Q1 2020 Earnings Call

[music].

Good yeah, welcome to <unk>, it's called without them.

Thanks call today's topic.

I would like to.

Sure.

Based on that please go ahead.

Thank you operator. Please note the discussion today will contain forward looking statements relating to future performance of company and they tended to play fivefold the safe Harbor someone like any see actually established by the U.S. Private Securities Litigation Reform Act.

Statements I love to Kevin T. The future performance on the subject you said he with no such as a team assumptions and other affected.

Some of these written up young companies control.

Actual results could differ materially films I was mentioning today's press release and just discussion.

General just go shelf their respective that could affect that used to skate business and financial results is included in fitness bodies as a company with the Securities Exchange Commission, including its annual report.

20-F.

With these does not undertake any obligation to update 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 put definition of non-GAAP financial measures and the reconciliation of GAAP to non-GAAP financial results. Please see the 12 twentytwenty.

First quarter earnings news release issued earlier today.

I think we're buying good. This conference is being is being recorded in addition, they let the presentation and a webcast replay of this call. Good cool will be available on net corporate website at <unk> Dot com.

Joining us today I'm a coal from that is a senior management is Mr., William Dean Chief Executive Officer, Michalski, All Chief Financial Officer, I mean, a day. He was in Kuwait co President of Netease games, I will now turn the call over to child, who will read the prepared marks on behalf of William.

[noise] [noise] few Margaret and thank you everyone for participating in today's call before we begin I would like to remind everyone that alter send countries based on renminbi.

Like every company around the globe, we stopped the yeah, we see great deal of uncertainty.

One of the world's word health crisis.

I am pleased to see that we have worked very hard to address the effects of the pin damage.

Her body account, where we can and making the appropriate adjustments to our businesses to ensure the safety of I wouldn't that east family.

We believe many companies inside and outside of China will overcome this can dynamic and come out strong.

We had a good quarter, increasing I wouldn't that's revenues by 80% to renminbi 17.1 billion and I wouldn't that income from continuing operations attribute to both to our shareholders was up by 30% to renminbi 3.6 billion, both on a year over year basis.

For our online games net revenues reached Reminbi 13.5 billion in the first quarter on the back of our existing high told a standout performances growing 14% year over year, even though one to 2019 was itself a very strong culture for our games services.

A year ago.

Our legacy PC titles, such as the fantasy westward journey and new westward journey online to continued their strong performances in the first water, which new expansion packs launched for the Chinese new year holidays, introducing a series of new content, possibly revenues for these gains broke new.

You record keeping another all time highs things get that huge almost two decades ago.

Momentum for legacy Mobile games was also strong as we continued to supply dislodge and sustainable user base. We just couldn't can your content updates.

Take a fantasy westward journey mobile game as an example, where we introduced a brand new character, which quickly gained popularity and was a strong driver for gross billings.

Well, we continue to dominate the I'm always genre. Many of our recent hi, tolling categories that are relatively new for US have also shown remarkable both success and sustainability.

Providing us with steady revenue streams in what is now very diverse game portfolio.

Invincible Onmyoji identifying and life after launched in 2015, 16, 18, and 18, respectively serve as good examples of our superior game longevity within different game genres.

Invincible, our 2015 launch keep another Paul record quarter high gross billing and active users.

We are pleased to see the games strong traction in the S algae My kids.

After more than five years, if successful operations within reasonable we have accumulated the solid S algae fan base and extensive expertise in this field, we look forward to developing more innovative games to delight, our users in DC engaging and thought provoking genre.

Ami LG continues to show remarkable longevity as we consistently introduced new characters. These additions are resonating well with new game players further solidifying the reach of arm Yohji has a leading a C.G. game.

At the first of our younger I piece that we have created in house our goals. The Army Oh Gee is to have an even larger and deeper impact on the vibrant community of younger users.

In addition to Onmyoji the cocking the clock to Bowl cocking, we launched last year and the upcoming simulation game Onmyoji Yokoyama planned for later this year, we have more exciting new games install based on the army OTI IP.

It's it's a day this evening Beijing time at our made plaintiffs game day event, we will introduce to new Onmyoji spinoff games in brands new genres.

Launched in 2018 identity, five and Lifelock to also a few of our newer titles attracting a large base of young fans and starting to demonstrate sustains launch of a T.

Celebrating its second anniversary in April with a series of content updates identified reached a milestone up 200 million registered users attracting players, we it's characteristic hostile and innovative game slate.

With life, how to thinks its initial phase of stabilization gross billings has been picking up steadily over the past few months asked we launched a couple of highly popular expansion packs introducing a series of new themes I didn't know the tip gameplay.

We believe that life off two will be another one of our titles that resonates with fangs for many years to calm.

