NetEase Inc (NTES) 2019 Q4 法說會逐字稿

Good day, and welcome to the NetEase 2019 Fourth Quarter and Fiscal Year Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Margaret Shi, IR Director of NetEase.

美好的一天，歡迎來到網易 2019 年第四季度和財年收益電話會議。今天的會議正在錄製中。這時，我想把會議轉交給網易 IR 總監 Margaret Shi。

Thank you, operator.

謝謝你，運營商。

Please note the discussion today will contain forward-looking statements relating to future performance of the company and are intended to qualify for safe harbor from liability as established by the U.S. 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 in this discussion.

請注意，今天的討論將包含與公司未來業績相關的前瞻性陳述，旨在符合美國私人證券訴訟改革法案規定的安全港免責條款。此類陳述不是對未來業績的保證，並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大相徑庭。

A general discussion of the risk factors that could affect NetEase's business and the 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 obligation to update this forward-looking information, except as required by law.

對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該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 表格的年度報告。除法律要求外，公司不承擔任何更新此前瞻性信息的義務。

During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2019 fourth quarter and fiscal year financial statements news release issued earlier today. And with respect to non-GAAP financial measures related to the results of our consolidated subsidiary, Youdao, please visit the Investor Relations website of NetEase at ir.netease.com.

在今天的電話會議上，管理層還將討論某些非 GAAP 財務措施，僅供比較之用。有關非 GAAP 財務指標的定義以及 GAAP 與非 GAAP 財務結果的調節，請參閱今天早些時候發布的 2019 年第四季度和財年財務報表新聞稿。關於與我們合併子公司有道業績相關的非美國通用會計準則財務指標，請訪問網易投資者關係網站 ir.netease.com。

As a reminder, this conference is being recorded.

提醒一下，這次會議正在錄製中。

In addition, an Investor Presentation and a webcast replay of this conference call will also be available on NetEase IR website.

此外，網易投資者關係網站還將提供投資者介紹和本次電話會議的網絡直播重播。

Joining us today on the call from NetEase senior management is Mr. William Ding, our CEO; Mr. Charles Yang, Chief Financial Officer.

今天，我們的首席執行官丁威廉先生應網易高級管理層的電話加入了我們的行列；首席財務官 Charles Yang 先生。

I will now turn the call over to Charles, who will read the prepared remarks on behalf of William.

我現在將電話轉給查爾斯，他將代表威廉宣讀準備好的發言稿。

Thank you, Margaret, and thank you, everyone, for participating in today's call.

謝謝瑪格麗特，也謝謝大家參加今天的電話會議。

Before we begin, I would like to remind everyone that all percentages are now based on renminbi.

在我們開始之前，我想提醒大家，現在所有的百分比都是以人民幣計算的。

2019 was an eventful year for NetEase. We expanded the reach of our online games, grew our international presence, IPO-ed our online learning arm, Youdao, advanced our music platform and refined our operations in e-commerce.

2019年對於網易來說是多事之年。我們擴大了在線遊戲的覆蓋範圍，擴大了我們的國際影響力，將我們的在線學習部門有道進行了 IPO，改進了我們的音樂平台並完善了我們在電子商務方面的運營。

For the full year, we grew our total net revenues by 16% to CNY 59.2 billion and increased our GAAP net income from continuing operations attributable to our shareholders by 60% to CNY 13.3 billion.

全年，我們的總淨收入增長了 16% 至 592 億元人民幣，我們的股東應佔持續經營業務的 GAAP 淨收入增長了 60% 至 133 億元人民幣。

Online games segment is the cornerstone of our business. Despite having launched fewer games throughout the year, we continued to grow our online games business at a healthy rate in 2019 with 16% year-over-year increase in net revenues. Driven by the steady performance of our long-standing titles, we once again exceeded CNY 10 billion this quarter for the past 7 consecutive quarters.

網絡遊戲分部是我們業務的基石。儘管全年推出的遊戲較少，但我們的網絡遊戲業務在 2019 年繼續以健康的速度增長，淨收入同比增長 16%。在長線穩健表現的帶動下，本季度我們再次連續7個季度突破100億元。

Our flagship titles continue to provide solid support for our online games business with increasing longevity and user loyalty. In 2019, revenues from Fantasy Westward Journey Online and Fantasy Westward Journey Mobile both grew at double-digit rate, remaining prevalent after years of operations. Westward Journey Online and its mobile version also grew steadily in 2019.

隨著壽命和用戶忠誠度的提高，我們的旗艦遊戲繼續為我們的在線遊戲業務提供堅實的支持。2019 年，夢幻西遊 Online 和夢幻西遊 Mobile 的收入均以兩位數的速度增長，經過多年的運營仍然保持普遍。2019年大話西遊及其手機版也穩步增長。

After over 15 years of operation, our FWJ and WWJ franchises have been instilled in the collective memory of a generation of Chinese players. We further expanded the reach of these IPs through the introduction of FWJ 3D in mid-December last year, captivating both returning fans as well as new audience.

經過超過15年的運營，我們的FWJ和WWJ特許經營權已被灌輸到一代中國玩家的集體記憶中。去年 12 月中旬，我們通過推出 FWJ 3D 進一步擴大了這些 IP 的影響範圍，吸引了回歸粉絲和新觀眾。

As another iteration of the FWJ franchise in mobile, this 3D version game reserves the classic gameplay and social system while bringing brand-new experiences to mobile users in a realtime 3D world. We are still working on new updates and expansion packs to further optimize the experience for FWJ 3D. And we are confident that over the long term, the 3D version will show similar longevity and popularity as our other titles in this franchise.

