Q4 2019 Earnings Call

[music].

Good day and welcome to then that would also Nike for quite a in fiscal year on news conference call today's call place being recorded at this time I was actually tend to called parcel went to Mark which is I I'd like to offer that Keith peacefully.

Thank you I'll take that please note the discussion today will contain forward looking statements relating to future performance of the company and I intended to qualify close they popped up some liability.

If that left by the U.S. Private Securities Litigation Reform Act.

Such statements are not guarantees of future performance and are subject to suddenly and I'll start from Ti assumptions and other factors.

This is Rick yes up younger companies control could cause actual results could differ materially from those mentioned in todays press release and he was discussion.

A general discussion of the risk factors that could affect net eat dismissed and the financial results is included in certain inciting Southern company, who the Securities Exchange Commission, including if I need to report on full Btwenty yet.

The company does not undertake no obligation to update these forward looking information except as required by law.

During today's call management will also discuss certain non-GAAP financial measures for comparison purposes of late.

Definition of non-GAAP financial measures and a reconciliation of GAAP and non-GAAP financial results. He see that 2000, Nike Inc.'s fourth quarter fiscal year financial statement Newcity heat study at today.

And we do expect to non-GAAP financial maggots related to the result out of our consolidated subsidiary no doubt peak visit.

Lessee relations website, nothing that I buy out on the east Dot com.

As a reminder, this conference is being recorded.

In addition, an investor presentation and a webcast replay of this conference call will also be available on that to eat IR website.

Joining us today on the coal from that used to people management, it Mr. William being our CEO.

Nick to Kalthoff Young Chief Financial Officer.

I will now pinnacle over like a child, who will lead to prepare the Muslim to help with him.

Thank you Margaret and thank you everyone for participating in today's call before we begin I would like to remind everyone that all percentages on outpaced.

[music].

2019 wasn't eventful year for maybe.

We expanded the reach of our online games through our international presence.

Appealed our online learning, you'll Dol advanced our music platform and refine our operations in E Commerce.

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

Online game segment is the cornerstone of our business.

Despite having launched fewer games throughout the year, we continues to grow our online games business at a healthy rate in 2019, we 16% year over year, increasing next revenues.

Driven by the steady performance of our long standing titles, we once again exceeded Remy be 10 billion this quarter for the past seven consecutive quarters.

Our flagship titles continue to provide solid support for our online games business, we think freezing longevity and use our loyalty.

In 2019 revenues from.

Fantasy westward journey online and fantasy westward journey mobile both grew at double digit rate remaining precedent after years of operations.

Westward journey online and it's more about version also grew steadily in 2019.

After over 15 years of operation, our FWJ and I feel W. Jay franchises happy instituting the collective memory of a generation of Chinese players.

We further extending the reach of these ickes through the introduction of FWJ three D being mid December last year captivating, both returning thing as well as new audience.

That's another its ration up the ex Lovedale Jay franchise immobile vis Threed version game River reserves to classic game slate and social system Wildbrain need brand new experiences to move out using a real times three D wells.

Were still working on new assays and expansion packs to further optimize the experience for their ability three d. and we are confident that over the long Chen the three D. version will show similar longevity and popularity as our other titles in this franchise.

In addition to growing and strengthening our existing franchise.

We are also give that incubating new lunch hour copper 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.

Army Oh Gee is the first of these relatively young to franchises that we have built in house.

We're pleased to see that as we introduce more enough that its new storylines, new characters and other new content. The influence of Army Oh, Geez, I P is growing and rats, and making well weve game players.

In 2019, Onmyoji tough the Io s. growth in China at four times stabilizing at a new round rage opt to more than three years of operation.

In December we launched Onmyoji the card game its second spinoff gain.

Living up to expectations, the new Onmyoji comps game Kerry on the tradition of being pressing the my Kid with its exclusive awkward.

With this situation, we also introduced more competitive and strategic gameplay, winning over a large group of hot call collectible hockey players.

We are now also currently working on several new Onmyoji games being closed team Yohji Yokoyama, a simulation game, which we plan to launch in the first half of this year.

Identify if it's another young I P, where we see the potential to be built into a successful in that east French highs.

With this goal in mind, we are continually in reaching this IP through a variety of initiatives, including E Sports IP collaboration and offline activities. We have hosted a number of high profile event, featuring identified including both international and region.

Series tournament.

Most notably our global championship call up the Abyss has attracted over 800000 players from the rounds of World Since December.

We also collaborated with happy Valley, a popular national Finpac brand in China, bringing some of the endgame characters to life. We are pleased to see the early success of identity fives as it becomes another powerful IP French highs establishing abroad and vibrant community.

I'm players in China and abroad.

Invincible, our 2015 launch that has been growing steadily year over year in terms of the rapid new and active users is now one of China's biggest S algae titles.

Like with many of our games, we invented a brand new in game mechanics, and that's very sad Guaymas calls every season.

Creating a much more balanced gain theories and setting a new spend that fund for the genre.

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

The prerequisites to Buda successful franchise is the ability to create popular game I piece in house, which is propelled by our world class R&D infrastructure.

Over the past two decades, we have built one of the largest in house R&D teams with China's most talented and passionate gain creators supported by one of the most unique and comprehensive R&D infrastructure is in the world.

We empower each of our talent with our game enthusiasts, the corporate culture and seconds to known training the kind of them in the industry.

Our training program at Matisse gains Academy, a widely recognized in China as the premium online games training institution for the creative minds.

Most recently to live our training programs were awarded the 2000 1980 he'd be axle and see practice award by the Association for talent development one of the most authoritative International awards in the global talent development industry.

Actually move ahead, we will continue to fall off the talent and stimulate new ideas that propelled the development of our games.

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 that inventive re creation of Wow.

Six and it was web very well received by a generation of returning players and new customers alike.

We're very pleased to feed the continued popularity of while in China, achieving a record number of total monthly subscribers in the fourth quarter, we've increased revenue quarter over quarter.

In 2019, we continue to advance our games and making Roes that expands our reach in overseas markets.

Nine salvage remained a household name in Japan, topping the iOS growth in China multiple times during the year.

Leveraging our knowledge of beauty gain brands, we further strengthened knives house brands presence by engaging in a series of successful collaboration and our first ever E Sports Championship tournament in Japan.

Identity five also exemplifies our ability to operate games in the overseas market over the long term, leading Japan's Iowa topping charge for the first time in September.

We used the success of these titles, we had do we have accumulated attached and deeper understanding of our users in terms of their interest social behaviors and preferences in style, it's tactics and gameplay.

