traditional and mobile Internet offerings. Our footprint in China is strong. To further extend our geographic footprint and generate new revenue streams, we are in the process of exploring additional overseas licensing and expansion opportunities. At the same time, we will continue our efforts to monetize our mobile portfolio as it matures, and enhance our traditional online offerings.

隨著我們繼續擴大傳統和行動互聯網產品組合，品質、多樣化和整合是關鍵。我們在中國的業務範圍十分廣泛。為了進一步擴大我們的地理覆蓋範圍並創造新的收入來源，我們正在探索更多的海外許可和擴張機會。同時，隨著行動產品組合的成熟，我們將繼續努力將其貨幣化，並增強我們傳統的線上產品。

We maintain a strong cash position, and recognize the importance of returning value to our shareholders. I'm pleased to announce that on May 13, 2014, our Board of Directors has approved a new quarterly cash dividend policy beginning this year. The first quarterly dividend payment of $0.34 per ADS will be issued next month for the first quarter of 2014.

我們保持強勁的現金狀況，並認識到向股東回報價值的重要性。我很高興地宣布，2014 年 5 月 13 日，我們的董事會批准了從今年開始實施的新季度現金股利政策。2014 年第一季的第一筆季度股息為每股 ADS 0.34 美元，將於下個月發放。

This concludes William's update. Now I will provide a review of our first quarter financial results. I will primarily focus on the discussions of margins and expense fluctuations along with net profits.

威廉的更新到此結束。現在我將回顧我們第一季的財務表現。我將主要討論利潤率和費用波動以及淨利潤。

Total sales tax for the first quarter of 2014 were RMB153.5million or $24.7 million, compared to RMB162.7 million and RMB105.4 million for the preceding quarter and the first quarter of 2013, respectively. The year-over-year increase in sales tax was mainly due to a change in the tax rules in China, which resulted in our online game revenues gradually becoming subject to value-added tax instead of business tax during 2013. This change in tax rules did not have a significant impact on gross profit from our online game services business segment as the increase in value-added tax was substantially offset by reductions in business tax on intra-group revenues, which were previously recorded in cost of revenues.

2014 年第一季銷售稅總額為 1.535 億元人民幣（2,470 萬美元），上一季和去年同期分別為 1.627 億元人民幣和 1.054 億元。銷售稅年成長主要是由於中國稅法的變化，導致我們的網路遊戲收入在 2013 年逐漸由營業稅變為增值稅。此項稅收規則的變化並未對我們線上遊戲服務業務部門的毛利產生重大影響，因為增值稅的增加被集團內部收入的營業稅的減少所抵消，而這些營業稅此前已計入收入成本。

Gross profit for this first quarter of 2014 was RMB1.7 billion or $274.7 million, compared to RMB1.73 billion and RMB1.55 billion for the preceding quarter and the first quarter of 2013, respectively.

2014 年第一季毛利為 17 億元人民幣（2.747 億美元），上一季及去年同期毛利分別為 17.3 億元人民幣及 15.5 億元。

The year-over-year and quarter-over-quarter increase in online game gross profit was primarily driven by increased revenues from Hearthstone, as well as certain self-developed games of ours, such as Fantasy Westward Journey II, which we launched a new expansion pack for -- during the quarter, and New Westward Journey Online II, which we held a series of promotional activities during the period.

網路遊戲毛利的年比和季增主要得益於《爐石戰記》收入的成長，以及我們自主研發的某些遊戲，例如《夢幻西遊2》（我們在本季為其推出了新的資料片）和《新大話西遊2》（我們在本季度舉辦了一系列促銷活動）。

The year-over-year increase in advertising services gross profit was primarily due to strong demand from the automobile, food and beverage, and financial services advertising sectors, as well as our monetization efforts for our mobile applications. The quarter-over-quarter decrease in advertising services revenues and gross profit were primarily due to seasonality.

廣告服務毛利年增率主要得益於汽車、食品飲料和金融服務廣告業的強勁需求，以及我們針對行動應用程式的貨幣化努力。廣告服務收入和毛利的環比下降主要是由於季節性因素。

The year-over-year and quarter-over-quarter increase in e-mail, e-commerce and others was primarily attributable to rapid growth in our e-commerce business, in areas such as our e-commerce services related to third-party lottery products and insurance products.

電子郵件、電子商務及其他業務同比增長和環比增長主要歸因於我們電子商務業務的快速增長，例如與第三方彩票產品和保險產品相關的電子商務服務。

Gross profit margin for our online games business was 78.5%, compared to 77.7% and 77.8% for the preceding quarter and the first quarter of 2013, respectively.

線上遊戲業務的毛利率為 78.5%，上一季和去年同期分別為 77.7%和 77.8%。

Gross profit margin for our advertising service business was 47.8%, compared to 57.8% and 29% for the preceding quarter and the first quarter of 2013, respectively. The year-over-year increase in gross profit margin was mainly due to a rise in demand for our advertising services. The quarter-over-quarter decrease in gross profit margin was mainly due to seasonality.