In terms of new titles fantasy westward journey three D. was launched at the end of 2019 and delivered a stable performance into first quarter further expanding the reach of the ask up you'll Jay French highs as a whole and captivating Bose returning fans as well as a new audience and.

April we launched on the volumes in China previously known as age Ohio.

As our new with and memo RPG featuring sandbox game play the game tops the iOS apps downloads child soon after its launch and was featured by the iOS capsule.

In overseas markets, we continue to gain market share in Japan.

Knives out and identity five remain at the forefront of Japan's top grossing games chops and the use a basis for both games are growing at a strong paid.

The success of these games has helped us to gain a much better understanding of Japanese users and their preferences, allowing us to bad to tailor our games for the Japanese My kids.

We have integrated the success, we experienced and know how into the design of other now these games enhancing our ability to deliver popular titles to global audience.

At the end of 2019, we began appraising invincible in Japan ourselves with our proficiency in operating this game domestically along with our newly acquired understanding of Japanese user preferences, we saw a steady increase invincibles revenues during the first quarter.

Okay.

Now turning to our game pipeline.

Many of the games under development has the potential to achieve mass audience appeal transcending job right geography, and spanning multiple genres. We have a number of these exciting new releases planned for 2000, and punky, which we expect to help us getting more brand recognition in the broad.

The global markets, particularly in the U.S. and European market.

As announced two days ago TV at Kohl's is ready for its global launch in August.

Additionally, other exciting upcoming titles include fantasy westward journey H five version King of Hunters P.S. club managers.

Yohji Yo Kai co young.

Go slowed chronicle revelation mobile game.

Harry Potter Magic awaken.

The abelow in Mato Hockema class and Malvo tool.

Now for our education business, you would know stopped as the year on a strong note with healthy gains across many of its primary financial metrics.

Total net revenues accelerated 540% year over year to renminbi 541 million.

And operating cash flow and positive for the first time.

We are seeing on increasing adoption rate of online education due in large part to the structurally effects of the pen dynamic.

Online courses generated gross billions of renminbi 519 million up 287% year over year.

Primarily due to continued enhancements to our cost hung tendon product.

To match the needs of newly enrolled students during the pin downtick Yotel quickly developed and refined new product.

Helping students receive the most effective teaching online, especially for those taking actions exams. This year.

In language the growing enrollments, we carefully crafted a few more product, including junior High School Matt.

Hi School English courses, which received wide popularity.

We also expanded our education team to over 1000 being structures and teaching assistants, who are well trained and incentivized to give our students the most tailored and personal support they need.

During the quarter, we further enhanced our technology offering with the launch of a <unk> assay assessment in our Dictionary Act a feature that automatically grade and office suggestions to improve English writing.

Going forward. Your dollar we'll continue to build up it's largely scalable business model and provides users with effective educational experiences in powered by great content and technology.

Well Alicloud music business. We are also growing I'm proud to have celebrated and that is cloud musics seventh anniversary in April.

Revenue from our cloud music platform continues to accelerate with high speed, achieving triple digit growth year over year in the first quarter and record high membership revenue.

Live streaming revenue is also growing at a rapid pace.

In the first quarter, we released several online live event, that's what that's what particular leave appointment during a pandemic outbreak and helps to support our independent musician and their ability to distribute.

These include the bathroom live music festival well she is here well well known musicians performed at home buyer live streaming and indeed life in the life a high quality broadcast of independent grant.

Fans life shows.

While we maintain a competitive and you are regional music with now over 160000 independent musicians on our platform. We are also looking to provide music from all over the globe to expand our music library.

In March we anticipate popular Japanese music to our platform through our distribution agreement with studio Ghibli, one of the most acclaimed animation studios in the world.

Further adding to our kind of log of songs, we recently signed a strategic partner the chip with rock record one of the largest record labels in China.

Always all.

As with all of our businesses innovation is key.

Along these lines our music platforms largest progression includes a newly launched karaoke offering for our young people. Moving ahead, we will continue to make sense about investments in content and innovation to remain relevant and competitive and exciting world of music.

Turning our focus the yen Shannon.

After a shot for years, we have developed a distinct and recognizable brand with a number of notable self developed products that appeal to a wide range of consumers.

In particular Ginger has made a name for itself with distinctive offerings in housing personal care and food categories.

During the first quarter, we upgraded our membership offering to a pro membership to include more benefits attracting a considerable new constituency.

New memberships rose by 138% year over year owning to our innovative marketing approaches such as collaborating with top live streaming celebrities.

Meanwhile, our inventory has been managed to a healthy level as we continuously optimize our procurement and reduce obsolete inventory.

Overall, we had a strong starts to 2020.

Our primary business lines grew during the first quarter and we're pleased to have advanced our mission to bring inspiring leading products and services to our growing community of followers.

We will press forward as we have time for the past two decades with our eyes on the long, Tim and plans to rich incremental gains along the way.