We have integrated stay successfully experience and know how into the design of our other games enhancing our ability to deliver popular titles to Japanese users.

In addition to our success in Japan, we've also expanded our footprint across more regions.

In December we launched Marvel Super Wal in several southeast Asian market, where it today many of the iOS app downloads child.

Building on our existing success at home and abroad, we have many exciting gains in our pipeline, including Harry Potter Magic awakened easy at Kohl's Onmyoji yoke HEICO, Yeah Ghost World Chronicle Revelation mobile game.

Hello, and muscle and Tocumen class.

Turning to our online learning the business Yotel made solid progress in 2019 significantly growing it online cost businesses.

Our income several cost products, including high school, Chinese and physics practical English for adult I'm quoting causes for kids.

We're also seeing axle and adoption and the rapid increase in sales of.

No doubt in Teligent lending devices, driven by the successful launch of our second generation Dictionary Pat.

We also expanded our tutoring and sales team and substantially improved our tutoring and operating systems to support them.

These assets have been rewarded by robust growth in gross billings up Yodles online courses by 225% in 2019 and over 200% into fourth quarter.

More importantly, we have accumulated experience that we can replicate across our highly scalable online cost model and are beginning to benefit from economies of scale.

In 2020 now these will continue to support your spouse mission to bring usage more effective and technology driven education experiences.

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 olds Chinese talk style Wamsi course digital single no sense exceeded renminbi 10 million within just 11 hours. Similarly sales of Chinese singer songwriter quite Agenus digital single, how I'd like to Lucky.

Swallowed exceeded renminbi 50 million after 45 days online, marking the highest digital single sales record online in China. According to a third party data source.

Now these cloud music is home to a large number of independent musicians.

More than 100000 independent artist feature their music on our platform and their songs what played back more than 270 billion times India.

This makes matisse cloud music the most recognized platform for our original music Hi, Chinese artist.

In 2019, we plan to use the platforms distribution capability and it's brought influence to create more viral content across the Chinese music industry.

And finally, our focus with yen shy in 2019 remained on improving supply chain management and operating efficiency.

We effectively reduce our inventory compares to a year ago and consistently improve our positive feedback ranged from users in the quarter.

We made adjustments to our cranking 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 ship product type providing valuable research market analysis gained from the customer end to our manufactured at the same time, we have significantly improved our membership system and are seeing the benefits of increased Amanda.

Repurchase rate.

As for our manufacturer and factory initiatives, we have helped to build Payless online data systems that have said it improves their manufacturing process and quality.

In 2020, we will continue to enhance our brand influence and reaching China by bringing even more high quality and personal life products to a growing number of consumers.

We are excited for the new year as our existing game titles continue to impress I'm not kit with their phenomenon longevity 2020, we'll also see more game launches in China and globally from that is.

2020 also master plan Chirs anniversary and that is being a publicly traded company.

As a internet battery in China, Natus has remained relevant and continues to be a four run in the evolving market.

With our long track record of success, our goal is to inspire of our ever growing community, while bringing increasing value to each of our stakeholders.

Before I pass the call that's a child I'd like to share some updates on the evolving situation with the Corona virus outbreak in China.

Right after the Corona outbreak.

We reacted instantly and rolled out a series of initiatives to support the affected regions.

We set up a special founder Remy be 100 million the Sun will be used to purchase medical equipment and Madison from home and abroad and deliver two places where the outbreak is the most severe and help us most needed.

At the same time janisha immediate fit delivered over 200003 masks and other protective supplies to our customers and set up special phones for the supply apartments for.

For your now we were among the first ones in the industry to offer free classes to K 12 students in the affected areas, which was later expenditures to other regions of China.

For the college students Chinese University Muecke connected with 800 universities covering 4000 professors lectures.

We also provide our technology support to help other offline educational institutions to move cost is to online through your without intelligent cloud.

Our company took every asset to protect a health and safety of our employees and adopted multiple measures to maintain our operation 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 impacts 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 moves through this.

Challenging time.

This now concludes William's comments.

We 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.

Total net revenue for 2019, Renminbi 59.2 billion, a U.S. dollar 8.5 billion, representing 16% increase year over year net revenue for the fourth quarter changing at 15.7 billion Renminbi, all U.S. dollar 2.3 billion.

Representing a 9% increase year over year.

So 2009 King.

Our net revenues from online game services grew 16% year over year to 46.4 billion renminbi and in the fourth quarter. It was also up 5% year over year to 11.6 billion.

Mobile games accounted for approximately 70% of net revenues from our online game services in the fourth quarter.

For 2019 net revenues from your towel were up 78% to Renminbi 1.3 billion and in the fourth quarter net revenue from your without was up 78% to renminbi 410 million.

Primarily due to increased net revenues from it online courses and sales of the intelligence lending devices.

For 2019 net revenues from innovative businesses and others were up 12% to reached 11.5 billion renminbi.

In the fourth quarter, it was up 18% year over year to reach Renminbi 3.7 billion, mainly due to the increased revenue contribution from cloud music and Cc live streaming out.

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 band ways based on the revenue mix of mobile and PC as well as self developed and license games.

You'll Dallas gross margin improved to 29.8% in the fourth quarter. This was primarily driven by an improvement of the sales and at the economies of scales.

Gross margin for innovative business and some others was 20.6% in this quarter margin improvement both year over yen Pata older Potter was primarily due to the increased revenue from cloud music.

For the fourth quarter total operating expenses were renminbi 5.2 billion.

Our selling and marketing expenses as a percentage of total revenue was 13.7%.

In this quarter.

On the 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.

R&D expenses were renminbi 2.3 billion.

Up 5% from the previous Quater.

We remain committed to investing in content creation and product development, we just want to find us as a technology company.

On a full year basis, R&D expenses represent 14.2% of full year net revenue comparing to 14.4% in 2018.

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 eight 2018 period, while mainly due to reduced losses from certain lossmaking subsidiaries of the company.

Non-GAAP net income from continuing operations attributes about while our shareholders for the fourth quarter totaled renminbi 3.7 billion or U.S. dollars 526.1 million, representing a decrease of 23% quarter over quarter and the increase of 15% yeah.

Over yet.

Our non-GAAP diluted earnings per 80, EPS from continuing operations, where renminbi 28.030, U.S. dollars 4.03 for the fourth quarter 2019.

Our cash position remains strong as of December.

So the first 2019, our total cash and cash equivalent current and non current time deposits and short term investment balance totaled renminbi 74.4 billion compared with 49.7 billion as of the year end of 2018.