廣告服務業務毛利率為 47.8%，上一季及去年同期分別為 57.8% 及 29%。毛利率年增主要是由於我們廣告服務需求的成長。毛利率季減主要由於季節性因素。

Gross profit margin for the e-mail, e-commerce and others business was 6.7%, compared to gross loss margins of 4% and 13.1% for the preceding quarter and the first quarter of 2013, respectively. The year-over-year and quarter-over-quarter increases in gross profit margin were mainly due to increased revenue from our e-commerce services, which had a relatively higher gross profit margin.

信箱、電商及其他業務毛利率為 6.7%，上一季及去年同期毛損率分別為 4% 及 13.1%。毛利率較去年同期成長主要由於電商服務收入增加，該業務毛利率相對較高。

Total operating expenses for the first quarter of 2014 were RMB563.6 million or $90.7 million, compared to RMB648.3 million and RMB455.6 million for the preceding quarter and the first quarter of 2013, respectively. The year-over-year increase in operating expenses was mainly due to increased selling and marketing expenses for the online games and advertising services businesses, staff-related costs resulting from an increase in the number of employees and average compensation, as well as higher research and development investments. The quarter-over-quarter decrease in operating expenses was mainly due to decreased promotional costs for our self-developed games.

2014 年第一季總營運費用為 5.636 億元人民幣（9,070 萬美元），上一季和去年同期分別為 6.483 億元人民幣和 4.556 億元。營業費用較去年同期成長主要由於網路遊戲及廣告服務業務的銷售及市場推廣費用增加、員工人數及平均薪資增加導致的員工相關成本，以及研發投入增加。營業費用較上季下降主要是因為我們自主研發遊戲的推廣費用減少。

We recorded a net income tax charge of RMB179.6 million or $28.9 million for the first quarter of 2014. This compares to RMB49.4 million and RMB142.9 million for the preceding quarter and the first quarter of 2013 respectively. The effective tax rate for the first quarter of 2014 was 13.8%, compared to 3.8% and 11.8% for the preceding quarter and the first quarter of 2013 respectively. The quarter-over-quarter change in the effective tax rate was mainly due to the fact that certain subsidiaries of ours were approved in the fourth quarter of 2013 as Key Software Enterprises for fiscal years 2013 to 2014, and the resulting income tax reduction for fiscal year 2013 was recognized in that quarter, which had the effect of reducing our effective tax rate.

2014 年第一季度，我們記錄的淨所得稅費用為 1.796 億元（約 2,890 萬美元）。而上一季及2013年第一季的營收分別為人民幣4,940萬元及人民幣1.429億元。2014 年第一季有效稅率為 13.8%，上一季及去年同期分別為 3.8% 及 11.8%。有效稅率的環比變化主要由於本公司的部分子公司於 2013 年第四季度被批准為 2013 至 2014 財年的重點軟體企業，因此 2013 財年的所得稅減免於該季度確認，從而降低了本公司的有效稅率。

During the first quarter of 2014, we had a net foreign exchange gain of RMB7.1 million or $1.1 million, compared to net foreign exchange losses of RMB17.6 million and RMB9.3 million for the preceding quarter and first quarter of 2013, respectively. The quarter-over-quarter and year-over-year changes in foreign exchange gains and losses were mainly due to unrealized exchange gains and losses arising from our foreign currency-denominated bank deposits and short-term loan balances as the exchange rate of the US dollar against the RMB fluctuated over the periods.

2014 年第一季度，我們實現淨匯兌收益 710 萬元人民幣（約 110 萬美元），而上一季和去年同期分別為淨匯兌損失 1,760 萬元人民幣和 930 萬元人民幣。匯兌損益的環比及年比變動主要由於期內美元兌人民幣匯率波動，導致本公司外幣銀行存款及短期貸款餘額產生未實現匯兌損益。

Net profit for the first quarter of 2014 total RMB1.1 billion or $180.8 million, compared to RMB1.2 billion and RMB1.1 billion for the preceding quarter and for the first quarter of 2013, respectively. We reported basic and diluted earnings per ADS of $1.39 and $1.38 respectively, for the first quarter of 2014. Our basic and diluted earnings per ADS were $1.53 and $1.52 respectively for the preceding quarter, and basic and diluted earnings per ADS of $1.32 each for the first quarter of 2013.

2014 年第一季淨利為 11 億元人民幣（1.808 億美元），上一季和去年同期分別為 12 億元和 11 億元。我們報告 2014 年第一季每股 ADS 基本收益和稀釋收益分別為 1.39 美元和 1.38 美元。上一季度，我們的每股美國存託憑證基本收益和稀釋收益分別為 1.53 美元和 1.52 美元；2013 年第一季度，我們的每股美國存託憑證基本收益和稀釋收益均為 1.32 美元。

As of March 31, 2014, our total cash and time deposits balance was RMB19.3 billion or $3.1 billion, compared to RMB18.6 billion as of December 31, 2013. Cash flow generated from operating activities was RMB1.7 billion or $265.5 million for the first quarter of 2014, compared to RMB1.6 billion and RMB1.5 billion for the preceding quarter and the first quarter of 2013, respectively. In addition, as of March 31, 2014, we had a loan from an offshore bank in the principal amount of $90 million that was secured by RMB deposits of the Company in an onshore branch of this bank in the amount of RMB605.1 million, which was recognized as a short term investment.