作為FWJ手游系列的又一次迭代，這款3D版遊戲在保留經典玩法和社交系統的同時，在實時3D世界中為手機用戶帶來全新的體驗。我們仍在致力於新的更新和擴展包，以進一步優化 FWJ 3D 的體驗。我們相信，從長遠來看，3D 版本將顯示出與我們在該系列中的其他遊戲相似的壽命和受歡迎程度。

In addition to growing and strengthening our existing franchise, we are also good at incubating new ones. Our corporate DNA in content innovation, marketing expertise and long-term operations have allowed us to consistently deliver new and long-lasting game titles to our users. Onmyoji is the first of these relatively younger franchises that we have built in-house. We are pleased to see that as we introduce more innovative new storylines, new characters and other new content, the influence of Onmyoji's IP is growing and resonating well with game players.

除了發展和加強我們現有的特許經營權，我們還擅長培育新的特許經營權。我們在內容創新、營銷專業知識和長期運營方面的企業 DNA 使我們能夠始終如一地為我們的用戶提供新的和持久的遊戲。陰陽師是我們內部建立的這些相對年輕的特許經營權中的第一個。我們欣喜地看到，隨著我們不斷推出更多創新的新劇情、新角色等新內容，陰陽師IP的影響力越來越大，並引起了遊戲玩家的共鳴。

In 2019, Onmyoji topped the iOS grossing chart 4 times, stabilizing at a new run rate after more than 3 years of operation.

2019年，《陰陽師》4次登頂iOS暢銷榜，運營3年多穩定在新的流水率。

In December, we launched Onmyoji: The Card Game, its second spin-off game. Living up to expectations, the new Onmyoji card game carried on the tradition of impressing the market with its exquisite artwork. With this iteration, we also introduced more competitive and strategic gameplay, winning over a large group of hardcore, collectible card players. We are now also currently working on several new Onmyoji games, including Onmyoji: Yokai Koya, a simulation game, which we plan to launch in the first half of this year.

12 月，我們推出了第二款衍生遊戲《陰陽師：紙牌遊戲》。不負眾望，全新的陰陽師卡牌遊戲延續了以精美的美術打動市場的傳統。通過這次迭代，我們還引入了更具競爭性和戰略性的遊戲玩法，贏得了一大批鐵桿、收藏卡牌玩家。我們現在也在開發幾款新的陰陽師遊戲，包括我們計劃在今年上半年推出的模擬遊戲《陰陽師妖怪高夜》。

Identity V is another young IP, where we see the potential to be building to a successful NetEase franchise. With this goal in mind, we are continually enriching this IP through a variety of initiatives, including eSports, IP collaborations and off-line activities. We have hosted a number of high-profile events featuring Identity V, including both international and regional series tournaments, most notably our global championship, Call of the Abyss, has attracted over 800,000 players from around the world since December.

第五人格是另一個年輕的 IP，我們看到它有可能成為網易成功的特許經營權。牢記這一目標，我們通過各種舉措不斷豐富這一 IP，包括電子競技、IP 合作和線下活動。我們舉辦了多場以《第五人格》為特色的備受矚目的賽事，包括國際和地區系列錦標賽，最著名的是我們的全球錦標賽“深淵的呼喚”，自去年 12 月以來吸引了來自世界各地的超過 800,000 名玩家。

We also collaborated with Happy Valley, a popular national theme park brand in China bringing some of the in-game characters to life. We are pleased to see the early success of Identity V as it becomes another powerful IP franchise, establishing a broad and vibrant community of young players in China and abroad.

我們還與中國流行的國家級主題公園品牌歡樂谷合作，將游戲中的一些角色栩栩如生。我們很高興看到第五人格的早期成功，因為它成為另一個強大的 IP 特許經營權，在中國和國外建立了一個廣泛而充滿活力的年輕玩家社區。

Invincible, our 2015 launch that has been growing steadily year-over-year in terms of the revenue and active users, is now one of China's biggest SLG titles. Like with many of our games, we invented a brand-new in-game mechanism that resets gamers' scores every season, creating a much more balanced game experience and setting a new standard for the genre.

我們 2015 年推出的無敵手游在收入和活躍用戶方面逐年穩步增長，現已成為中國最大的 SLG 遊戲之一。與我們的許多遊戲一樣，我們發明了一種全新的遊戲內機制，每個賽季都會重置遊戲玩家的分數，從而創造更加平衡的遊戲體驗並為該類型設定新的標準。

Given the recently increasing popularity of SLGs in China, we are optimistic about our prospects and are working to bring more exciting content to the promising SLG category.

鑑於最近 SLG 在中國越來越受歡迎，我們對我們的前景持樂觀態度，並正在努力為前景廣闊的 SLG 類別帶來更多精彩內容。

The prerequisite to build a successful franchise is the ability to create popular game IPs in-house which is propelled by our world-class R&D infrastructure. Over the past 2 decades, we have built one of the largest in-house R&D teams with China's most talented and passionate game creators, supported by one of the most unique and comprehensive R&D infrastructures in the world. We empower each of our talent with our game-enthusiastic corporate culture and second to none training mechanism in the industry. Our training program at NetEase Games Academy are widely recognized in China as a premier online games training institution for the creative minds.

建立成功特許經營權的先決條件是在我們世界一流的研發基礎設施的推動下，能夠在內部創造流行的遊戲 IP。在過去的 2 年裡，我們與中國最有才華和熱情的遊戲創作者建立了最大的內部研發團隊之一，並得到世界上最獨特和最全面的研發基礎設施之一的支持。我們以熱愛遊戲的企業文化和業內首屈一指的培訓機制賦能每一位人才。我們在網易遊戲學院的培訓項目在中國被廣泛認為是首屈一指的創意人才在線遊戲培訓機構。

Most recently, 2 of our training programs were awarded the 2019 ATD Excellence in Practice awards by the Association for Talent Development, one of the most authoritative international awards in the global talent development industry. As we move ahead, we will continue to foster talent and stimulate new ideas that propel the development of our games.

最近，我們的 2 個培訓項目獲得了人才發展協會頒發的 2019 年 ATD 卓越實踐獎，這是全球人才發展行業最權威的國際獎項之一。在我們前進的過程中，我們將繼續培養人才並激發新的想法來推動我們遊戲的發展。

2019 is also a fruitful year for our licensed games, especially for our joint venture with Blizzard Entertainment. World of Warcraft Classic was launched in August as an inventive recreation of WoW, it was in 2006, and it was very well received by a generation of returning players and newcomers alike. We are very pleased to see the continued popularity of WoW in China, achieving a record number of total monthly subscribers in the fourth quarter with increased revenue quarter-over-quarter.