This concludes Williams prepared remarks, I will now provide a brief review of our 2000 and Plenti first quarter financial results given the limited time on todays call I will be presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today.

For further details.

Total net revenues for the first quarter, where renminbi 17.1 billion or U.S. dollar 2.4 billion, representing an 18% increase year over year.

Net revenue from online game services, where renminbi 13.5 billion up 14% year over year.

This increase was primarily driven by the strong performance of our flagship titles in FWJ franchises, new westward journey to as well as blizzards world of Warcraft.

Mobile games accounted for approximately 70% of match revenues from our online games in the first quarter.

Net revenues from Yodle also increased hundred 40% year over year in the first quarter, reaching renminbi 541 million, primarily due to the increase net revenues from online courses with a rapid increase in K 12 paid enrollment and sales of intelligence.

Learning devices.

That's revenues from innovative businesses and others will remain these 3 billion for the three squatter up 28% year over year, mainly due to increased contribution from that is clouds music and cc live streaming.

Overall gross margin was 55% in the first quarter GP margin for our online game services for the first quartile was 64.1%.

Our gross margin for online games is generally stable fluctuate from quarter to quarter within a narrow band ways based on the revenue mix of mobile and PC as well as self develop and licensed games.

Those gross margin expanded sharply to 43.5% in the first spotchem a vast improvement from funky 9.8 in the last quarter. This was primarily driven by the achievement of economies of scale and that's the faculty compensation structure.

Gross margin for innovative businesses and others for the first quarter was 15.8% up from 5.7 10 year over year. The improvement comes primarily from significantly increased revenue from our never use cloud music business.

For the first quarter total operating expenses were renminbi 4.9 billion, our selling and marketing expenses as a percentage of net revenue was 10.9% compared with 13.7% in the prior quarter to quarter over quarter decrease was a result of less spending in online game promote.

Motion and cloud music during this quarter.

R&D expenses were renminbi 2.1 billion up 5% year over year, we remain committed to investing innovative content creation and product development wishes watts defining us as a technology company.

The effective tax rate was 22% for the first part to relatively flat with the prior period and down from 31% into first quarter of 2019.

Non-GAAP net income from continuing operations attributable to our shareholders for the first quarter was renminbi 4.2 billion or U.S. dollar 595 million, representing an increase of 15% quarter over quarter and nearly 26% year over year.

Our non-GAAP diluted earnings per eight yes, some continuing operations were renminbi 32.17, or U.S. dollars 4.5 fall for the first quarter 2000 and punky.

Our cash position remains strong.

As a 31st as of March 31st 2000, Punky, our total cash and cash equivalents current and non current time deposit and short term investments balance totaled renminbi 79.3 billion compared with Renminbi 74.4 billion as of the end of last.

Yeah.

In accordance with our dividend policy. We are pleased to report that our board of directors has approved a dividend of U.S. dollars 1.16 pray D. S. For this quarter. This represents a regular dividend paying stream since 2013.

On February 26, 2020, we announced the board approval for a new share repurchase program for up to 1 billion U.S. dollar has of our outstanding Adss, and we announced an amendment to such program earlier today to increase the total authorized repurchase amount.

From the original 1 billion to 2 billion U.S. dollars.

As of March 31st 2000, Punky, approximately 1.1 billion Ats has been repurchased for total consideration of U.S. dollar 342 million.

Thank you for your attention we would like now to open the call to your questions. Operator. Please go ahead with Q anyway.

Thank you if it would like to ask the question piece by pressing star wind up having for key pet you've had using a speaker phone. This may kill me fanfare and after that you're thinking that the which our equipment for the benefit of all participants on todays call. If you wish to ask your question to management tiny.

It would be your question in English.

That limit that type of today's call piece also lakes wide question. Each time, you can give you more questions. Please rejoin the queue the apostle addressable, but to allow everyone applications with a couple questions.

Well take our first question from July of Alex <unk> from Morgan Stanley.

[noise] like discussion.

[noise] acidic on its own go figure out how to yet.

These are when do you have when you've got going you you always see.

I've seen wouldn't try to are you seeing a trigger should get a young male use you don't see suitable must versatile be russo.

To Sue will Usher and maybe RPG mobile order, so DRC tied to go see Lacy and beautiful occupy you'll see Susan Yossi thought a lot harder.

Say it triggers using courtship holds I sort of go see and saw a young who fought shoes to circle Yomiuri He has seen a cellphone.

Just to do you want it the other one is always a younger it's again a trigger so don't try to figure out Lehigh, though felt when you took a campaign qlogic thoughts on site senior and Joel where you're so must alpha hydro took a margin of sand gotta trees as soon as bad Guy so much stripping Fisher.

I translate my questions. First first question is regarding the lesson learned from covert 19 regarding the game business.