截至 2014 年 3 月 31 日，我們的現金及定期存款總額為人民幣 193 億元（約 31 億美元），而截至 2013 年 12 月 31 日為人民幣 186 億元。2014 年第一季經營活動現金流為 17 億元人民幣（2.655 億美元），上一季及去年同期分別為 16 億元人民幣及 15 億元人民幣。此外，截至 2014 年 3 月 31 日，我們從一家境外銀行獲得了一筆本金為 9000 萬美元的貸款，該貸款以公司在該銀行境內分行的人民幣 6.051 億元人民幣存款作為擔保，這筆貸款被確認為一項短期投資。

We are committed to returning value to our shareholders by growing our business, and also through shareholders' return and repurchase programs. Before we open the call to your questions, I would like to provide an update on these topics.

我們致力於透過發展業務以及股東回報和回購計劃為股東帶來價值。在我們開始回答你們的問題之前，我想先介紹一下這些主題的最新情況。

As we previously announced, our annual cash dividends for fiscal 2013 was $1.41 per ADS, amounting to approximately $180.5 million. This dividend was awarded on March 7, 2014, to shareholders of record as of February 26, 2014.

正如我們先前宣布的，我們 2013 財年的年度現金股利為每股美國存託憑證 1.41 美元，總額約為 1.805 億美元。該股於 2014 年 3 月 7 日發放給截至 2014 年 2 月 26 日登記在冊的股東。

On May 13, 2014, our Board of Directors approved a new quarterly dividend policy commencing this year. Under the new policy, quarterly dividends will be set at an amount equivalent to approximately 25% of our anticipated net income after tax in each fiscal quarter. Accordingly, the Board has declared a dividend of $0.34 per ADS for the first quarter of 2014, which will be payable on June 6, 2014, to shareholders of record as of the close of business on May 28, 2014. In February 2014, we also announced that our Board of Directors approved a new share repurchase program for up to $100 million of the Company's outstanding ADS over the course of 12 months. As of March 31, 2014, no ADSs have been repurchased under this program.

2014 年 5 月 13 日，我們的董事會批准了今年開始實施的新季度股利政策。根據新政策，季度股利將設定為相當於我們每個財政季度預期稅後淨收入的約 25% 的金額。因此，董事會宣布 2014 年第一季股利為每股美國存託憑證 0.34 美元，將於 2014 年 6 月 6 日支付給 2014 年 5 月 28 日營業時間結束前登記在冊的股東。2014 年 2 月，我們也宣布董事會批准了一項新的股票回購計劃，計劃在 12 個月內回購公司流通在外的 ADS 金額高達 1 億美元。截至 2014 年 3 月 31 日，尚未根據該計劃回購任何 ADS。

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

感謝您的關注。我們現在想開始回答你們的問題。接線員，請繼續。

Thank you sir. Ladies and gentlemen, we will now begin the question and answer session. (Operator instructions)

謝謝您，先生。女士們、先生們，我們現在開始問答環節。（操作員指示）

Our first question comes from the line of Alicia Yap with Barclays Capital. Please go ahead.

我們的第一個問題來自巴克萊資本的 Alicia Yap。請繼續。

Hi, good morning William and Onward. Thanks for taking my questions. My first question is regarding Hearthstone. So I understand this is quite new to our overall game portfolio, so can you help us understand how big will this game to become from both the contribution on the PC and iPad going forward?

嗨，早上好，William 和 Onward。感謝您回答我的問題。我的第一個問題是關於《爐石戰記》的。所以我知道這對我們的整體遊戲組合來說是相當新的，那麼你能幫助我們了解這款遊戲未來在 PC 和 iPad 上的貢獻會有多大嗎？

(interpreted) So basically with regard to the latest introductions of Hearthstone to the China market, basically it is ranking as the number one globally within the [NetEase] entertainment game products and it also got a very high ranking in terms of the user numbers. With the introduction of these game products to the China market, we also see that the feedback has been very popular and well-received in the China market.

(翻譯) 基本上，就《爐石戰記》最近引入中國市場而言，它在[網易]娛樂遊戲產品中排名全球第一，並且在用戶數量方面也獲得了非常高的排名。隨著這些遊戲產品引入中國市場，我們也看到在中國市場的回饋非常受歡迎且好評。

With the launch of the other versions in April of this year, we have seen that the game itself has been ranked number one for 2 weeks in the Apple's iPad store China -- iPad store on both the top grossing link and the free download links. One of the very unique or special features of this game is that it is freely interchangeable of playing this game, whether it is using the PC or the iPad. Basically we not got any specific differentiations of the income coming from the iPad or the PC. And we do see that, even though the game has been in the market for not long because it has just been launched in April, but we still see that the users or the players are very interested to play this game and find it very popular to play on the iPad platforms, owing to the fact that they also find the user experiences of playing, using the iPad has been very good.