2019 年對於我們的授權遊戲來說也是碩果累累的一年，尤其是對於我們與暴雪娛樂的合資企業而言。魔獸世界經典版於 2006 年 8 月作為 WoW 的創新遊戲推出，受到了一代回歸玩家和新玩家的一致好評。我們很高興看到《魔獸世界》在中國的持續流行，第四季度的月度總訂閱人數創下歷史新高，收入環比增長。

In 2019, we continued to advance our games and make inroads that expand our reach in overseas markets. Knives Out remained a household name in Japan, topping the iOS grossing chart multiple times during the year. Leveraging our knowledge of building game brands, we further strengthened Knives Out's brand presence by engaging in a series of successful collaborations and our first ever eSports championship tournament in Japan.

2019 年，我們繼續推進我們的遊戲並取得進展，擴大我們在海外市場的影響力。Knives Out 在日本仍然是家喻戶曉的名字，在這一年中多次榮登 iOS 票房榜首。利用我們在打造遊戲品牌方面的知識，我們通過一系列成功的合作以及我們在日本舉辦的首場電子競技錦標賽進一步加強了荒野行動的品牌影響力。

Identity V also exemplifies our ability to operate games in the overseas market over the long term, leading Japan's iOS topping chart for the first time in September. With the success of these titles, we have accumulated a better and deeper understanding of our users in terms of their interest, social behaviors and preferences in style, aesthetics and gameplay. We have integrated this successful experience and know-how into the design of our other games, enhancing our ability to deliver popular titles to Japanese users.

第五人格第五人格也體現了我們在海外市場長期運營遊戲的能力，9月首次領跑日本iOS榜單。隨著這些遊戲的成功，我們對用戶的興趣、社交行為以及對風格、美學和遊戲玩法的偏好有了更好、更深入的了解。我們已將這一成功經驗和專業知識融入到我們其他遊戲的設計中，增強了我們向日本用戶提供熱門遊戲的能力。

In addition to our success in Japan, we've also expanded our footprint across more regions. In December, we launched Marvel Super War in several Southeast Asian markets where it topped many of the iOS download charts.

除了在日本取得成功外，我們還在更多地區擴大了足跡。12 月，我們在多個東南亞市場推出了 Marvel Super War，它在許多 iOS 下載排行榜上名列前茅。

Building on our existing success at home and abroad, we have many exciting games in our pipeline, including Harry Potter: Magic Awakened, EVE Echoes, Onmyoji: Yokai Koya, Ghost World Chronicle, Revelation mobile game, Diablo Immortal and Pokémon Quest.

基於我們在國內外的現有成功，我們正在開發許多令人興奮的遊戲，包括哈利波特：魔法覺醒、EVE Echoes、陰陽師：妖怪高野、幽靈世界編年史、啟示錄手游、暗黑破壞神不朽和神奇寶貝探索。

Turning to our online learning business, Youdao made solid progress in 2019, significantly growing its online course businesses. Youdao enhanced several course products including high school Chinese and Physics, practical English for adult and coding courses for kids. We are also seeing excellent adoption and a rapid increase in sales of Youdao's intelligent learning devices, driven by the successful launch of our second-generation dictionary pen.

在線學習業務方面，有道在2019年取得了長足的進步，在線課程業務實現了顯著增長。有道強化了高中語文物理、成人實用英語、少兒編程課程等多門課程產品。在我們第二代詞典筆的成功推出的推動下，我們還看到有道智能學習設備的出色採用率和銷量快速增長。

We also expanded our tutoring and sales team and substantially improved our tutoring and operating systems to support them. These efforts have been rewarded by robust growth in gross billings of Youdao's online courses by 125% in 2019 and over 200% in the fourth quarter. More importantly, we have accumulated experience that we can replicate across our highly scalable online course model and are beginning to benefit from economies of scale. In 2020, NetEase will continue to support Youdao's mission to bring users more effective and technology-driven education experiences.

我們還擴大了我們的輔導和銷售團隊，並大幅改進了我們的輔導和操作系統以支持他們。這些努力得到了回報，有道在線課程的總收費在 2019 年強勁增長了 125%，在第四季度增長了 200% 以上。更重要的是，我們積累了可以在高度可擴展的在線課程模型中復制的經驗，並開始從規模經濟中受益。2020年，網易將繼續支持有道的使命，為用戶帶來更高效、科技驅動的教育體驗。

Our Cloud Music revenue hit a record high in the fourth quarter, with membership revenue more than doubled year-over-year. Revenues from digital albums and live streaming also grew rapidly. Sales of digital albums have proven to be particularly effective on our platform. For example, sales from a 22-year-old Chinese popstar, Wang Yibo, digital single, No Sense, exceeded CNY 10 million within just 11 hours.

我們的雲音樂收入在第四季度創下歷史新高，會員收入同比增長一倍多。數字專輯和直播收入也快速增長。事實證明，數字專輯的銷售在我們的平台上特別有效。例如，22 歲的中國流行歌星王一博的數字單曲《無意義》的銷售額在短短 11 小時內就突破了 1000 萬元人民幣。

Similarly, sales of Chinese singer-song writer Hua Chenyu's digital single I'd Like to Love This World exceeded CNY 50 million after 45 days online, marking the highest digital single sales record online in China according to a third-party data source.

同樣，華晨宇的數字單曲《我願意愛這個世界》上線45天后銷售額突破5000萬元，創下第三方數據顯示的中國數字單曲網絡最高銷售記錄。

NetEase Cloud Music is home to a large number of independent musicians. More than 100,000 independent artists feature their music on our platform and their songs were played back more than 270 billion times in the year. This makes NetEase Cloud Music the most recognized platform for original music by Chinese artists. In 2019, we plan to use the platform's distribution capability and its broad influence to create more viral content across the Chinese music industry.

