NetEase Inc (NTES) 2023 Q4 法說會逐字稿

Good day, and welcome to the NetEase 2023 Fourth Quarter and Full Year Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente, President of Piacente Financial Communications. Please go ahead.

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

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 and in announcements and filings on the website of the Hong Kong Stock Exchange. The company does not undertake any obligation to update this forward-looking information, except as required by law.

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 2023 fourth quarter and full year earnings news release issued earlier today.

Please note that certain financial information regarding Cloud Music we will be discussing on this call has been prepared in accordance with IFRS. For additional information, including a definition of non-IFRS measures and a reconciliation of IFRS to non-IFRS financial results, please refer to Cloud Music's annual results announcement for 2023.

As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase senior management are Mr. William Ding, Chief Executive Officer; and Mr. Bill Pang, Vice President of Corporate Development. I will now turn the call over to Bill, who will read the prepared remarks on William's behalf.

Thank you, Brandi, and thank you, everyone, for participating in today's call. Before we begin, I would like to remind everyone that all percentages we're talking about here today are in RMB.

2023 marked another year of innovation for NetEase. We drove momentum across our businesses, expanding our top and bottom lines year-over-year for both 2023 and the fourth quarter.

Continuous cross-category innovation at NetEase Games is actively expanding and diversifying our ever-growing game portfolio. On top of our enhanced strength in MMO and Chinese culture-derived titles, in 2023, we have landmark success and breakthroughs in diversified genres. This powerful combination is driving our games business, with healthy fourth-quarter performances from both our new and time-honored titles.

Looking first at some of our MMO performance for the period. We remain highly committed to supporting and growing the robust appeal of our esteemed legacy franchises, such as Fantasy Westward Journey and Westward Journey Online with fresh content and exciting in-game events like our annual celebration for Fantasy Westward Journey. In the fourth quarter, we had a series of carnival-themed events that reinvigorated players, reaffirming the importance of Fantasy Westward Journey's IP and its stature as one of the most influential MMORPGs in China. The longevity of these flagship titles also underscores our commitment and ability to elevate traditional game standards through ongoing in-game innovation.

Adding to our conventional MMO titles, our new MMOs are pushing the boundaries of what MMOs can be. The revolutionary advancement we have introduced with games like Justice are evolving the genre as a whole and continue to gain player momentum. In the fourth quarter, the Justice franchise reached a new milestone of 100 million active users, encompassing a broad and diverse user base. In our experience, these are telltale signs of games's potential for robust operating longevity. The innovative renovation seasonal mechanism, which both introduces new pursuits and reduces entry barriers, continues to captivate and inspire current users and new users alike. These are bolstered by rich challenges and achievements where everyone can develop individual interest and be rewarded equally, whether playing in PVE instances, combat-focused PVP sessions, or casual gameplay modes.

The steps we're taking to strengthen our brand and engage players are also bearing fruit. By integrating players' other interests with our games and giving them more in-game autonomy and choices, we create deeper connections between our games and player communities. For example, in the fourth quarter, players got to weigh in on the selection of collaboration partners for Justice franchise. In response to players' popular choices, we established a collaboration with the Chinese band sensation, Phoenix Legend, providing players with a voice in shaping their gaming experience has proved highly resonant with our community. The event was a huge success led by players' word-of-mouth marketing, with friend recommendations driving the bulk of newcomers to the game.

In addition to our MMOs, we made headway across a diverse set of genres in 2023, broadening our reach across more casual game players and entering new genres such as sports and simulation games. These are not only extend and enrich our broader NetEase community, but also highlights our ability to bring highly successful games to players in more diverse game categories.

Touching on a few of successes in genres that are new to us, Dunk City Dynasty, has emerged as a groundbreaking basketball game. Here, we have successfully attracted a large user base to a genre that was previously considered relatively small in China. To build on the game's initial success, we are providing more for our players, adding further diversified gameplay and exciting player to the team roasters. We have been expanding the player lineup since the fourth quarter, introducing NBPA stars like James Harden, Russell Westbrook, Joel Embiid, Jamal Murray and Aaron Gordon, as well as CBA Legends, including Yi Jianlian and Guo Ailun. Beyond the game itself, we are committed to spreading basketball game culture. To foster broad basketball game community growth, we are launching a foundation valued at more than RMB 10 million this year to support the sport's development, including sponsoring university basketball games and facilitating events promotions. We expect these initiatives to extend the reach of our game and sport itself across the broader audience.