隨著今年 4 月其他版本的推出，我們看到遊戲本身已連續兩週在蘋果 iPad 商店中國區——iPad 商店暢銷榜和免費下載榜上排名第一。這款遊戲的一個非常獨特或特殊的功能是，無論是使用 PC 還是 iPad，都可以自由切換玩這款遊戲。基本上，我們沒有發現來自 iPad 或 PC 的收入有任何具體的區別。我們確實看到，儘管這款遊戲上市時間不長，4 月才剛剛推出，但我們仍然看到用戶或玩家對這款遊戲非常感興趣，並且發現它在 iPad 平台上非常受歡迎，因為他們也發現使用 iPad 玩遊戲的用戶體驗非常好。

Going forward, we do see that the revenue contributions from the Hearthstone will be quite apparent, but given the fact that the game has been in the market for not long, perhaps less than 5 months so far, we would like to take a bit more time to see how it goes in terms of its performance going forward.

展望未來，我們確實看到《爐石戰記》的收入貢獻將非常明顯，但考慮到遊戲上市時間不長，可能至今不到 5 個月，我們想花更多時間來觀察它未來的表現。

I see --

我懂了 -

(interpreted) Okay so basically because the revenue data -- because the product has been launched for a very short period of time within a month, so we have just to get a more -- the revenue data from the Apple in order to use the (inaudible) of our revenue contributions from those games.

（翻譯）好的，基本上是因為收入數據——因為產品推出的時間很短，只有一個月，所以我們必須獲得更多——來自蘋果的收入數據，才能使用（聽不清楚）這些遊戲對我們的收入貢獻。

Okay thank you. My second question is regarding the licensing that we have from -- I believe that recently the Heroes of the Storm. So I understand Blizzard is also beta-testing the game. So I wonder whether NetEase would have any chance to be able to launch the games simultaneously as a global launch. Then lastly if with the Guild Wars 2 from NCSOFT, which is operated by KongZhong in China -- would that be any -- or potentially any impact to World of Warcraft? Thank you.

好的，謝謝。我的第二個問題是關於我們最近獲得的《風暴英雄》的許​​可。據我了解，暴雪也在對遊戲進行 Beta 測試。所以我想知道網易是否有機會在全球同步推出這些遊戲。最後，如果 NCSOFT 的《激戰 2》由中國的空中網運營，這會對《魔獸世界》產生任何或潛在的影響嗎？謝謝。

(interpreted) So in regard to, Alicia, your first question about the potential launch of Heroes of Storm, basically we do anticipate that it would be launched on a quite close manner with the global launch or (inaudible) the simultaneous launch. Because if you look back in the past for the past one year, just like the World of Warcraft or even the Hearthstone, usually we will be able to keep the launch in the China market within one week following the global launch.

（翻譯）所以關於艾莉西亞，你的第一個問題是關於《風暴英雄》的潛在發布，基本上我們確實預計它將以與全球發布或（聽不清）同步發布相當接近的方式發布。因為如果你回顧過去一年，就像《魔獸世界》或《爐石戰記》一樣，通常我們能夠在全球發布後一周內在中國市場推出。

With regard to the -- and other game titles, these are from NCSOFT. We do not foresee that this game would have any significant impact to our World of Warcraft.

至於——以及其他遊戲名稱，這些都是來自 NCSOFT 的。我們預計這款遊戲不會對我們的魔獸世界產生任何重大影響。

One supplement that we didn't have highlighted is that at present it's also very emphasized and focused on the importance of the users in the China market, and we would be working along these directions and visions to make sure that the launch would be a seamless one on a global basis.

我們沒有強調的一點是，目前我們也非常強調和關注中國市場用戶的重要性，我們將沿著這些方向和願景努力，確保在全球範圍內無縫發布。

Okay. Thank you. So really I'm quite eager to follow up. (Spoken in a foreign language) have you already applied for the license approval from the government? Thank you.

好的。謝謝。所以我真的很渴望跟進。（外語）你已經向政府申請執照批准了嗎？謝謝。

(interpreted) Just wait until we've got more updates regarding this.

（解釋）請等待我們獲得有關此事的更多更新。

Okay, thank you. (Spoken in a foreign language).

好的，謝謝。（用外語說）。

Thank you. Our next question's from the line of Jialong Shi with Credit Suisse. Please go ahead.

謝謝。我們的下一個問題來自瑞士信貸的施嘉龍。請繼續。

Hi, good morning William and Onward. Thank you for taking my question. First of all congratulations on the solid debut of your self-developed mobile game (inaudible) and the successful launch of Hearthstone as well. And as NetEase still generates most of the revenue from PC games, can management provide some colors of the performance of your top five PC games and how their respective revenue trends? (Spoken in a foreign language).