In accordance with our dividend policy. We are pleased to report that our board of directors have approved that dividend of U.S. dollars 1.02 per AG ass.

On February 26, our board also announced and approved.

A new share repurchase program for up to U.S. dollar 1 billion of our outstanding Adss for the next 12 months beginning on March 2nd.

Thank you for your pension we would like now to open the call to your questions.

Operator, let's go to coordinate please.

Thank you if you like to asset classes.

Pricing wise like a telephone keypad you can you sort of speakerphone, Please make sure youre.

All Philadelphia thing after which I like that.

For the benefit all participants on today's call if he would like to ask your questions diminishment in Chinese.

Let me repeat your question in English.

This is one question per time, if you like small question, it's only the killed by pressing star why they can't.

<unk> for just like everyone else allocated to signal for questions.

You would take all of but the question from the write off Alex <unk> from Morgan Stanley.

Your line is open.

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We intend to music and.

The top three labels are ending this year and next year and how will this change the competition landscape.

Revenue growth and the cost structure off now these cloud music in the next two years and my second question is regarding the overall company.

Elias has been lossmaking, but it has been sold and music already Racino funds and over a company margin is improving so what's the thoughts on balance sheet cash flow.

In the in the next two three years. Thank you very much.

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HM Okay. Thank you Alex for your first question, let me provide a brief translation of Williams a response.

So firstly label companies exclusivity arrangement in the past years have said China's overall online music industry and affects all sorts of players along the value chain not only just the platform like us but are also app stores.

At hardware manufacturers upstream and downstream players along the chain.

We hope that all label companies not just the big three going forward can all comply with the regulatory framework setting China.

We aim to provide a healthy environment to the overall industry as a whole financially it's definitely going to make the cost structure of the cloud music up the whole industry to return to a more healthy and normalized level because in APAC.

Yes, we the whole industry has been over paid the content cost twice or three times I, even more to the label companies English unfair set up a wise the cost structure Cannibalize then players like Mattys cloud music can focus more resource.

Steve promoting or innovative music content and encourage a native Chinese musicians with our mission to create a vibrant healthy and successful music culture and community in China, So that.

The response to your first question on your second question on the cash. So first of all let me make a comment that we used a conscious effort of being more focused on our core business as a starting from the end of 2008, King and you see a series.

We have a 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 as being very very strong along the way. We've been also very disciplined thing paying dividend increase.

Recent dividend payout ratio and have a regular stock buyback programs. All in all we've acted in a responsible way to our shareholders and especially in a relatively more volatile not kid, we think about by having a strong cash flow position.

And together with a disciplined and responsible treasure policy to our shareholders that will make navvis or even stronger and more defensive company through outpaced macro turmoil.

Operator next question please.

Well take our next question from human type from equal.

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Corona pilots can impact on our various business lines.

Positive and negative how long the impact was last part of the and my second question is on overseas game expansion.

Management on the pipeline with a major eyepiece like the Alto Maipo heavy quarter, I guess I'm much.

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Yeah, Hi, she shops, okay. Thank you hear me, let me provide a brief translation play up through a two questions first question on the Corona virus in Penn Yeah impacts to two hour different business lines, Firstly William commented that D.

Situation definitely affects the economy as a whole it also affect us a different be using two different extent.

Particular advertising segment will be more affected by or 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 of the ER of people going out and moving around it helps to raise awareness and adoption rates of online education, which propelled the trend of the of the boroughs of this new format up and learning.

For your second question on our.

General or a strategy and pipeline about overseas games. Firstly William commented that we are very serious and very focused overseas expansion as a major business strategy of our games Bu. We've we've achieved for staff achievement in Japan, we.

Couple of games, that's been well established and we're hoping to further leverage this experience and expanding to mainstream Western My kids.

And by offering by bringing more a high quality products to be a user in those geographies in the past couple of years, we being consciously or moving up the learning trends and we think we are more prepared more ready to.

Reap some fruit in this year and in the coming to three yes.

Operator next question please.

He thought that you're on a lot to offline question time.

With that I'll ask more questions. It's only they keep my presentation all by the King.

Our next question from deadline of Alex Yao from JP Morgan.

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To follow up with a question regarding the impact for from the Verona virus or breakouts on the gaming side of the business.

So from a consumers perspective are you guys see increasing usage in the better monetization during the Verona virus or three accounts and then secondly, you from common development perspective is the current situation making.

Internal come from developments are more difficult or would that potentially affected the new game launch in China. This true. Thank you.

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See I. Thank you Alex I I'll provide a brief translation for everyone's benefits on the call. So intensity use a Mac shrinks Willem comment is 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 Corona virus situation. So it is a a longer a Chinese new year period, a user metrics has being stronger than the previous a similar processing Chinese new year.

And for your question on the R&D impact or so now we do not see any a significant delays or impacts to our our R&D development progress as well as planned our pipeline launch schedule. So obviously the virus situation is evolve.

Moving and we will continually to assess the intact. The game development, if Fannie and William also further supplemented the crashed the direct impact on the online learnings.

In particular, we assemble leaves a that online learning actually offers a batches user experience overall sees a v. the traditional offline Len I think we see the virus situation more and more people are now more receptive and adapt.

To the online lending model and a lot of learning is it is also an opportunity for them to be more out reaching to a more variety of knowledge that is only available and offset in a convenient way online so a oh.

We think this virus situation is probably a catalyst to propel the overall online learning industry as a whole.

Operator next question please.

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HM Okay.

Thank you and I play a patch and Ah, Let me briefly translate a williams comment so cloud Philly age or as well as the other features such as live streaming a et cetera. This is overall this is we the our way of thinking how as them me.

Using platform, we can enhance value add to our use as most of them are very vibrant music NCM enthusiasts. We wants to provide a integrated experience not only just listening, but some listening to also spending more time a watching this.

Brings as well as interactions so many of the initiatives and the strategies around of building a more vibrant community. Our now these cloud music platform, but the mission be.

<unk> mission of us tapping into the online music.

Segment is really to provide the most conducive channel of promoting a native songs Napier I piece for the Chinese Ah Ah.

Independent musician artist with regard to your second part of the crashing on the class mobile data again, I think you are referring to the the average daily use that time spent on the out again, we do not know hall.

External third party data channels track. These number that's based on what we I see in the second five there's no decline in the you the activity and the use of time spent or on our platform as asphalt so that's probably something.

And you can you can further verifying double check we used to extend our channel.

Yes.

Operator next question please.

Oh.

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Right.