Racing Master,is another new hit for us, offering top-tier content for auto racing fans. During the fourth quarter, we enriched the player experience with an expanded selection of international professional racetracks and aspirational supercars, catering to our robust demand from our player community. Following its official launch in China in June, Racing Master is now available in Hong Kong, Macau and most recently, Taiwan, where it topped local iOS download and grossing charts in the first week of its launch.

As we expand our reach across a growing range of genres, we are also capturing the attention of more female players with innovative games like Shijiezhiwai. With this ACG-style romance game, we have once again defied conventions, introducing an infinite scroll backdrop and bringing players more storytelling and gameplay innovation. We released Shijiezhiwai in January this year and the players continue to embrace it. Having topped China's iOS download gaming chart during its first week on the market.

For our blockbuster Eggy Party, we continue to cultivate our UGC ecosystem. Building on players' enduring enthusiasm, in December, we introduced a new feature, Eggy Code, unleashing even more content creation potential by offering an engaging and easy coding tool for our players. Coding lines can be now translated into user-friendly toy blocks to control events, actions, and conditions more readily, allowing creators to further unleash their creativity. This newest innovation pushes prior game coding limits, greatly increasing creation flexibility for the game's more than 26 million creators.

To further expand our rich catalog of diverse games, we have a number of new titles under development. Today, I'd like to mention a couple of our new upcoming games that we will begin rolling out this year.

First is Shediao/Condor Hero Based on one of China's most popular martial art novels, Shediao is an open-world RPG that will be launching across PC, mobile and cloud gaming platforms. We have established a highly immersive martial arts world for the game, featuring open explorations and rich storytelling. All players will embark on their journey within a single server that can accommodate over 10 million players' simultaneous online interaction. Multiple rounds of tests have shown an excellent performance so far, and we are on course for Shediao's soft launch on March 28 this year.

Next, comes Where Winds Meets, which is designed to bring players an open-world gaming experience comparable to console gameplay. The game features realistic martial arts combat experiences and an inclusive art style with a unique historical backdrop. We successfully concluded testing on the PC side in December, and we are currently gearing up for the game's launch later this year.

Additionally, we are thrilled to announce that we have received license approval for Naraka: Bladepoint on mobile earlier this week. We are excited to extend the immersive combat experience enjoyed by players on PC and console platforms to mobile realm.

On the global stage, we continue to add studios around the world that cement our ability to draw on local talent and extend our international appeal. We are thrilled to announce the latest additions to our game studio portfolio, Worlds Untold in Vancouver, Canada, and our newest U.S. addition, BulletFarm, headquartered in Los Angeles. Worlds Untold is led by industry veteran Mac Walters, who has over 2 decades of experience in games and writing. Well-known for his contribution to the acclaimed Mass Effect series. We welcome Mac and his team, who will be dedicated in creating new IP with their debut project already underway. The remote first studio of BulletFarm, is led by David Vonderhaar and his team of industry veterans. David is an award-winning and experienced game developer, best known for leadership on the Call of Duty franchise. They are currently working on an ambitious new AAA game set in the original universe with an emphasis on cooperative gameplay. We're looking forward to his contribution in creating more highly anticipated titles for our portfolio.

As we have always said, people are most valuable, and talent development is one of our top priorities. The tailored course we offer our employees across various clear development stages and professions ensure that NetEase's culture fosters sustainable talent incubation. I'm pleased to announce that in the first quarter of 2024, we were the sole Chinese Internet company to be awarded the ATD Excellence in Practice Award. This prestigious award and acknowledgment from the global talent development industry is an honor that further strengthens our commitment to cultivating the newest wave of Internet talent.

Alongside with our business momentum, we have assumed increasing social responsibility. This comes with a resolve to protect minors in our Internet endeavors. In addition to our existing anti-addiction system, we have started integrating serveral functions, including a "Minors Mode", across our China-based game lineup to protect minors, and we'll continue to steer the gaming ecosystem towards a healthier trajectory with our innovative products and technology.

Now let's move to Youdao. In the fourth quarter, Youdao continue to propel technological innovation and product development, further improving profitability and cash flow.