網易云音樂是一大批獨立音樂人的聚集地。超過 100,000 位獨立藝術家在我們的平台上展示了他們的音樂，他們的歌曲在一年內被播放了超過 2700 億次。這使得網易云音樂成為最受中國藝術家認可的原創音樂平台。2019年，我們計劃利用平台的分發能力和廣泛的影響力，在華語音樂行業創造更多的病毒式內容。

And finally, our focus with Yanxuan in 2019 remained on improving supply chain management and operating efficiency. We effectively reduced our inventory compared to a year ago and consistently improved our positive feedback rate from users in the quarter. We made adjustments to our pricing management, which resulted in increased revenue and better gross margins from the business. Our participation in product design has resulted in the creation of many hit products by providing valuable research and market analysis gained from the customer end to our manufacturers. At the same time, we have significantly improved our membership system and are seeing the benefits of increased member repurchase rate.

最後，我們在 2019 年與嚴選的重點仍然是改善供應鏈管理和運營效率。與一年前相比，我們有效地減少了庫存，並持續提高了本季度用戶的積極反饋率。我們對定價管理進行了調整，從而增加了業務收入並提高了毛利率。我們參與產品設計，通過向我們的製造商提供從客戶端獲得的有價值的研究和市場分析，創造了許多熱門產品。同時，我們顯著完善了會員體系，會員回購率提升帶來的效益正在顯現。

As for our manufacturer and factory initiatives, we have helped to build tailored online data systems that have further improved their manufacturing process and quality. In 2020, we will continue to enhance our brand influence and reach in China by bringing even more high-quality and personalized products to a growing number of consumers.

至於我們的製造商和工廠計劃，我們幫助建立了量身定制的在線數據系統，進一步改進了他們的製造流程和質量。2020年，我們將繼續提升我們在中國的品牌影響力和影響力，為越來越多的消費者帶來更多優質和個性化的產品。

We are excited for the new year. As our existing game titles continue to impress the market with their phenomenal longevity, 2020 will also see more game launches in China and globally from NetEase. 2020 also marks the 20th anniversary of NetEase being a publicly-traded company. As an Internet veteran in China, NetEase has remained relevant and continues to be a forerunner in the evolving market. With our long track record of success, our goal is to inspire our ever-growing community while bringing increasing value to each of our stakeholders.

我們對新的一年感到興奮。隨著我們現有的遊戲繼續以其非凡的壽命給市場留下深刻印象，2020 年網易還將在中國和全球推出更多遊戲。2020年也是網易上市20週年。作為中國的互聯網老牌企業，網易一直保持相關性，並繼續成為不斷發展的市場的先行者。憑藉我們長期的成功記錄，我們的目標是激勵我們不斷壯大的社區，同時為我們的每個利益相關者帶來更多價值。

Before I pass the call over to Charles, I would like to share some updates on the evolving situation with the coronavirus outbreak in China. Right after the Coronavirus outbreak, we reacted instantly and rolled out a series of initiatives to support the affected regions. We set up a special fund of CNY 100 million. The fund will be used to purchase medical equipment and medicine from home and abroad and deliver to places where the outbreak is the most severe and help is most needed.

在我將電話轉給查爾斯之前，我想分享一些關於中國冠狀病毒爆發的最新情況。新冠肺炎疫情爆發後，我們第一時間做出反應，推出一系列舉措支援受災地區。設立1億元專項資金。這筆資金將用於從國內外採購醫療設備和藥品，運送到疫情最嚴重、最需要幫助的地方。

At the same time, Yanxuan immediately delivered over 200,000 free masks and other protective supplies to our customers and set up special funds for the supply partners.

同時，嚴選第一時間向客戶免費發放超過20萬隻口罩等防護物資，並為供應商設立專項基金。

For Youdao, we were among the first ones in the industry to offer free courses to K-12 students in affected areas, which was later expanded to other regions of China. For the college students, Chinese University MOOC connected with 800 universities covering 4,000 professors' lectures. We also provide our technology support to help other off-line educational institutions to move courses to online through Youdao Intelligent Cloud.

對於有道，我們是業內首批為受影響地區的 K-12 學生提供免費課程的公司之一，後來擴展到中國其他地區。針對大學生，中大MOOC對接了800所大學，覆蓋了4000名教授的講座。我們還提供技術支持，幫助其他線下教育機構通過有道智能雲將課程上線。

Our company took every effort to protect the health and safety of our employees and adopted multiple measures to maintain our operational efficiency, such as flexible work policy and remote office collaboration using our proprietary technology. Overall, with respect to the outbreak, we currently expect to see some impact to our business lines in the near term. However, the situation is evolving. NetEase is committed to providing support to our employees, users and communities and working together as we together move through this challenging time.

我們公司盡一切努力保護員工的健康和安全，並採取多項措施來保持我們的運營效率，例如靈活的工作政策和使用我們專有技術的遠程辦公協作。總體而言，就疫情而言，我們目前預計短期內會對我們的業務線產生一些影響。然而，情況正在發生變化。網易致力於為我們的員工、用戶和社區提供支持，並在我們共同度過這個充滿挑戰的時期時共同努力。

This now concludes William's comments.

威廉的評論到此結束。

I will provide a brief overview and review of our fourth quarter and full year 2019 financial results. Given the limited time on the call, I will be only presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details.

我將簡要概述和回顧我們 2019 年第四季度和全年的財務業績。鑑於電話會議時間有限，我將只介紹一些簡短的財務亮點。我們鼓勵您通讀我們今天早些時候發布的新聞稿，了解更多詳情。

Total net revenues for 2019 were CNY 59.2 billion or USD 8.5 billion representing a 16% increase year-over-year. Net revenues for the fourth quarter came in at CNY 15.7 billion or USD 2.3 billion, representing a 9% increase year-over-year. For 2019, our net revenues from online games services grew 16% year-over-year to CNY 46.4 billion. And in the fourth quarter, it was also up 5% year-over-year to CNY 11.6 billion.