嗨，早上好，William 和 Onward。感謝您回答我的問題。首先恭喜你們自主研發的手機遊戲（聽不清楚）的順利推出，也恭喜《爐石戰記》的成功推出。由於網易的大部分收入仍來自 PC 遊戲，管理階層能否介紹五大 PC 遊戲的表現以及它們各自的收入趨勢？（用外語說）。

So Jialong, with regard to your questions about our top performing game titles, basically we're not ranked them into order, but perhaps we can give you a sense that up to now in terms of our self-developed games, our major revenue contributing game titles would be including Fantasy Westward Journey Online II, the New Westward Journey Online II, Tianxia III, Ghost II, Heroes of Tang Dynasty II, and also Kung Fu Master.

佳龍，關於你問到的我們表現最好的遊戲，基本上我們沒有對它們進行排序，但也許我們可以給你一個大概的印象，到目前為止，就我們的自主研發遊戲而言，我們主要的收入貢獻遊戲包括《夢幻西遊2》、《新西遊2》、《天下三國》、《倩女2》、《大功夫2》、《唐大師》2》和《大功夫》。

Okay, now how's their performance, their trend, in both revenue and the user traffic?

好的，現在他們的收入和用戶流量表現如何，趨勢如何？

Well I think just as what we have highlighted in our press release or the earlier discussions, the performance of the games has also been well on-track and the user feedback has also been very positive. We also see that they are still doing good both in terms of the overall performances and also the user traffic.

嗯，我認為正如我們在新聞稿或之前的討論中所強調的那樣，遊戲的表現也一直很順利，用戶的回饋也非常積極。我們也看到，無論從整體表現或用戶流量來看，它們仍然表現良好。

Okay, understood. My second question is about your mobile game (inaudible) I just wonder how much of the gross revenue from Enjoy platform was generated by NetEase's proprietary channels.

好的，明白了。我的第二個問題是關於你們的手機遊戲（聽不清楚），我只是想知道 Enjoy 平台的總收入有多少是由網易的專有管道產生的。

(Spoken in a foreign language).

（用外語說）。

So basically to recap on what William has just highlighted (inaudible) of the Mini Westward Journey. With the launch of this game not long ago, which was on 25 April, we do see that this has been a very successful product launch. And for now in terms of the revenue contributions, more than 90% of it would be from our own internal channels.

所以基本上回顧一下威廉剛剛強調的（聽不清楚）迷你西行之旅。這款遊戲於 4 月 25 日不久前發布，我們確實看到這是一個非常成功的產品發布。目前就收入貢獻而言，90％以上來自我們自己的內部管道。

Understood. The last question is about the online education. I noticed recently at launch day a new online education platform. So can management elaborate its potential business model and how is it different from your competitors like YY's 100.com? (Spoken in a foreign language).

明白了。最後一個問題是關於線上教育的。最近我在發布日註意到了一個新的線上教育平台。那麼管理層能否詳細說明其潛在的商業模式以及它與 YY 的 100.com 等競爭對手有何不同？（用外語說）。

(interpreted) Basically with regard to NetEase Online Education's footprint, first of all, we have launched the NetEase Open Education course for more than 3 years history. But now we have more than 3000 hours of courses being translated and available for the users to download and to learn on a free basis.

(翻譯)基本上關於網易線上教育的足跡，首先我們推出網易開放教育課程已經有3年多的歷史了。但現在我們有超過 3000 小時的課程被翻譯並可供用戶免費下載和學習。

Earlier this year we also undertook, in cooperation with Coursera and another very reputable service provider for the (inaudible) and so far we have launched around 56 MOOC courses to allow the users to learn from it. Basically one of the features of these education platforms is to allow the users or the learners to get their learning credits being certified after they have taken the course.

今年早些時候，我們還與 Coursera 和另一家非常知名的服務提供者合作（聽不清楚），到目前為止，我們已經推出了大約 56 門 MOOC 課程，供用戶學習。基本上，這些教育平台的功能之一是允許使用者或學習者在完成課程後獲得學習學分認證。

Other things that we have also recently launched would be our (inaudible) which is the NetEase cloud study room or products.

我們最近也推出的其他產品是（聽不清楚），即網易雲自習室或產品。

(spoken in a foreign language)

（用外語說）

Thank you. Our next question is from the line of Tian Hou with TH Capital. Please go ahead.

謝謝。我們的下一個問題來自泰合資本的天后。請繼續。

So William and Onward, a couple of questions. One is I was wondering about the revenue contribution potentially from the mobile game. So one thing I do realize from a lot of mobile game operators, so the game is very -- you know when they reach the top in their ranking.

那麼 William 和 Onward，我有幾個問題。一是我想知道手機遊戲可能帶來的收入貢獻。所以我確實從許多手機遊戲運營商那裡意識到了一件事，那就是遊戲非常——你知道他們何時達到了排名的頂峰。

So the revenue may not necessarily big enough, you know, as big as the user and so I wonder -- we just launched several really popular games, and I wonder how the revenue contribution could be. Will that be NetEase's game revenue growth driver? So that is the first question.

因此，收入可能不一定足夠大，你知道，不像用戶那麼多，所以我想知道——我們剛剛推出了幾款非常受歡迎的遊戲，我想知道收入貢獻會如何。這會成為網易遊戲收入成長的動力嗎？這是第一個問題。

The second is really to do with the e-commerce business. So in China Market, you guys know, the only two lenders are making money is (inaudible) and Alibaba. None of the other e-commerce guys are actually making money and may not make money in a long time. So what's our consideration in this area? (Spoken in a foreign language).