In our learning services, we have consistently raised the quality of our unique courses. Digital content services kept its healthy growth momentum in the fourth quarter. In addition, the retention rates were approximately 70% in the fourth quarter for both advanced-level programming courses and Go courses. In 2023, 340 students from our programming courses received awards in the CSP programming competition held in China. Notably, 106 students won first prize, comprising over 20% of all the award residents. We believe that our students' success highlight the high standard and effectiveness of courses.

Additionally, the utilization of our cutting-edge AI technology and the enhancement of our data infrastructure drove Youdao 's online marketing services revenue to reach a record-breaking RMB 474.1 million in the fourth quarter. These AI-driven advancements have empowered us to enhance our real-time API technology capabilities, diversify our client base, and broaden the scope of our applications.

Our smart devices saw an expected year-on-year decline in the net revenues in the fourth quarter. This was due to optimization initiatives for our strategic channel structures, as mentioned last quarter. The steps we have taken are directed at reducing low ROI sales channels, which, in turn, affected channel inventory in the short-term, but are expected to serve our long-term ROI-driven objectives. Encouragingly, we have observed signals indicating a recovery, including a return to healthy development in the fourth quarter compared to the previous quarter. The sales channel optimization have sale completed.

Our commitment to technological innovation remains central to Youdao 's business. We have consistently advanced our proprietary LLM Ziyue, and accelerated the development of large language model applications since the fourth quarter. Expanding our capabilities in virtual human tutoring, we upgraded the digital human language coach, High Echo in the fourth quarter, further enhancing its conversational capabilities. To augment students' learning experiences, we introduced the AI Tutor into our recently launched Youdao Smart Learning Pad X20. Our AI tutor adeptly responds to students queries on PAD, simulating the interaction of a human tutor. Furthermore, we are observing the tangible impact of AI technology in truly improving performance. Our existing LLM features, particularly AIbox, continue to receive user acclaim, contributing to more than 100% year-on-year growth in the translation subscription fees for 3 consecutive quarters.

Turning to NetEase Cloud Music. In the fourth quarter of 2023, Cloud Music continued to navigate quality development across our music-centric ecosystem while further extending robust monetization momentum in the core online music business and improving overall profitability.

The revenue from subscription-based membership in the fourth quarter continued a solid upward trend. This growth was primarily driven by an increase in the number of subscribers, along with a moderate improvement in ARPU, as a result of our diligence is strengthening our music-centric monetization capabilities.

With the introduction of new premium offerings, including expensive content and innovative features, as well as the broader membership privileges and joint programs with external partners, we notably grew our subscriber base in the fourth quarter. Moreover, we considerably improved our profitability for Cloud Music throughout 2023, achieving full year positive adjusted net profit under IFRS for the first time.

We remain committed to fostering strong partnerships with music copyright holders and are actively working towards deepening this collaboration to expand our catalog of music label content, promote advantageous music genres and increase album sales in cooperation with the top artists. In particular, music genres such as Hip-Hop and Chinese folk has been seen a surge in the popularity of our platform and we continue to culture content in these advantageous genres. 2023 also marks our debut in physical album market with our first core-public physical album, Hua Chenyu's new album, Xiwang Hope, followed by the successful sales of Zhang Jie's physical album, Wainanjie 1982 in the fourth quarter.

We continue to enhance our support system for independent artists. By actively investing to initiatives that bolster positions, improve music creation tools, and expand online and offline music exposure. We aim to help independent artists increase their influence and commercial income, ultimately, strengthening the original music ecosystem on our platform. As of December 2023, our platform had over 684,000 registered independent artists who contributed around 3.1 million music tracks to our library.

Drawing on our expertise in music, a wide and varied user base, and our in-house studios continue to enrich our content matrix, offering high quality and unique music content. Our studios are gaining increasing ground in advantageous music genres. For instance, we produced a number of popular tracks in the fourth quarter, including Sunshine Boys and Sunshine Girls 2023, and Sheng Shan, further solidifying our competitiveness in the hip-hop genre.

Turning to our private-label consumer brand. In 2023, Yanxuan continued to strengthen its brand presence with highly popular products in focused categories. With increasing consumer recognition of domestically made products in China, Yanxuan has established solid brand awareness across pet supplies and household cleaning, as well as office supplies and food, among others. Sales growth remained steady in 2023, with double-digit increase in specific e-commerce channels year-over-year. Simultaneously, we are continuously optimizing Yanxuan 's supply chain to improve cost-efficiency by integrating automated system. In 2024, we will continue to provide Yanxuan customers with consistent, high-quality original products.