2019 年的總淨收入為 592 億元人民幣或 85 億美元，同比增長 16%。第四季度淨收入為 157 億元人民幣或 23 億美元，同比增長 9%。2019 年，我們來自網絡遊戲服務的淨收入同比增長 16% 至 464 億元人民幣。而在第四季度，它也同比增長 5% 至 116 億元人民幣。

Mobile games accounted for approximately 70% of net revenues from our online games services in the fourth quarter. For 2019, net revenues from Youdao were up 78% to CNY 1.3 billion. And in the fourth quarter, net revenues from Youdao was up 78% to CNY 410 million primarily due to increased net revenues from its online courses and sales of the intelligent learning devices.

第四季度，手機遊戲占我們在線遊戲服務淨收入的約 70%。2019 年，有道的淨收入增長 78% 至 13 億元人民幣。第四季度，有道的淨收入增長 78% 至 4.1 億元人民幣，這主要是由於其在線課程和智能學習設備銷售的淨收入增加。

For 2019, net revenues from innovative businesses and others were up 12% to reach CNY 11.5 billion. In the fourth quarter, it was up 18% year-over-year to reach CNY 3.7 billion, mainly due to the increased revenue contribution from Cloud Music and CC live streaming. Our gross margin was 52.2% in the fourth quarter. Gross margin for our online games remained relatively stable. It fluctuates quarter-to-quarter within a narrow bandwidth based on the revenue mix of mobile and PC as well as self-developed and licensed games. Youdao's gross margin improved to 29.8% in the fourth quarter. This was primarily driven by the improvement of the sales and better economies of scales.

2019 年，創新業務及其他業務的淨收入增長 12%，達到 115 億元人民幣。第四季度，同比增長 18% 至 37 億元，主要是由於雲音樂和 CC 直播的收入貢獻增加。我們第四季度的毛利率為 52.2%。我們網絡遊戲的毛利率保持相對穩定。根據移動和 PC 以及自主開發和授權遊戲的收入組合，它在狹窄的帶寬內按季度波動。有道的毛利率在第四季度提高至 29.8%。這主要是由於銷售的改善和更好的規模經濟所推動的。

Gross margin for innovative businesses and others was 20.6% in this quarter. Margin improvement, both year-over-year and quarter-over-quarter, was primarily due to the increased revenue from Cloud Music.

本季度創新業務及其他業務的毛利率為 20.6%。利潤率同比和環比均有所改善，這主要是由於 Cloud Music 的收入增加所致。

For the fourth quarter, total operating expenses were CNY 5.2 billion. Our selling and marketing expenses as a percentage of total revenue was 13.7% in this quarter.

第四季度，總運營費用為人民幣 52 億元。本季度我們的銷售和營銷費用佔總收入的百分比為 13.7%。

On a full year basis, selling and marketing expense as a percentage of full year net revenue was at 10.5% compared with 13.5% in 2018.

從全年來看，銷售和營銷費用佔全年淨收入的百分比為 10.5%，而 2018 年為 13.5%。

R&D expenses were CNY 2.3 billion, up 5% from the previous quarter. We remain committed to investing in content creation and product development, which is what defines us as a technology company. On a full year basis, R&D expenses represent 14.2% of full year's net revenue comparing to 14.4% in 2018.

研發費用為23億元人民幣，環比增長5%。我們仍然致力於投資於內容創作和產品開發，這正是我們作為一家科技公司的定義。按全年計算，研發費用佔全年淨收入的 14.2%，而 2018 年為 14.4%。

The effective tax rate was 22% for Q4 and 18% for the full year 2019. The lower effective tax rate for the fourth quarter and for the full year compared to the 2018 period were mainly due to reduced losses from certain loss-making subsidiaries of the company.

第四季度的有效稅率為 22%，2019 年全年的有效稅率為 18%。與 2018 年同期相比，第四季度和全年的實際稅率較低，主要是由於公司某些虧損子公司的虧損減少。

Non-GAAP net income from continuing operations attributable to our shareholders for the fourth quarter totaled CNY 3.7 billion or USD 526.1 million representing a decrease of 23% quarter-over-quarter and an increase of 15% year-over-year.

第四季度歸屬於我們股東的持續經營業務的非美國通用會計準則淨利潤總計 37 億元人民幣或 5.261 億美元，環比下降 23%，同比增長 15%。

Our non-GAAP diluted earnings per ADS from continuing operations were CNY 28.03 or USD 4.03 for the fourth quarter of 2019.

2019 年第四季度，我們來自持續經營業務的每份 ADS 的非美國通用會計準則攤薄收益為 28.03 元人民幣或 4.03 美元。

Our cash position remains strong. As of December 31, 2019, our total cash and cash equivalents, current and noncurrent time deposits and short-term investment balance totaled CNY 74.4 billion compared with CNY 49.7 billion as of the year-end of 2018.

我們的現金狀況依然強勁。截至 2019 年 12 月 31 日，我們的現金及現金等價物、活期和非活期定期存款以及短期投資餘額總額為 744 億元人民幣，而 2018 年底為 497 億元人民幣。

In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 1.02 per ADS.

根據我們的股息政策，我們很高興地報告，我們的董事會已批准每股 ADS 1.02 美元的股息。

On February 26, our Board also announced and approved a new share repurchase program for up to USD 1 billion of our outstanding ADS for the next 12 months beginning on March 2.

2 月 26 日，我們的董事會還宣布並批准了一項新的股票回購計劃，從 3 月 2 日開始，在未來 12 個月內回購最多 10 億美元的已發行 ADS。

Thank you for your attention. We would like now to open the call to your questions. Operator, let's go to Q&A, please.

感謝您的關注。我們現在想打開您的問題的電話。接線員，請進入問答環節。

(Operator Instructions) We will take our first question from the line of Alex Poon from Morgan Stanley.