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We have yet to Dallas or opinions snow up and take a highlight because nobody sees up on Tony I know, what somebody had uncertainty about him tied to the Atlanta Showtime content on and a one eventing affiliate with ended up happening.

Doug I forgot hard on each other we like to think about them being done on go Salix and ER boss I'll. Just so just want to deal with you know dabble into different going on in a New York [laughter] Gen. One olin's, you're a home about Union Israel.

Somewhat and you'll see timberland it sounds like that's 100 million bird all utiba yet.

To go to implement domain or she's doing to the ceiling on T.J.C.L. wainscott doesn't need them are continuing to other thing you'll see something the gym climbing up on selling so can you can someone I got anything can get into our figure things out I had two questions. On my first question is a follow up on the overseas expansion not just one on their behalf.

Much of that is mobile gaming revenue is currently a agenda read it there probably isn't my pit and management mentioned earlier on the call. It this year will be a hobby tee up on their teams Oh my opinion business.

She is not yet so I just wonder what is.

The gross potential ballpark, what the revenue contribution.

From my sense can monitor it going forward. My second question on regulation I, just wonder how management thing up the regulatory environment this year or a phone call China don't I didn't mean.

That's the last year. The authorities are suspended Dan approvals for certain number a mouse. So I just wonder what management think up their regulatory attend this year for Tenda is a game market. Thank you.

Oh.

Hey ended the year this essentially on doesn't need to the trust me another pinnacle, what I played out, but I mean, but you're still wait I have thank you when they came back and you keep on how to make a middle end Decouple. Then we'll tell you exactly where you want to say.

Hi, good to go through to the two should come down.

No no keyboard team has some of them soon probably this year, so uh huh.

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Tension People's it can have something to.

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Okay. Thank you.

Okay. Thank you John on for your questions. Let me, let me provide a brief translation and further supplements to some of the a number related crashed ounces. Firstly William commented that I think is as all of that I've noticed that although the Chinese new year period alcohol.

<unk> App store has also [noise] implemented more stringent requirement, requiring developers, who apollos their content onto Apple iOS starwoods needs to provide a evidence of approvals which is in line with.

The regulators have more emphasis and regulation IP protection in no way, we think that this is going to be more beneficial to frisky a play a big players like natty piece, we have all that 50 game studios.

The 10000 in house developed is working in a very.

Finally in a 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.

[music].

Regulated content to only regulated and tends to be uploaded and and also having more punishment along the I P violations that is a longer term beneficial for the whole industry in particular towards upstream content providers.

And on top of the on top of our emphasis something house development. We are also putting more and more focus on collaborating with global developers joining hands strong, hence together hopefully in making a joint assets to provide some exciting.

Content to the global audience that naturally brings to your first part of the question for 2009 King on a full year basis. This is the very first time that and that east older overseas game revenue has accounted for more than 10% of the overall game.

Revenue.

First time thing that is history as a bringing us closer to a global premium premium game operator like William commented earlier I think this year and the next couple of years or we're going to see more fruit or we're going to bear more through the in house.

Our international expansion.

Okay, great. Thanks for the cut.

[noise] due to timing me that Congress todays question and answer session. At this time I like the conference back to my quick ship for any additional opposing remarks.

Okay.

Okay. Thank you once again for joining US today. If you have any further questions. Please feel free to come to us directly or ppt regulations have looked like that.

Hey, Thank you everyone.

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

[music].

Oh.

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But they and welcome to than that it's without and thank him for quite a in fiscal <unk> earnings conference call today's call. They came back with it at this time I would like to to the conference over to my quick here I I like to often that he's please go ahead.

Thank you I'll take that please note that discussion today will contain forward looking statements relating to future performance up the company and I intended to quantify the safe Harbor some liability.

That best study U.S. private Securities Litigation Reform Act.

Such statements are not guarantees of future performance and that gets you said no I know that compete assumption and other back to.

Some of this me net up younger companies control and could cause actual results could differ materially from those mentioned integrated companies and discussion.

General discussion of music factors that could affect naive thickness and the financial results is included in certain fighting for the company with the Securities Exchange Commission, including if I need to report on form 20-F <unk>.

The company does not undertake no obligation to update forward looking information, except as required by law.

During today's call management will also discuss that non-GAAP financial measure for comparison purposes only.

Definition of non-GAAP financial measure and a reconciliation of GAAP no definitely does he see that we've had a nightmare fourth quarter fiscal year financial statement easily you see earlier today.

With respect to non-GAAP financial measure it's related to an adult out of our consolidated subsidiary no doubt piece that.

Hi, Good relations website nothing.

Hi, Hi, outdoor naive dotcom.

As a reminder, this conference is being recorded.

In addition, I mean, let the presentation and a webcast replay of this company cool well also be available on that if I ask website.

Joining me today on the call from 90 people management it Mr. William game, our CEO.

Makes it tough young Chief financial Officer.

I'll now turn the call I would like to tell you I'll be the prepared remark I mean, how William.

Thank you Margaret and thank you everyone for participating in today's call before we begin I would like to remind everyone that all percentages are now based renminbi.

2019 was an eventful year facilities.

We extended the reach of our online games grew our international presence IPO that our online learning Yotel advanced our music platform and refine our operations in E Commerce.

For the full year, we grew our total net revenues by 16% to Renminbi 59.2 billion and increase our GAAP net income from continuing operations attribute to both our shareholders by 60% to Renminbi 13.3 billion.

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, we 16% year over year, increasing net revenues.

Driven by the steady performance of our longstanding typos, we once again exceeded renminbi 10 billion this quarter for the past seven consecutive quarters.

Our flagship titles continue to provide solid support for our online games business with increasing longevity and use a loyalty.

In 2019 revenues from.

Fantasy westward journey online and fantasy westward journey mobile both grew at double digit rate remaining traveled and after years of operations.

Westward journey online and it's more about version also grew steadily in 2019.

After over 15 years of operation, our after bluejay and W.W.A.J. French hybrid happy instituting the collective memory of a generation of Chinese players.

We further expanding the reach of these ickes through the introduction of FWJ three D. In mid December last year captivating, both returning thing as well as new audience.

As a matter its ration up the excess capital J. franchising mobile this threed version gain river reserves, the classic game play and social system, while bringing brand new experiences to mobile using a real times three D wells.

Were still working on new update in extension packs to further optimize experience for Abuja, three d. and we are confident that over the long term. The three D. version will show similar longevity and popularity as our other titles in this franchise.

In addition to growing and strengthening our existing franchise.

We are also give that incubating new ones, our copper 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.