第二個確實與電子商務業務有關。因此，在中國市場，你們知道，唯一賺錢的兩家貸款機構是（聽不清楚）和阿里巴巴。其他電子商務公司實際上都沒有賺錢，而且可能很長一段時間都賺不到錢。那我們在這方面的考慮是什麼？（用外語說）。

(interpreted) So with regard to, Tian Hou, first question is about the revenue contribution potentials from the mobile game. Basically, our will is that as long as those games can get to the top-grossing [levels] we do see that this will probably good potentials of being profitable. We also anticipated that the profit viabilities of those mobile games wouldn't be lower than what our client base (inaudible) has been doing so far.

(翻譯) 那麼關於天后，第一個問題是關於手機遊戲的收入貢獻潛力。基本上，我們的意願是，只要這些遊戲能夠達到最暢銷的水平，我們就有可能看到良好的獲利潛力。我們也預期這些手機遊戲的獲利能力不會低於我們的客戶群（聽不清楚）迄今為止的獲利能力。

Another point is that we've got good confidence to do this kind of new business initiatives regarding the mobile games on a very sustainable patterns, because this is what we have experienced in the past. We have been asking by the investors for some of our longer-term operated game titles like the Fantasy Westward Journey or even the Westward Journey Online II and stuff like that. They have been in the markets for -- operations for 10 years, and the investors will be interested to know whether it has come to the peak point and then have some life cycle issues.

另一點是，我們對以非常可持續的模式開展此類有關手機遊戲的新業務計劃充滿信心，因為這是我們過去所經歷的。我們一直向投資人尋求一些長期營運的遊戲，像是《夢幻西遊》甚至《大話西遊2》等等。他們已經在市場上運作了 10 年，投資者很想知道它是否已經達到頂峰，然後會出現一些生命週期問題。

But the fact has proved that those games are still operating well and still making some new hit records of PC numbers in recent years. Although we do see that the growth potentials wouldn't be that significant as compared in the past as what we have been doing so far, but we do see that we do possess the capabilities and the visions to make it to be a very sustainable business model. This would be the first part of it.

但事實證明，這些遊戲仍然運作良好，並且在近年來不斷創造一些新的PC銷售紀錄。儘管我們確實看到，與過去相比，成長潛力並不那麼顯著，但我們確實看到，我們確實擁有使其成為非常永續的商業模式的能力和願景。這將是它的第一部分。

With regard to your second question on the e-commerce, so far NetEase has been undertaking on a wide array of e-commerce related activities, say for example the sales of the game podcast, we have already made it available to online using the e-commerce kind of methods of doing so. Basically, for now, users like our World of Warcraft and even our (inaudible) game, users can readily available to purchase those points cards online.

關於你提到的第二個問題，關於電商，目前網易在電商方面已經開展了非常多的活動，比如游戲播客的銷售，我們已經通過電商的方式把它放到了線上。基本上，目前，像我們的《魔獸世界》甚至我們的（聽不清楚）遊戲這樣的用戶，都可以輕鬆地在線購買這些積分卡。

Secondly with the introductions of the sales of the insurance products, the movie tickets, and train tickets, and stuff like that, we have been entering into the area of -- like e-commerce area or (inaudible) without any logistic related kind of e-commerce. We do foresee that this would lay down a good fundamental for us to move into this area. And other than those items that we have just mentioned, we have also gotten into areas like the financial product and even for the sale of lottery products as well. That's what we have (inaudible) in these earnings.

其次，隨著保險產品、電影票、火車票等銷售的推出，我們已經進入了電子商務領域，或者（聽不清楚）沒有任何與物流相關的電子商務領域。我們確實預見到這將為我們進入該領域奠定良好的基礎。除了我們剛才提到的那些項目之外，我們還涉足金融產品等領域，甚至還銷售彩票產品。這就是我們在這些收益中所擁有的（聽不清楚）。

Those are very helpful. Just a follow-up on the lottery sales, recently the government came out saying none of the selling agencies online has government licenses. So will that be some concern going forward? William, (spoken in a foreign language).

這些非常有幫助。關於彩券銷售的後續情況，最近政府表示，網路銷售機構均沒有政府許可證。那麼這會引起一些後續擔憂嗎？威廉（用外語講話）。

(spoken in a foreign language).

（用外語說）。

(spoken in a foreign language).

（用外語說）。

So basically, the simple answer to your last question is that there has been some rumors in the market, and after that there has been some clarifications in the media or in the market.

所以基本上，對於你最後一個問題的簡單答案是，市場上出現了一些謠言，之後媒體或市場上出現了一些澄清。

That's all my questions. Thank you.

這就是我所有的問題。謝謝。

Okay, thank you. Thank you.

好的，謝謝。謝謝。

Thank you. Our next question's from the line of Philip Wan with Morgan Stanley. Please go ahead.