（操作員說明）我們將從摩根士丹利的 Alex Poon 那裡回答我們的第一個問題。

(foreign language) I'll translate my questions. First is regarding music. So we are hearing the master agreements between Tencent Music and the top 3 labels are ending this year and next year? And how will this change the competition landscape, revenue growth and cost structure of NetEase Cloud Music in the next 2 years? And my second question is regarding the overall company, Kaola has been loss-making, but it has been sold and Music already raised enough funds and the overall company margin is improving. So what's the thoughts on balance sheet, cash flow in the next 2, 3 years?

（外語）我會翻譯我的問題。首先是關於音樂。所以我們聽說騰訊音樂與前三大唱片公司之間的主協議將在今年和明年到期？以及這將如何改變網易云音樂未來2年的競爭格局、收入增長和成本結構？我的第二個問題是關於整個公司，考拉一直在虧損，但它已經被出售，音樂已經籌集到足夠的資金，公司整體利潤率正在提高。那麼未來 2、3 年對資產負債表和現金流有何看法？

(foreign language)

（外語）

(foreign language)

（外語）

Thank you, Alex. For your first question, let me provide a brief translation of William's response.

謝謝你，亞歷克斯。對於您的第一個問題，讓我簡要翻譯一下 William 的回答。

So firstly, label companies' exclusivity arrangement in the past years has served China's overall online music industry and affects all sorts of players along the value chain, not only just the platform like us, but also app stores and hardware manufacturers, upstream and downstream players along the chain. We hope that all label companies, not just the big 3, going forward, can all comply with the regulatory frameworks serving China with aim to provide a healthy environment to the overall industry as a whole.

首先，唱片公司在過去幾年的獨占安排服務於中國整個在線音樂產業，並影響到價值鏈上的各種參與者，不僅是像我們這樣的平台，還有應用商店和硬件製造商，上下游參與者。沿著鏈條。我們希望所有標籤公司，而不僅僅是三巨頭，在未來都能遵守為中國服務的監管框架，旨在為整個行業提供一個健康的環境。

Financially, it's definitely going to make the cost structure of the Cloud Music -- of the whole industry to return to a more healthy and normalized level because in the past, we -- the whole industry has been overpaying the content cost twice, 3x or even more to the label companies in this unfair setup. Once the cost structure can normalize, then players like NetEase Cloud Music can focus more resources in promoting innovative music content and encourage native Chinese musicians with our mission to create a vibrant, healthy and successful music culture and community in China. So that's the response to your first question.

在財務上，它肯定會讓整個行業的雲音樂成本結構恢復到更健康和正常的水平，因為在過去，我們 - 整個行業一直在為內容成本多付兩倍，三倍或在這種不公平的情況下，對標籤公司來說更是如此。一旦成本結構能夠正常化，像網易云音樂這樣的玩家就可以將更多資源集中在推廣創新音樂內容上，並鼓勵中國本土音樂人，我們的使命是在中國創造一個充滿活力、健康和成功的音樂文化和社區。這就是對你第一個問題的回答。

On your second question, on the cash. So first of all, let me make a comment that with a conscious effort of being more focused on our core businesses, starting from the end of 2018, and you see a series of fruitful actions throughout 2019, we are benefiting from the economies of scale. As a result, our balance sheet has been growing strong. Our cash position has been very, very strong. Along the way, we've been also very disciplined, retained dividend, increase the dividend payout ratio and have a regular stock buyback program. All in all, we've acted in a responsible way to our shareholders. And especially in a relatively more volatile market, we think by having a strong cash flow position together with a disciplined and responsible treasury policy to our shareholders, that will make NetEase an even stronger and more defensive company throughout this macro turmoil.

關於你的第二個問題，關於現金。所以首先，讓我發表評論，從 2018 年底開始，我們有意識地更加專注於我們的核心業務，你會看到整個 2019 年的一系列卓有成效的行動，我們正在從規模經濟中受益.因此，我們的資產負債表一直在增長。我們的現金狀況一直非常非常強勁。一路走來，我們也非常自律，保留股息，提高股息支付率，並有定期的股票回購計劃。總而言之，我們以對股東負責的方式行事。尤其是在一個相對波動較大的市場中，我們認為，通過擁有強勁的現金流狀況以及對股東有紀律和負責任的財務政策，這將使網易在這場宏觀動盪中成為一家更強大、更具防禦性的公司。

Our next take our next question from Hillman Chan from Citigroup.

我們的下一個問題來自花旗集團的 Hillman Chan。

(foreign language) So my first question is on the coronavirus impact on our various business lines, positive and negative and how long the impact would last in your point of view? And my second question is on the overseas game expansion. Can management update on the timeline with the major IPs like the Apple, Marvel and Harry Potter?

（外語）所以我的第一個問題是冠狀病毒對我們各個業務線的影響，無論是積極的還是消極的，在您看來這種影響會持續多久？我的第二個問題是關於海外遊戲擴張。管理層能否更新蘋果、漫威和哈利波特等主要 IP 的時間表？

(foreign language)

（外語）

Okay. Thank you, Hillman. Let me provide a brief translation for 2 questions.

好的。謝謝你，希爾曼。讓我為兩個問題提供一個簡短的翻譯。

First question on the coronavirus impacts to our different business lines. Firstly, William commented that the situation definitely affects the economy as a whole. It also affects us different BUs to a different extent. But in particular, advertising segment will be more affected by the situation, whereas our online games and online education businesses are relatively less impacted by the situation for now, especially for online education given the physical restrictions of people going out and moving around. It helps to raise the awareness and the adoption rate of online education, which propels the trend of the growth of this new format of learning.