Army Oh Gee is the first of these relatively younger franchises that we have built in house.

We're pleased to see that as we introduce more in of the kids New storyline, new characters and other new content. The influence of Army Oh, Geez I P is growing and resonating well with game players.

In 2019, Onmyoji top the iOS grossing chart four times stabilizing at a new round rage after more than three years of operation.

In December we launched Onmyoji the cop game its second spinoff gain.

Living up to expectations, the new arm Yohji comp gain carried on the tradition of being pricing to my Kid with its exclusive upward.

With this situation, we also introduced more competitive and strategic gameplay, winning over a large group of hot call collectible cost players.

We're now also currently working on several new Onmyoji games in closing Yohji Yo Kai Korea, a simulation game, which we plan to launch in the first half of this year.

Identify if there's another young I P, where we see the potential to be building to a successful Matisse French highs.

With this goal in mind, we are continually in reaching this IP through a variety of initiatives, including E sports IP collaboration and offline activities.

We have hosted a number of high profile event, featuring identity five including both international and regional series tournament.

Most notably our global championship call up the Abyss has attracted over 800000 players from the rounds of World Since December.

We also collaborated with happy Valley, a popular national Finpac brand in China, bringing some of the endgame characters to life.

We are pleased to see the early success of identity five as it becomes another powerful IP French highs, establishing abroad and vibrant community of young players in China and abroad.

Invincible, our 2015 launch that has been growing steadily year over year in terms of the revenue and active users. If now one of China's biggest S algae titles.

Like with many of our games, we invented a brand new in game mechanics, and that the resets game as calls every season.

Creating a much more balanced game experience and setting a new extended funds for the genre.

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

The prerequisites to Buda successful franchise is the ability to create popular game I teasing house, which has propelled by our world class R&D infrastructure.

Over the past two decades, we have built one of the largest in house RMB teams with China's most talented and passionate increases supported by one of the most unique and comprehensive R&D infrastructure is in the world.

In power each of our talent with our game enthusiasts, the corporate culture and seconds to known training the kind of them in the industry.

Our training program at Matisse Games Academy, a widely recognized in China as a premium online games trainee institution for the creative minds.

Most recently tool of our training programs were awarded the 2000 1980, the actual anything 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 fall off the talent and stimulate new ideas that propelled the development of our games.

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 that inventive re creation of Wow as it was in 2006 and it was web very well received by a generation of returning players and new comers alike.

We're very pleased to feed the continued popularity of while in China, achieving a record number of total monthly subscribers in the fourth quarter, we've increased revenue quarter over quarter.

In 2019, we continue to advance our games and making Roes that expand our reaching overseas market.

Nine salvage remained a household name in Japan, topping the Io ask growth in China multiple times during the year.

Leveraging our knowledge of viewed the gain brands. We further strengthened knives house brands presence by engaging in a series of successful collaboration and our first ever he spots Championship tournament in Japan.

Identity five also exemplifies our ability to operate gains in the overseas market over the long term, leading Japan's Iowa topping charge for the first time in September.

We used the success of these titles. We have you we have accumulated attached and deeper understanding of our users in terms of their interest social behaviors and preferences in style is tactics and game play.

We have integrated stay successfully experience and know how into the design of our other games enhancing our ability to deliver popular titles to Japanese users.

In addition to our success in Japan, we've also expanded our footprint across more regions.

In December we launched Mabile Super Wal in several southeast Asian, My Kids, where it talked many of the iOS app downloads charts.

Building on our existing success at home and abroad, we have many exciting games in our pipeline, including Harry Potter Magic awakened easy echoes Yogi yoke HEICO, Yeah growth was chronicle revelation mobile game.

Hello, Immortal and Tocumen class.

Turning to our online learning music business, you without made solid progress in 2019 significantly growing it online cost businesses.

Your dollar income several cost products, including high school, Chinese and physics practical English for adult I'm quoting it causes for kids.

We're also seeing axle and adoption and the rapid increase in sales so you'll without intelligence lending devices driven by the successful launch of our second generation Dictionary Pat.

We also expanded our tutoring and sales team and substantially improved our tutoring and operating systems to support them.

These I've said half being rewarded by robust growth in gross billings.

That was online courses, 525% in 2019 and over 200% into fourth quarter.

More importantly, we have accumulated experience that we can replicate across our highly scalable online cost model and are beginning to benefit from economies of scale.

2000, clunky now these will continue to support your without mission to bring uses more effective and technology driven education experiences.

Our cloud music revenue hit a record high in the fourth quarter with membership revenue more than doubled year over year.

Rather news from digital albums and live streaming also grew rapidly.

Sales of digital out and have proven to be particularly effective on our platform. For example sales from a 22 year olds Chinese pop style Wamsi Board digital single no sense exceeded renminbi 10 million within just 11 hours.

Similarly sales of Chinese singer songwriter watching these digital single how I'd like to love. This world exceeded Renminbi 50 million. After 45 days online, marking the highest digital single sales record online in China. According to a third party data source.

Now these cloud music is home to a large number of independence musicians.

More than 100000 independent artist feature their music on our platform and their songs what played back more than 270 billion times India.

This makes matisse cloud music the most recognized platform for our original music Hi, Chinese artist.

In 2019, we plan to use the platforms distribution capability and its broad influence to create more viral content across the Chinese music industry.

And finally, our focus with yen shot in 2019 remained on improving supply chain management and operating efficiency.

We effectively reduce our inventory compared to a year ago and consistently improved our positive feedback ranged from uses in the quarter.

We made adjustments to our pricing management, which resulted in increased revenue and at a gross margins from the business.

Our participation in product design has resulted in the creation of many ship the product type providing valuable research market analysis gains from the customer end to our manufacturers at the same time, we have significantly improved our membership system and I've seen the benefits of increased Amanda.

Repurchase rate.

As for our manufacturer and factory initiatives, we have helped to build payload online data systems that have further improved their manufacturing process and quality.

In 2020, we will continue to enhance our brand influence and reaching China by bringing even more high quality and personal life products to a growing number of consumers.

We are excited for the new year as our existing game titles continue to impress the market with their phenomenal longevity to talent and he will also see more game launches in China and globally from that.

Put on Plenti also marks the twentyth anniversary of Medici being a publicly traded company.

As a internet battery in China, Natus has remained relevant and continues to be a four runner 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.

Before I pass the call that's a child I'd like to share some updates on the evolving situation with the Corona virus outbreak in China.

Right after the Corona outbreak.

Reacted instantly and rolled out a series of initiatives to support the affected regions.