Across our business lines, the cornerstone of our competitive edge is our innovation. With our robust R&D capability, we have consistently produced unique products that drive our Company and industries as we serve forward. In 2024, we remain committed to these principles, and we will bring more high-quality products to the markets. By crafting outstanding products, we can simultaneously create value for both our user community and our stakeholders.

This concludes William's comments.

I will now provide a brief review of our 2023 annual results with a focus on the fourth quarter. Given the limited time on today's call, I will be presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details.

Our total net revenue for 2023 were RMB 103.5 billion or USD 14.6 billion, representing a 7% increase year-over-year. For the fourth quarter, total revenues were RMB 27.1 billion or USD 3.8 billion, up 7% year-over-year.

For 2023, our net revenues from games and related VAS were RMB 81.6 billion, up 9% from 2022. Revenues accelerated even faster in Q4 to RMB 20.9 billion, up 10% year-over-year. The additional growth was primarily due to increased revenue contribution from launch of new games such as Justice Mobile, and sustainably developed titles like Egg Party. Revenues from mobile games continue to make up the lion's share of our game business, accounting to 77% of our total net revenues from online game operations in the fourth quarter and 75% for the year.

Youdao's net revenue for 2023 reached RMB 5.4 billion and were up 2% year-on-year in the fourth quarter in the fourth quarter, reaching RMB 1.5 billion, primarily due to increased revenue contribution from Youdao's online marketing services.

NetEase Cloud Music's net revenues were RMB 7.9 billion for the full year and RMB 2 billion in the fourth quarter, a 13% and 16% decline, respectively, compared to the same period last year. As we have previously discussed, the decline reflects lower revenue from social entertainment services as we adjusted our focus to improve profitability in a sustainable manner.

Net revenue for innovative business and others were RMB 8.6 billion for the year, up 9% year-over-year. In Q4, total revenue were RMB 2.8 billion, up 12.9% year-over-year, mainly due to increased revenue contribution from Yanxuan and some of our innovative business.

The total gross profit margin was 62% in the fourth quarter, compared with 52.2% for the same period in 2022. Looking at our fourth quarter margin in more detail.

Gross profit margin was 69.5% for games and related VAS, compared with 59.1% in the same period last year. The increasees were primarily attributed to a higher proportion of net revenues contributed by NetEase's self-developed games.

Our gross profit margin for Youdao was 49.9% compared with 53.3% in the same period of last year. The decrease was mainly due to reduced revenue contribution from smart devices, which was partially offset by increased revenue contribution from online marketing services, which carry relatively lower margins.

Gross profit for Cloud Music improved in the fourth quarter, reaching 30.3% versus 17.8% in the same period a year ago. The margin improvement primarily resulted from increased revenue scale from membership subscriptions and continued improvement to our cost-management measures.

For our innovative business and others, gross profit margin was 34.4% compared with 31.5% in the fourth quarter of 2022. The increase was primarily the result of margin improvement in Yanxuan and our advertising services.

Total operating expenses for the fourth quarter was RMB 10 billion or 37% of total net revenues. Taking a closer look at our cost composition.

Our selling and marketing expenses as a percentage of total net revenues was 15.6% compared with 13.5% for the same period last year, mainly due to increased spending on gaming promotions this quarter. On a full year basis, selling and marketing expenses accounted for 13.5% of net revenues, which remained relatively stable compared with 2022, when it was 13.9%.

Our R&D expenses as a percentage of total net revenues also remained stable year-over-year at 16.5% in the fourth quarter, compared with 16.1% for the same period last year. On a full year basis, R&D expenses accounted for 15.9% of net revenues, which remained relatively stable compared to 2022, when it was 15.6%. We remain committed in investing in content creation and product development. We are also seeing leverage in our R&D investment longer-term.

Our other income was RMB 876 million for the fourth quarter, compared with RMB 1.5 billion last quarter. The decrease was mainly due to exchange rate of U.S. dollar against RMB fluctuating over the periods, and mark-to-market value of certain publicly traded security in our investment portfolio witnessed deprecation during the fourth quarter. As per actable accounting standard, we are required to reflect the fair value changes.