關于冠狀病毒對我們不同業務線的影響的第一個問題。首先，威廉評論說，這種情況肯定會影響整個經濟。對我們不同的BU也有不同程度的影響。但尤其是廣告業務受疫情影響較大，而我們的網絡遊戲和在線教育業務目前受疫情影響相對較小，尤其是在線教育，考慮到人們外出和走動的身體限制。它有助於提高在線教育的意識和採用率，從而推動這種新學習形式的發展趨勢。

For your second question on our general strategy and pipeline about overseas games. Firstly, William commented that we are very serious and very focused on overseas expansion as a major business strategy of our games BU. We've achieved first step achievements in Japan with a couple of games that's been well established, and we are hoping to further leverage this experience and expanding to mainstream Western market by offering -- by bringing more high-quality products to the users in those geographies.

關於我們關於海外遊戲的總體戰略和管道的第二個問題。首先，William 評論說我們非常重視並非常專注於將海外擴張作為我們遊戲事業部的主要業務戰略。我們已經通過幾款成熟的遊戲在日本取得了第一步成就，我們希望進一步利用這一經驗並通過提供——通過為這些用戶帶來更多高質量的產品來擴展到主流西方市場地理。

In the past couple of years, we've been consciously moving up the learning curves, and we think we are more prepared, more ready to reap some fruits in this year and in the coming 2, 3 years.

在過去的幾年裡，我們一直在有意識地提高學習曲線，我們認為我們已經做好了更多的準備，更願意在今年和未來 2、3 年收穫一些成果。

(Operator Instructions) We will take our next question from the line of Alex Yao from JPMorgan.

（操作員說明）我們將接受來自摩根大通的 Alex Yao 的下一個問題。

(foreign language) So I would like to follow up with a question regarding the impact of coronavirus breakout on the gaming side of the business. So from a consumers' perspective, are you guys seeing increasing usage and a better monetization during the coronavirus breakouts? And then secondly, from content development perspective, is the current situation making internal content development more difficult? Would that potentially affect the new game launch in China this year?

（外語）所以我想跟進一個關于冠狀病毒爆發對業務遊戲方面的影響的問題。因此，從消費者的角度來看，在冠狀病毒爆發期間，你們是否看到使用量增加和貨幣化更好？其次，從內容開發的角度來看，目前的情況是否讓內部內容開髮變得更加困難？這是否會影響今年在中國推出的新遊戲？

(foreign language)

（外語）

Thank you, Alex. I'll provide a brief translation for everyone's benefit on the call.

謝謝你，亞歷克斯。為了通話中的每個人的利益，我將提供一個簡短的翻譯。

So in terms of the user metrics, William commented that Chinese New Year period is always a high season for online entertainment as a whole for our games. This New Year period is obviously being affected by the coronavirus situation, so it is a longer Chinese New Year period. User metrics has been stronger than the previous similar quarters in Chinese New Year.

因此，就用戶指標而言，William 評論說，春節期間始終是我們遊戲的整體在線娛樂旺季。今年過年明顯受到疫情的影響，所以是一個比較長的過年時間。農曆新年期間，用戶指標強於之前的類似季度。

And for your question on the R&D impact. So now we do not see any significant delays or impacts to our R&D development progress as well as the planned pipeline launch schedule. Obviously, the virus situation is evolving, and we will continually to assess the impact on the game development, if any.

以及關於研發影響的問題。因此，現在我們沒有看到對我們的研發開發進度以及計劃的管道啟動時間表有任何重大延遲或影響。顯然，病毒情況正在演變，我們將繼續評估對遊戲開發的影響（如果有的話）。

And William also further supplemented the virus impact on the online learnings in particular, we are a firm believer that online learning actually offers a better user experience overall vis-à-vis the traditional off-line learning. I think with the virus situation, more and more people are now more receptive and adaptive to the online learning model. And for a lot of learners, it is also an opportunity for them to be more outreaching to a more variety of knowledge that is only available and offered in a convenient way online. So all in all, we think this virus situation is probably a catalyst to propel the overall online learning industry as a whole.

William 還進一步補充了病毒對在線學習的影響，我們堅信在線學習實際上提供了比傳統離線學習更好的整體用戶體驗。我認為隨著病毒的情況，現在越來越多的人更容易接受和適應在線學習模式。對於很多學習者來說，這也是他們接觸更多種類知識的機會，而這些知識只能通過便捷的在線方式獲得和提供。因此，總而言之，我們認為這種病毒情況可能是推動整個在線學習行業發展的催化劑。

We will take our next question from the line of Natalie Wu from CICC.

我們將接受中金公司吳娜塔莉的下一個問題。

(foreign language) I would translate myself quite quickly. My question is regarding the Cloud Music. Just wondering, despite that you launched several features last year including the Cloud Village, so you emphasized on the highlights broadcasting features on the Cloud Music app. But according to the QuestMobile, the daily time spent per user dropped by around 20% in the second half of last year. Just wondering what's the reason. Or it's just simply because the QuestMobile data is not acting right.

（外語）我會很快翻譯自己。我的問題是關於雲音樂的。只是想知道，儘管你去年推出了包括雲村在內的幾個功能，所以你在雲音樂應用程序上強調了亮點廣播功能。但根據 QuestMobile 的數據，去年下半年每個用戶每天花費的時間下降了約 20%。只是想知道是什麼原因。或者只是因為 QuestMobile 數據不正確。

Can you give us some color on the Cloud Village business contribution for the Cloud Music? And also what kind of the new features that we should be anticipating this year?

您能否介紹一下 Cloud Village 對 Cloud Music 的業務貢獻？還有我們今年應該期待什麼樣的新功能？

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Thank you, Natalie, for your question. Let me briefly translate William's comment.

娜塔莉，謝謝你的問題。讓我簡單翻譯一下William的評論。

So Cloud Village as well as the other features such as live streaming, et cetera, this is overall -- this is our way of thinking how, as a music platform, we can enhance value-add to our users. Most of them are very vibrant music enthusiasts. We want to provide an integrated experience, not only just listening, but from listening to also spending more time watching the streams as well as interactions. So many of the initiatives and the strategies are around us building a more vibrant community on our NetEase Cloud Music platform, but the mission of us tapping into the online music segment is really to provide the most conducive channel of promoting native songs, native IPs for the Chinese independent musician artist.