We set up a special found Remy the 100 million the found will be used to purchase medical equipment and Madison from home and abroad and deliver two places where the outbreak is the most severe and child because most needed.

At the same time, you inject immediately delivered over 200003 masks and other prepackaged supplies to our customers and set up special phones for the supplier partners.

For your Dol, we were among the first ones in the industry to offer free causes to K 12 students in affected areas, which was later expanding to other regions of China.

For the college students Chinese University mood connected with 800 universities covering 4000 professors lunches.

We also provide our technology support to help other offline educational institutions to move passes to online through your without intelligent cloud.

Our company took every asset to protect the health and safety of our employees and the DOCSIS multiple measures to maintain our operation 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 impacts to our business lines in the near term. However, the situation is evolving nowadays is committed to providing support to our employees users and communities and working together as we together move through this.

Challenging time.

This now concludes William's comments.

We 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.

Total net revenue for 2019, Renminbi 59.2 billion, a U.S. dollar 8.5 billion, representing 16% increase year over year net revenue for the fourth quarter came in at 15.7 billion Renminbi, All U.S. dollar 2.3 billion.

Representing a 9% increase year over year.

For 2009 King.

Our net revenues from online game services grew 16% year over year to 46.4 billion renminbi and in the fourth quarter. It was also up 5% year over year to 11.6 billion.

Mobile games accounted for approximately 70% of net revenues from our online game services in the fourth quarter.

So 2019 net revenues from Youre now were up 78% to remedy 1.3 billion and during the fourth quarter net revenue from your without was up 78% to renminbi 410 million.

Primarily due to increased net revenues from it online courses and sales of the intelligence learning devices.

For 2019 net revenues from innovative businesses and others were up 12% to reached 11.5 billion renminbi.

In the fourth quarter, it was up 18% year over year to reach Remy be 3.7 billion, mainly due to the increased revenue contribution from cloud music and Cc live streaming.

Our gross margin was 52.2% into fourth quarter.

Gross margin for our online games remained relatively stable.

It fluctuates quarter to quarter with being a narrow band ways based on the revenue mix of mobile and PC as well as self developed and license games Yodles gross margin improved to 29.8% in the fourth quarter. This was primarily.

Even by the improvement of the sales and I'd say economies of scales.

Gross margin for innovative business and some others was 20.6% in this quarter margin improvement both year over year and auto over quarter was primarily due to the increased revenue from cloud music.

For the fourth quarter total operating expenses were renminbi 5.2 billion.

Our selling and marketing expenses as a percentage of total revenue was 13.7%.

In this quarter.

On the 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.

R&D expenses were renminbi 2.3 billion up 5% from the previous quieter.

We remain committed to investing in content creation and product development. We just wanted to find us as a technology company.

On a full year basis, R&D expenses represent 14.2% of full years net revenue comparing to 14.4% in 2018.

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 eight 2018 period, while mainly due to reduced losses from certain lossmaking subsidiaries of the company.

Non-GAAP net income from continuing operations attribute about where our shareholders for the fourth quarter totaled Remy. These 3.7 billion or U.S. dollars 526.1 million, representing a decrease of 23% quarter over quarter and the increase of 15% yeah.

Over yet.

Our non-GAAP diluted earnings per acre, yes from continuing operations, where renminbi 28.030, U.S. dollars 4.03 for the fourth quarter 2019.

Our cash position remains strong as of December.

So the first 2019, our total cash and cash equivalent current and non current time deposits and short term investment balance totaled renminbi 74.4 billion compared with 49.7 billion as of the year end up 2018 and.

The conference with our dividend policy. We are pleased to report that our board of directors have approved that dividend of U.S. dollars 1.0 to pray D. S.

On February 26, our board also announced and approved.

A new share repurchase program for up to U.S. dollar 1 billion of our outstanding 80, Yes for the next 12 months beginning a much second.

Thank you for your pension we would like now to open the call to your questions.

Operator, let's go to coordinate please.

Thank you if you like to assets I hit piece that you know by pressing star Weinberger City from Keybanc, Yeah, you see a speaker phone if they show your me I hit an all Philadelphia, which I'll equipment.

The benefit of all participants on today's call. If he would you like to ask your questions Diminishment in Chinese immediately your question in English.

This is one question per time.

But I will ask more questions.

Like appeal by pressing star why they can you are possible just.

Everyone allocated to signal for questions.

You would take all of the question something like Alex <unk> from Morgan Stanley.

Your line is open.

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What do you are going to sell when you are FEMSA you like Colorado should play some pick out about a using [noise].

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Same thing Youre Crazy or you go some rather see Honda.

I translate my questions first is regarding music.

So we are hearing they're not the agreements between types and music and the top three labels ending this year and next year and how will this change the competition landscape revenue growth and cost structure off now these cloud music in the next two years and my second.

My question is regarding the overall company.

Okay, Elias has been loss, making but it has been sold and music already raised enough funds and over a company margin is improving.

So what's the thoughts on balance sheet cash flow.

In the in the next two three years. Thank you very much.

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Okay. Thank you Alex for your first question, let me provide a brief translation of Williams a response.

So firstly label companies exclusivity arrangement in the past years have said China's overall online music industry and affects all sorts of players along the value chain not only just the platform like us but are also app stores.

A hardware manufacturers upstream and downstream players along the chain.

We hope that on label companies not just the big three going forward can all comply with the regulatory framework setting China.

We aim to provide a healthy environment to the overall industry has a hall financially, it's definitely going to make the cost structure of the cloud music up the whole industry to return to a more healthy and normalized level because in the past.

Last week, the whole industry has been older pay the content cost twice or three times I, even more to the label a companys English unfair setup a once the cost structure can normalize then players like nannies cloud music can focus more resource.

Yes in promoting or in have achieved music content and encourage a native Chinese musicians with our mission to create a vibrant healthy and and successful music culture and community in China, So that.

The response to your first question 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 business as a starting from the end of 2008, King and you see a series.

We have a fruitful actions throughout 2009 P., we are benefiting from the economies of scale as a result, our balance sheet has been growing strong our cash position is being very very strong along the way. We've been also very disciplined be paying dividend increase.

Recent dividend payout ratio and have a regular stock buyback programs offering all we've acted in a responsible way to our shareholders and especially in a relatively more volatile market, we think a by having a strong cash flow position.

And together with a disciplined and responsible treasure policy to our shareholders that will make navvis, even stronger and more defensive company through outpaced macro turmoil.

Operator next question please.

Let's take our next question from he'll lead time from Citigroup.