The effective tax rate was 13.8% for both full year and the fourth quarter. As a reminder, the effective tax rate is presented on an accrual basis, and the tax credits for each of our entities at differenct time periods, depending on appliable policies and our operations.

Non-GAAP net income from continuing operations attributable to shareholders for the fourth quarter totaled RMB 7.4 billion, or USD 1 billion, up 53% over year. Non-GAAP basic earnings per ADS from continuous operations for the quarter was USD1.62, or USD 0.32 per share.

Additionally, our cash position remains strong. As of year-end, our net cash position was about RMB 110.9 billion, compared with RMB 95.6 billion at the end of 2022.

In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 0.215 per share, or USD 1.07985 per ADS.

Lastly, under our current USD 5 billion share repurchase program starting in mid-January last year, we have repurchased approximately 7.2 million ADs as December 31, 2023, for a total cost of approximately USD 644 million.

Thank you for your attention. We would now like to open the call to your questions.

Thank you. (Operator Instructions). Your first question comes from Felix Liu with UBS.

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Thank you management for taking my question, and congratulations on the banhao for the mobile version of Naraka: Bladepoint. My question is on the game. Can management share a bit more color on the R&D progress of the game? How would the mobile version differ from PC version? And what is your expected launch time for this game? Thank you very much.

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(foreign language)

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That's great. Thank you.

[Interpreted] [I will do the translation] Yes, for the mobile version of Naraka, we did a test -- everything is on track. We did a test in Chengdu back in December and the result was very good. And regarding your question on the experience between mobile and PC, what William said is that during the past 2.5 years operating on PC, we have accumulated a ton of experiences, and we're doing all the needed modifications everything observation for the mobile version. And regarding the going live date, everything is on track. And now our best estimate is somewhere in Q2.

Your next question comes from Alex Poon with Morgan Stanley.

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Congratulations management for very strong results and game pipeline. My question is -- first question is regarding the overseas expansion of Eggy Party. We have launched in many countries already last year. What's our latest thought for the game in 2024? My second question is related to the progress of Project Mugen? Thank you very much.

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(foreign language)

[Interpreted] First of all, as everybody knows, Eggy Party is a huge success in China, and we have accumulated tons of experience. And regarding overseas market, we are in the exploration period now. And we're doing that step by step, validating a lot of concept and thoughts to try different things out. We do want you to get that, please stay tuned, we're going to get there for the overseas market of Eggy Party. Regarding the status of Project Mugen, it's under normal game development now. And of course, it's also in the process of applying for the publishing number as well. The product has a very specific, very clear positioning and development targets. And we hope in the area of ACG open world games, we can make the game differentiated enough to have his own foot on the market. [Thank you. Next question.]

Your next question comes from Lei Zhang with Bank of America Securities.

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Thanks management for taking my question, My question is regarding the overseas business. And can you give us some update on overseas game plan? And any -- do we have any plans to expand or acquire more overseas, if we do? Thanks.

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(foreign language)

[Interpreted] Yes. So now we have studios in U.S., in United States, Japan, U.K. and other countries. This is quite normal when we are going global. We have set up our studios around the globe, that's quite normal. And we're going to -- it's going to be a new norm for us in the future. Thank you. Next question.

Your next question comes from Yang Bai with CICC.

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I will translate it by myself. For Eggy Party and the party game, how do we think the future of UGC in game content creation? How is the user structure now compared to January 2023? And how to view the current computation in party game? And second line, as so many successful domestic products, can we buy some synergy between domestic and overseas business. Thank you.

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(foreign language)

[Interpreted] Regarding our heading up the game -- UGC-type game. First, we would like to say doing UGC game is not the easy job. Looking globally, not many companies successfully did that. And for NetEase, we have our strength, our experience, our unique experience and strength, but we all we are doing is keep exploring. What we can do is keep a humble and creative attitude, and keep exploring the new ways of be creative in the game design. And regarding the -- your next question on the synergy between domestic success and going overseas. Games -- the fun part of game play are the same, regardless where the game sits, where the players sit. So what we can do is leverage what we learn on the fun part, how to do a fun game, how to do gameplay design, and apply that through global products. Yes. [Thank you, and next question, please.]

Your next question comes from Jialong Shi with Nomura.