所以 Cloud Village 以及直播等其他功能，這是總體的——這是我們思考如何作為一個音樂平台，我們可以為用戶增加價值的方式。他們中的大多數人都是非常有活力的音樂愛好者。我們希望提供一種綜合體驗，不僅僅是聆聽，而是從聆聽到花更多時間觀看直播和互動。這麼多的舉措和策略都是圍繞著我們在網易云音樂平台上建立一個更有活力的社區，但我們進軍在線音樂領域的使命實際上是為推廣原生歌曲、原生IP提供最有利的渠道。中國獨立音樂藝術家。

With regard to your second part of the question, on the QuestMobile data. Again, I think you are referring to the average daily user time spent on the app. Again, we do not know how external third-party data channels track this number. But based on what we are seeing in the second half, there's no decline in the user activity and the user time spent on our platform as a whole. So that's probably something you can further verify and double check with the external channel.

關於問題的第二部分，關於 QuestMobile 數據。同樣，我認為您指的是平均每天用戶花在該應用上的時間。同樣，我們不知道外部第三方數據渠道如何跟踪這個數字。但根據我們在下半年看到的情況，用戶活動和用戶在我們平台上花費的時間總體上沒有下降。所以這可能是您可以通過外部渠道進一步驗證和仔細檢查的內容。

We will take our next question from the line of Shi Jialong from Nomura.

我們的下一個問題將來自野村證券的石家龍。

(foreign language) I have 2 questions. My first question is a follow-up on the overseas expansion. Just wondering how much of NetEase mobile gaming revenue is currently generated from our overseas market? And the management mentioned earlier on the call, this year will be a harvest year for NetEase online gaming business in the overseas market. So I just wonder what is the growth potential for the revenue contribution from the overseas game market going forward.

（外語）我有兩個問題。我的第一個問題是關於海外擴張的後續問題。只是想知道目前有多少網易手游收入來自我們的海外市場？而管理層此前在電話會議中提到，今年將是網易網游海外市場業務的豐收年。所以我只是想知道未來海外遊戲市場收入貢獻的增長潛力是什麼。

My second question is about regulation. I just wonder how management think of the regulatory environment this year for China's online gaming industry. Last year, the authorities suspended new game approvals for certain number of miles. So I just wonder what management think of the regulatory trend this year for China's game market.

我的第二個問題是關於監管。我只是想知道管理層如何看待今年中國網絡遊戲行業的監管環境。去年，當局暫停了一定里程數的新遊戲審批。所以我想知道管理層如何看待今年中國遊戲市場的監管趨勢。

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Okay. Thank you, Jialong, for your questions. Let me provide a brief translation and further supplement to some of the number related answers.

好的。謝謝佳龍老師的提問。讓我提供一個簡短的翻譯，並進一步補充一些與數字相關的答案。

Firstly, William commented that I think as all of us have noticed that over the Chinese New Year period, Apple iOS App store has also implemented more stringent requirements, requiring developers who upload their content onto Apple iOS would -- needs to provide evidence of approvals, which is in line with the regulator's more emphasis in regulation or IP protection. In a way, we think that this is going to be more beneficial to first tier players, big players like NetEase. We have over 50 game studios, over 10,000 in-house developers working in a very compliant way of creating premium content. So when the whole environment, whether it's the iOS App Store, whether it's the regulators that's putting more emphasis in protecting IP and also encouraging regulated content to only regulate content to be uploaded and also having more punishment on the IP violations, that is longer-term beneficial for the whole industry, in particular, towards upstream content providers.

首先，William 評論說，我認為我們所有人都注意到，在農曆新年期間，Apple iOS App store 也實施了更嚴格的要求，要求將內容上傳到 Apple iOS 的開發者將 -- 需要提供批准證據，這符合監管機構對監管或知識產權保護的更多重視。在某種程度上，我們認為這將更有利於一線玩家，像網易這樣的大玩家。我們有超過 50 個遊戲工作室，超過 10,000 名內部開發人員以非常合規的方式創建優質內容。因此，當整個環境，無論是 iOS App Store，還是監管機構更加重視保護知識產權，也鼓勵受監管的內容只監管要上傳的內容，並對侵犯知識產權的行為進行更多的懲罰，那就更長了——對整個行業有利的術語，特別是對上游內容提供商。

On the top of our emphasis on in-house development, we are also putting more focused on collaborating with global developers. Joining hands strong hands together hopefully in making a joint effort to provide some exciting content to the global audience that naturally brings to your first part of the question.

除了重視內部開發之外，我們還更加註重與全球開發商的合作。希望強強聯手，共同努力，為全球觀眾提供一些令人興奮的內容，這些內容自然會引出您的第一部分問題。

For 2019, on a full year basis, this is the very first time that NetEase overseas game revenue has accounted for more than 10% of the overall game revenue. First time in NetEase's history as bringing us closer to a global premium game operator. Like William commented earlier on, I think this year and the next couple of years, we are going to see more fruit. We are going to bear more fruit in our international expansion.

2019年全年來看，這是網易海外遊戲收入佔整體遊戲收入的比例首次超過10%。網易歷史上第一次讓我們更接近全球優質遊戲運營商。就像威廉早些時候評論的那樣，我認為今年和未來幾年，我們將看到更多的成果。我們將在國際擴張中結出更多果實。

Due to the time limit, that concludes today's question-and-answer session. At this time, I will turn the conference back to Margaret Shi for any additional or closing remarks.

由於時間關係，今天的問答環節到此結束。此時，我會將會議轉回 Margaret Shi 以徵求任何補充或結束語。

Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly or TPG investor relations. Have a great day.

再次感謝您今天加入我們。如果您有任何其他問題，請隨時直接聯繫我們或 TPG 投資者關係部。祝你有美好的一天。

Thank you, everyone.

謝謝大家。

That concludes today's conference. Thank you, everyone, for your participation. You may now disconnect.

今天的會議到此結束。謝謝大家的參與。您現在可以斷開連接。