Hello, well there Charles.

Hello, really chosen migrate kind of sit there so that he was because they want you completed it got your opinion that push who then we should start to see other it that way it feels like Johnson T. No deal when do you decide when he said that you seem to you what that put on a day will send it's a good insight someone who minute.

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When you sound and took a sudden Dallas San Luis you got the I'll jump on that Youd IP and I got the outdoor remodel highlight is the amount of folks here pay reported.

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I find the SAP. So my first question is on the qualify that impact on Unserious, It's a flight.

Positive or negative at how long the impact was last part of it and my second question is on the overseas gaming expansion.

Management on the pipeline with a major eyepiece like the Alto Maipo Harry Potter. Thank you very much.

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It should benefit from bank of Houston.

Mhm swung goal.

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HM.

So you shouldn't city.

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Business It has generated a feel good.

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Oh, sorry, two at a meeting which is over there.

You guys Susan.

Uh huh she's out okay. Thank you hear me, let me provide a brief translation for you I'm sure a two questions first question on the Corona virus in Penn Yeah intact to two hour different business lines, Firstly William commented that D.

Situation definitely affects the economy as a haul it also affect us a different views to different extend.

In particular advertising segment will be more affected by or the situation, whereas our online games and online education businesses I relatively last impacted by the situation for now.

Especially for online education, given the physical restrictions of of EUR of people going out and moving around it helps to raise awareness and adoption rates of online education, which propelled the trend of the of the boroughs of this new format.

Of learning.

For your second question on our.

General a strategy and pipeline about overseas games, Firstly William come into Atlanta, We are very seriously very focused overseas expansion as a major business strategy of our games Bu. We've we've achieved first that achievements in Japan we.

A couple of games have been well established and we're hoping to further leverage this experience and expanding to mainstream Western My kids.

By offering by bringing more a high quality products to the a user in those geographies in the past couple of years weve been consciously or moving up and learning trends and we think we are more prepared more ready to.

A replay some fruits in this year and in the coming two three years.

Operator next question please.

He felt that you're on a lot to ask why classes tying into that we'll ask more questions. It's only thats my pricing power lines I came here.

Our next question from deadline of Alex Yao from JP Morgan.

All right, but typically.

I was just 20 pounds or some anchor touching pool and when she mentioned that you Sean just with some women usually JPM younger from Yeah. You got your sure a tone woman Yoshi when charter school young option TV in the June quarter on my job you change from its own Sheila you tend to use shoot.

You have shown who should come into the only way you've been a show tune woman and you wish to U.M. foundry that you all do not to John's I'm going to your time again, reaching the doing Johnson door and one cannot show touch up on going from Goldman Virgin is surely out you can do you do not to go quickly young woman trigger young front it seemed to use for twoq.

As a young plant teaching and she was she the final quick before your chance or you can show a seasonality if I use oh, so I would like to follow up with the question regarding the impact of from the Verona virus or breakouts on the gaming side of the business.

So from a consumers perspective are you guys I see increasing usage and the better monetization during the Verona virus or free counts a and then secondly from common development perspective is the current situation making.

Internal Compton developments more difficult or would that potentially affected the new game launch in China. This year. Thank you.

But it's either do so appealing or.

Okay.

Now.

It's interesting to see.

So the teacher to do.

But you see it gets you there.

All of that data you're simply to know why you should also truthful.

No.

Well, we cannot images for crude equal on trends in satellite.

Yes.

Good for you.

Ah yes in.

And then the devastation that someone could how long Samsung could take insisting that.

The two inches.

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C C. Nick.

Yes.

Yeah.

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Without a need association to punish here.

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Loosened establishing now.

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Yes, yes.

Yeah.

Exactly.

Uh huh.

Yeah, Hi, this is my individual.

Just a question you took a just again classical hodgkin's lymphoma whole she you'll see that high fives. He just sheer fossil Michigan Jessica.

Let me.

Or mobile couldn't come on television Kinda, Neil will each Uh huh.

She.

Thank you Alex I I'll provide a brief translation favour once benefits on the call. So in simple to use a match rates Willem commented that Chinese new year period is always a high season for online entertainment as a whole for our games. This new year period. This August.

Really being affected by the Corona virus situation. So it is a a longer term.

Chinese new year period, a user metrics has being stronger than the previous a similar processing Chinese new year.

And for your question on the R&D impact or so now we do not see any a significant.

Delays or impacts to our our R&D development programs as well as the trend pipeline launch schedule. Obviously the virus situation is evolving and we were continually to access the impact of the game development, if Fannie and William also further.

Supplemented the class D direct impact on the online learnings.

In particular, we assemble leaves a that online learning actually offers abaxis user experience overall Cesar v. The traditional offline Len I think we see virus situation more and more people are now more receptive and.

Adapted to the online learning model and a lot of learning is it is also an opportunity for them to be more out reaching to a more variety of knowledge that is only available and offsetting a convenient way online. So aim.

Owning all we think these virus situation is probably a catalyst to propel the overall online lending industry and the hall.

Operator next question please.

Yes.

See let's take always ask missing from the layoffs that <unk> from the I see.

[noise] life.

Thanks.

Oh, I'm, sorry, I see so, particularly when they went from that that don't seem to income I know, where they want to Mr. Guy near that I, just got to no tenant so no today and it sounds like Messina Goldman Useighty two.

Pushing that thing, but it just go to pull Goldman.

That town and Tony I smoke or something like 10 o'clock Hmm.

Sure Tom.

Mm Hmm switching to Hmm huh.

But I didn't hear <unk> <unk> I see so to see quite small changes this year to date.

I don't want more complete HM claim count Hmm.

Oh no.

No.

Mm Hmm.

Mm Hmm.

Oh, it should see myself.

Hi, My question is regarding a problem is sick.

Just wondering despite that nice step will feature well youre right, including that causes damage and say okay.

Right. Okay features on that.

I couldn't nice mobile.

HM.

John I want to 10%.

Well for [noise].

Wondering.

[laughter] right well, it's just simply because the customer data I'm not.

That's right [noise].

And when you do that I, some color on that but probably niche.

[laughter] contribution what that.

So what kind of and feature so you should anticipate <unk>. Thank you.

Okay.

Ah Nick or to try to not only the wouldn't you only uncool bank nearby across more than regular later on in a couple of those osteosarcoma summer summer.

[laughter], that's not a slightly though huh.

This is a lot took place.

Okay. Thank you Tom.

On to myself, how that goes on.

She can you tell when those guys friendship and goes.