謝謝。我們的下一個問題來自摩根士丹利的 Philip Wan。請繼續。

Hi, thank you for taking my question. This is Amanda Chen asking on behalf of Philip Wan. My first question is regarding your sales and marketing expenses as you are going to launch some new mobile games and also you are going to broadcast your World of Warcraft in 2014, so I was wondering will that impact your margin in 2014? Thank you.

你好，謝謝你回答我的問題。我是 Amanda Chen，代表 Philip Wan 提問。我的第一個問題是關於你們的銷售和行銷費用，因為你們將在 2014 年推出一些新的手機遊戲，並且還將播放《魔獸世界》，所以我想知道這是否會影響你們 2014 年的利潤率？謝謝。

Okay. With regard to your questions on the potential spending on the sales and marketing, basically we are still upholding the visions of holding about 12% of our total revenues on an annual basis of spending in order to promote our various products and services. So you will see that up to now, we do not foresee there would be a very significant impact or negative impact on our overall operating margins.

好的。關於您所問的銷售和行銷方面的潛在支出，基本上我們仍然堅持每年將總收入的 12% 左右用於推廣各種產品和服務的願景。因此，您會看到，到目前為止，我們預計這不會對我們的整體營業利潤率產生非常重大的影響或負面影響。

Of course, we do see that given the higher cost trend, there will be some competition pressures in the market, but our wishes is to try to upkeep our current levels of the operating margins.

當然，我們確實看到，鑑於成本上升趨勢，市場上會出現一些競爭壓力，但我們希望努力維持目前的營業利潤率水準。

Okay. My second questions is regarding the YiChat. As William just mentioned that you are going to introduce social networking functions to the mobile games by connecting them to YiChat. So my question is could you please give us more colors on that and if possible, could you please give some operational data of YiChat like MAU or registered users? (Spoken in a foreign language)

好的。我的第二個問題是關於易信的。正如William剛才提到的，你們將透過與易信對接，為手機遊戲引入社交網路功能。所以我的問題是，您能否為我們提供更多細節，如果可能的話，您能否提供一些 YiChat 的營運數據，例如 MAU 或註冊用戶？（用外語說）

(interpreted) So basically with regard to the Company's assets or the commitments on developing the YiChat business, this has been our focus so far and we will make sure that the YiChat will be developed in a very well manner. With regard to how to better leverage social networking impact, by the end of this month, we will launch a new function or new features on the YiChat platforms by launching the mobile games and by then we will be able to make it a more complete user experience to the users of YiChat.

(翻譯) 因此，基本上就公司的資產或發展易信業務的承諾而言，這一直是我們迄今為止的重點，我們將確保易信以非常好的方式發展。關於如何更好地發揮社群網路的影響力，本月底我們將在易信平台上推出一項新功能或新特性，透過推出手機遊戲，屆時我們將能夠為易信用戶帶來更完善的用戶體驗。

With regard to the user populations developments, so far it has been within our own expectations and our targets. We would also find a more appropriate timing to talk about the active users' profiles on these new initiatives.

關於使用者群體的發展，到目前為止，一切都在我們的預期和目標之內。我們也會尋找更合適的時機來談論這些新措施的活躍用戶概況。

Okay thank you. Also I have another question if I may. It's about mobile games compared to other PC game developer and companies. What's your advantage in the mobile game area compared to them? (Spoken in foreign language)

好的，謝謝。如果可以的話我還有一個問題。與其他 PC 遊戲開發商和公司相比，它是關於手機遊戲的。你們在手遊領域相對於他們來說有什麼優勢？（用外語說）

(interpreted) So with regard to our mobile games development competitive advantages, basically we can take -- at our recent launch of the Mini Westward Journey game, the game itself is a very interesting game with rich gameplay and features. We also found that the contents therein is very fruitful (inaudible), as compared with all the other games so far as we identify in the market. For other mobile game titles, the performance will somehow be reliant on the channel abilities. But to us, our games are based on our own reputations and the qualities of the games. [They are saying] that the first tier game products would be able to perform well based on this own reputations or these quality, and the second tier games can only do so by way of finding the different channels, so to call.

(翻譯) 因此，關於我們在手機遊戲開發的競爭優勢，基本上我們可以採取——在我們最近推出的《小西遊》遊戲上，遊戲本身是一款非常有趣的遊戲，具有豐富的遊戲玩法和功能。我們還發現，與我們目前在市場上發現的所有其他遊戲相比，其中的內容非常豐富（聽不清楚）。對於其他手機遊戲來說，其性能在某種程度上取決於管道能力。但對我們來說，我們的遊戲是基於我們自己的聲譽和遊戲的品質。[他們說]一線遊戲產品可以憑藉自身的口碑或品質取得好成績，而二線遊戲只能透過尋找不同的管道來取得好成績。

To give you an added supplements on the performance of our various mobile games that has launched so far for our licensed game like Hearthstone, since it launched to the China market, it has been standing at the top ranking for 2 weeks on the iPad's app store. For our Mini Westward Journey, so far it has been ranking in the top 10 within the China ranking list.