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Thanks management for taking my question. I have a question about Eggy Party. We noticed that since the end of last year, many off-line promotional activities have been held for your game Eggy Party. Just wonder what is the trend for your marketing expenses this year, whether or not this promotional expense for Eggy Party was the driver for an acceleration in your marketing expense last Q4. Thank you.

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(foreign language)

[Interpreted] Generally, you're right. In Q4, if you look at our marketing spending, of course, as you can imagine, there is some factor of competition that we have to deal with in the market. But in the meantime, you look at the recent performance -- outperformance during the Chinese year 2024. Eggy Party achieved 40 million DAU achievement, which shows that the marketing initiative we spent are quite effective. The result is quite good and quite effective. Looking forward, we don't see a big increase on the marketing spending, and we will keep exploring the most effective ROI on the marketing spending, as well as the more rigid where to spend. And the marketing spending increase shouldn't be a concern. And William, also talked about some greater macro backdrops that as you can see, as the quality of games in general, increase year-over-year, it's more and more challenging for other companies to compete in the market. For NetEase, because we have long-term long-time accumulation in game development, everything and we also invest bigly into our new project. So to some extent, year of 2024 is actually a year of harvest to us. We are going to unleash the accumulation we -- experience we accumulated over the past 20 years, and you will see more and more result of new games comes out. [Thank you, and next question.]

Your next question comes from Lincoln Kong with Goldman Sachs.

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So my first question is about Where Winds Meet. So what's our target launch time line for this game, it will be a cross-platform global launch for this time. And it seems during the testing, it requires quite high equipment for the -- on the PC world. So would that affected the mobile world in terms of the game play and other companies. How would that fit in both PC and mobile? And the second question is around the overall market. We do see some of the uncertainty for the overall macro economy and consumption going forward into 2024. So in those longer-term legacy games like Westward Journey and Fantasy Westward, do we see any of the change in terms of the user spending behavior or paying willingness on those games? How's our outlook for this year's gaming industry?

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(foreign language)

[Interpreted] First of all, regarding your question to Where Winds Meet. Where Winds Meet as we explained, this is a game we spent 3 years in developing. It's a very high-quality martial art based open world game, RPG game. And regarding the graph -- the graphic question, that's something you don't need to worry and players don't need to worry either. Our engine has the capability to adapt on different hardware platforms to push the limit of that specific hardware, but also make sure it's runnable on different platforms. So that's been taken care of by our in-house gaming engine, everything. And in the meantime, for the game itself, it's indeed a high-graphic game on advanced hardware platforms. And also, from our experience, we thought people like - Wuxia culture like to play the game, and we hope this game could be a vehicle that we could promote the Wuxia cultures to the world as well.

And to your second question regarding the macro economy uncertainties, how will that impact the game performance? From our observation, actually, gamers, they spend pretty prudently on how much they spend in different games to get the fund they are pursuing. It's not very related to macroeconomic conditions. It's actually more related to the quality of the game itself. Now as we said, the gamers, not only in China, but globally become more and more picky regarding the quality, which puts all the developers, ours included, to spend more and more effort to making high-quality content. Yes, that's kind of the game industry macro we are in. [Thank you. And next question, please. I think we have time for one last question. Yes.]

Thank you. Your last question comes from Ritchie Sun with HSBC.

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So I will translate this question myself. So Shediao there will be launched in March, and Where Winds Meet can be launched in the first half. So in terms of the user demographics, how big is the overlapping between these games and our existing games? And how would NetEase coordinate the promotion and launch schedule to maximize the hit rate? And when would - Where Winds Meet to be launched? Thank you.

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(foreign language)

[Interpreted] Yes. So this -- regarding your question on the two different both martial art base game. They are different -- these two games have totally different IP attributes. One is very beloved by Jinyong fans. The other one is more like an Ancient reality kind of setup. And both games are developed by different teams with different art styles, different system set up. We don't see that the game is going to have a lot of collaboration with other games. And actually, our view is the market is actually looking for high-quality Wuxia open-world games. And by offering two high-quality Wuxia games in the market with different positioning, we hope we can push the market further. And as on the go-live date, everything has been prepared. Everything is on track. And yes, everything is on care. [Thank you.]

And that concludes the question-and-answer session. I would like to turn the conference back over to Brandi Piacente for any additional or closing comments.

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Thank you, once again, for joining us today. If you have any further questions, please feel free to contact us. And have a great day.

Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.