Touching what's happening Joel I don't know South Central 1000 shaking like you sound. They should you didn't go tell me like that push it didn't.

So well Mickey this is an issue.

Hey, Lincoln Park.

Yeah.

They shouldn't Natalie wipe would there be Santana Suji a sound like you see you could be Fucci shipping, Washington, Chet optical coatings outpace our way calculate ACA look a lot I mean wait I use young how when the gang reach when they want mentioned T. The you got really unfortunate when looking at your meal, you've seen that you know more ship.

Yeah. So did you say oh, so when I surfaces.

$2 or the other uses are switching yes Institute who to Doug.

No I don't European.

Sure. So when you consider to design, a religion or something.

Just a pineda, Josh I think there's room to two others insertion.

And then go swimming pool.

Uh huh.

And then go so could you to them.

Let me tell you want me to the team has.

Welcome to.

I actually thought.

This is this an intruder Linda.

Just to remind you that took another justice.

HM how that Ah. Thank you naturally if they are patch and let me briefly translate a william's comments, so cloud philly age or as well as the other features such as live streaming a et cetera. This is overall this week.

Our way of thinking how as them music platform, we can enhance value add to our users. Most of them are very vibrant music NCM enthusiasts, we wants to provide a integrated experience not only just listening, but some listening.

Two also spending more time are watching the streams as well as interactions. So many of the initiatives in the strategies around of building a more vibrant community or on our nannies cloud music platform by the mission the lead.

<unk> mission of us tapping into the online music.

Segment. This really to provide he most conducive channel of promoting a Napier songs native I piece for the Chinese Ah Ah.

Independent musician options with regard to your second part of the crashing underclass model. They are again I think you are referring to the the that the average daily use that time spent among the App again, we do not know how.

<unk> external third party data channels track these numbers, but based on what we I see in the second time, there's no decline in the use the activity and to use that time spent or on our platform as asphalt. So that's probably some.

Thing you can you can for the verifying double checked we used to extend our channel.

Oh.

Operator next question please.

Oh.

Well take our next question something like HM Campbell from Nomura.

All right, but typically.

Hi, good money, a women's health and the macro things like taking my question or is it does how hard it does is it your thoughts there wasn't a holiday was downtown well like we had since out when you got to so many the highlight that these Ah Ah Ah Nick.

No. He got caught that if I'm going to want to each other teach him make up whenever you had to Dallas or opinions snow up and how I think on can nobody sees a phone Sonia Oh, what somebody had associated loss in Doha, Qatar why that is I shouldnt huh.

Gentlemen, one is I think I saw you know what does pick up happened.

Now that it's always hard I'm going into though we like sort of thing about them being done Oh, sorry, Oh Boy Oh, just some or just want to deal with you know gallons intercompany whenever Guinea oceanfront agenda, I know when you're a home on how much in initial.

Somebody you'll see someone selling international has not yet, but all utiba yet.

Good.

I don't know she doesn't see that seem to most you see something like that doesn't mean sometime soon.

The other thing you'll see if you're not going to Tim Glenda deal comes down. So please consult the only thing can get in here I wanted to find shops I had two questions. On my first question is a follow up on the overseas expansion I. Just was wondering how much have met is mobile Daniel Daniel is apparent to me generated about events into my intent and then.

Management mentioned earlier on the call. This year will be a holiday this year up on their teams Oh My opinion business in the alternative market. So I just wonder what is.

The gross potential for fourth quarter revenue contribution.

From the open since came up and going forward. My second question on regulation I just wonder how.

I think up the regulatory environment. This year board for Chinas online gaming industry last year. The authorities that spend that you can approvals for that and a number mouse. So I just wonder what management pick up the regulatory 10 this year for tennis game market. Thank you.

Yes.

Oh.

Hey ended the year this is actually on doesn't it.

Okay, and that's a lot I played out other new projects still wait I have thank you when they came back and you keep at held Annika nickel and studied over time will tell you exactly the way you're.

Hi, good too.

So you see it kinda now.

They've got people pay something you're going see somebody was she said Uh huh.

What was issued a bill referred to do something from a simple.

Tensions people's it can have some additional capacity she knew about it so.

Uh huh.

Hi, this issue.

Mm Hmm genius.

Which I, it's about a two children or just some simple for them to into.

John I like to get to the public pension funds it turned out to do two things she needed.

Oh, no two basins in the system does with enough that you do want them.

To the hospitality.

The consequences consumables, especially the sources.

HM.

They they say well immediately.

There are some I mean.

You should look we wish you the interim news to them.

Yeah.

Oh.

Just a took another machine.

HM.

That's it.

So it's understood yes.

Good.

Uh huh.

So just to go there does seem to me the.

Thank you.

Yeah. The official launch was interesting.

The team that can.

Well I think that.

Well just on them, we should help out there.

The data into.

Switching to go.

Sometimes too.

Sure.

Absolutely.

Okay.

Uh huh, sometimes it.

She does it fit pivot Susie.

Okay sometimes.

Okay. Thank you talent for your questions. Let me, let me provide a brief translation and so the supplements to some of the a number related crashed ansys. Firstly William commented that I think s. as all of that I've noticed that over the Chinese new year period I call.

IOS App store has also.

Implemented more stringent requirement, requiring developers, who apollos or their content onto Apple iOS starwoods needs to provide a evidence of approvals, which distinct line. We see regulates is a more emphasis.

And the regulation IP protection in the way, we think that this is going to be more beneficial to Ah first tier players big players like not east we have all that 50 game studios over 10000 in house developers.

Well keeping a very.

Comply in a 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 ER.

Regulation its content to only regulated and tends to be uploaded and and also having more punishment along the IP violations that is a longer term beneficial for the whole industry in particular towards upstream content providers.

And on top of the on top of our emphasis on in House development. We are also putting more and more focus on collaborating with global developers joining hands strong hands together hopefully in a making a joint access to provide some insight.

Content to the global audience that naturally brings to your first part of the question for 2009 King on a full year basis. This is the very first time that not east older overseas game revenue has accounted for more than 10% of the overall gain.

Revenue.

First timing that is history as a bringing us closer to a global premium premium game operator like William commented earlier on I think this year and the next couple of years.

We are going to see mall or through a web going to bear more through in our international expansion.

Okay, great. Thanks for the time.

[noise] due to timing me that Congress todays question and answer sections at this time of it and the contract type of migration for any additional of closing remarks.

Okay.

Okay. Thank you once again for joining US today, if you have any other questions. Please feel free to contact directly Oh, TPP regulation have looked like that.

Hey, Thank you everyone.

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