為了讓您進一步了解我們迄今為止推出的多款手機遊戲的表現，對於我們的授權遊戲，例如《爐石戰記》，自從進入中國市場以來，它已經在 iPad 應用商店的排名中連續兩週位居榜首。就我們的《小西遊》來說，目前為止，它在中國排行榜上一直排在前十名。

Another point that I would like to supplement is that given the fact that NetEase has been in the client based game development market for over 14 years, we have accumulated a very good sums of loyal and supportive players in the market. More importantly, from time to time whenever there is got some new game initiatives being launched in the market, our players and our users would get the passions and got the wish to have a try of our new games in the market.

另外我想補充一點，網易在客戶端遊戲開發市場已經耕耘了14年多，累積了大量忠實的玩家支援。更重要的是，每當市場上推出一些新的遊戲項目時，我們的玩家和用戶就會產生興趣，並希望嘗試我們在市場上推出的新遊戲。

Thank you. Our next question comes from the line of Thomas Chong, BOCI. Please go ahead.

謝謝。我們的下一個問題來自中銀國際的 Thomas Chong。請繼續。

Hi, good morning. Thanks for taking my questions. I have two questions. The first question is about the advertising sentiment. Can management comment about the advertising sentiment in the second half as well as your views about the trend in mobile advertising going forward? My second question relates to the online games revenue outlook. Given that the online games revenue grew by 6% year-on-year in the first quarter, should we expect the online games revenue growth to re-accelerate in the second quarter going forward? Thanks.

嗨，早安。感謝您回答我的問題。我有兩個問題。第一個問題是關於廣告情緒。管理階層能否評論一下下半年的廣告情緒以及您對未來行動廣告趨勢的看法？我的第二個問題與網路遊戲收入前景有關。鑑於第一季網路遊戲營收年增6%，我們是否可以預期第二季網路遊戲營收成長將再次加速？謝謝。

(interpreted) So with regard to your first question about the advertising sentiment, basically we do hold a positive view to it because of -- special year because of the World Cup 2014 and with the fact that we are partnering with two popular football teams from the Brazil and the Spain. We are also the official partners to broadcast those matches, so we do see this kind of contents or the resources will stand us in good stead, especially during this special events year. So we do look forward that in second half of the year. There will be a good growth potential in particular on our advertising businesses.

（翻譯）關於您關於廣告情緒的第一個問題，基本上我們對此持正面看法，因為 2014 年世界盃是特別的一年，而且我們與巴西和西班牙兩支受歡迎的足球隊合作。我們也是轉播這些比賽的官方合作夥伴，因此我們確實認為這類內容或資源將對我們大有裨益，尤其是在這個特別的賽事年。所以我們確實期待下半年的這項進展。我們的廣告業務尤其具有良好的成長潛力。

At the same time, we also see that in terms of our monetization on our mobile news applications, this has also been doing in a good trend so far with a further attraction of the advertisers and the users in general.

同時，我們也看到，就我們的行動新聞應用程式的貨幣化而言，到目前為止也一直呈現良好的趨勢，進一步吸引了廣告商和廣大用戶。

On your second question regarding the online games outlook for this year, basically in 2014 this would be a year for NetEase to actually give away lots of new initiatives, whether they are the mobile games, our self-developed games or even our newly introduced (inaudible) games in those parts of the market. We do hold a positive view about this growing potential in the upcoming periods of this year.

關於您關於今年網路遊戲前景的第二個問題，基本上，2014 年將是網易推出許多新舉措的一年，無論是手機遊戲、我們自主開發的遊戲，還是我們新推出的（聽不清楚）遊戲。我們確實對今年未來時期的成長潛力持樂觀態度。

Thank you. Ladies and gentlemen, that's all the time we have for questions today.

謝謝。女士們、先生們，今天我們的提問時間就到這裡了。

At this time, I'd like to turn the conference back to Brandi Piacente for closing remarks.

現在，我想請布蘭迪·皮亞森特 (Brandi Piacente) 致閉幕詞。

Thank you once again for joining us today. If you have further questions, please feel free to contact Cassia Curran, NetEase's IR manager based in Hangzhou, or the Piacente Group. Have a wonderful day.

再次感謝您今天加入我們。如果您還有其他問題，請隨時聯繫網易杭州的投資者關係經理 Cassia Curran 或 Piacente 集團。祝您有美好的一天。

Thank you. Ladies and gentlemen, if you'd like to listen to a replay of today's conference, please dial 1-800-406-7325 or 303-590-3030 using the access code of 4679831 followed by the pound key. This does conclude the NetEase first quarter 2014 earnings call. Thank you very much for your participation. You may now disconnect.

謝謝。女士們、先生們，如果您想收聽今天會議的重播，請撥打 1-800-406-7325 或 303-590-3030，接入碼為 4679831，然後按井號鍵。網易2014年第一季財報電話會議到此結束。非常感謝您的參與。您現在可以斷開連線。

Portions of this transcript that are marked (interpreted) were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.

本記錄中標記（翻譯）的部分是由現場通話中的翻譯人員說的。翻譯由贊助本次活動的公司提供。