Many just game genres have become very popular during this period no matter it is mobile or shooting games and also casual games.

As well so in terms of user acquisition retention game, John <unk> development strategy do we have some new thoughts new ideas. After this coffee 19 and my second question is regarding the music business topline growth is very strong how should we think about the productive.

Elements and margin trend in 2020, thanks very much.

Thank you Alex.

Yeah, Yeah, yeah yeah.

Right. The agencies, you know look how losses fuel.

You should see these jobs through other youre closer.

Okay, and all that ER cigar Josh.

Hi, good but other than the who undergo.

So going toward Oh, you ship wireless well.

Sure you the ecosystem didn't get Hello.

Hi, why you should that she gives them.

Yeah, Good sure title I go Sue.

Oh, no because I thought that job or your children, but why should I.

So suitable candidate.

Yeah.

Yeah that is why you it.

Well show Wahoo, there she could Tim.

Well, Joe Gorder, lineal Oh wait till go though oh.

Well, well Moqueta, who took up also going to outdoor though.

Overall legal oh by the though.

I'll shoot possible to Chicago, yes, or no real slow.

Right you can get the cold weather.

Hello.

It's important all it couldn't talk.

Good to have that Oh books.

What you're at the time today, what would Wovens, Florida, Google liquidity, we love them.

Ooh Ooh <unk> right.

Got it sounds function.

So again since you've human LIBOR.

I just got other outcomes I like I'll provide a brief translation of Williams remarks.

Firstly on games on during the pandemic, a we have seeing games, becoming a sensor event for family members staying together in house. So they have more time spent together or as a family as a whole to gather joy and exact excitement and.

Some relief from a game as a broad entertainment. It is also a boost to new game users during the.

Hi culture.

These will be obviously translated into our thinking of how to focus more on R&D self development of games that can create a bonding opportunity for family members as a whole going forward for the music and William emphasized in fact reemphasize from he's a prior remarks.

The ambition mission of now these cloud music platform is we want to create a basket environment to support development of China's independent musicians people with pilot, who can express themselves and distribute stem product to a group of music and.

Yes, yes, with passion Wilson with the with the exploration of new diversified.

Different genres of songs and I think for the foreseeable future that is our our chief focus of development. Ah. You also asked about emerging trend I think that as we continue to grow the scale and diversification of our music.

Revenue stream possibilities, we will naturally benefit a lot from economies of scale with the enhancement of margin trend and I think on the margin trend. We are also hi optimistic.

Hope that answers your question Alex.

Okay. Thank you very much.

Well take our next question from at least I got from Citi.

Hello Shake out your line open Pease go ahead.

Okay, Hi, I'm. Thank you money Leland towers, congrats on the reads out thanks for taking my questions. Oh. My question is on your gaming business as many of the company has seen the normalizing trailed off the gamers traffic and activity.

Post Ah you know what does the lockdown lift off how does that trend low paying for Nike schools, and how should we think about the offsetting sac Oh, we feel deferred revenue.

For the second quarter, I know silicon locked out in overseas that might benefit the away from gaming well.

Thank you.

Oh, Okay. Alicia do you want to translate your question a yourself.

Sure.

So you say Glenys Oh wonder when he should you should know that you'll see as usual woman kind not a T hat you sequel sure yet you should it sounds like.

She said uses for that he can that Ah Ah Ah you, a young who doesn't count not wholly osha their dreams aren't dashes say judges sure Frankel frugal food had the that handle KLA <unk> Oh, the traffic T. She gets you laid out because that's how the level. So you just robot he sees it is that a woman.

Got some I've said before.

Before revenue.

Oh Gosh I'm Oh, it took a acute revenue now I O woman here, but you see why didn't you can.

I think it took us to do their short haul odd years ahead, I hopefully you got a genius hopefully it's useful when they accumulate benefit dr. sharply so he or she said.

<unk>.

I'm sorry to go.

So why are you.

You'll you'll know if I'm at either from illnesses.

Uh huh.

So I wouldn't that's Oklahoma, yeah, yeah apartments, or something that compute shield.

Hi, Sheila.

HM.

Sure.

That's helpful Mission that you can better this year should Alex you lose a whole lot fashion.

Sure.

We will wage ago straw today, so oh Hello.

Oh, it wouldn't be so Korea baidu lots of that those are concise again.

Today's young woman has to meet with over five years since you have to go.

She's has that changed.

She is and then it should.

She somebody go.

<unk>.

Sure.

I will provide a brief translation.

Of Williams remarks, so he commented I leash I think your observation is right I remember that is a shot tenant volatility I think across the board as you mentioned other game companies and das might be see how are the William emphasized that the growth engine of Ninetys games.

He is our ability to continuously a long produce in house and launch new game titles as well as our ambition of becoming a mall globalized game company, which more exciting titles launched into an overseas market such as Japan.

And hopefully very soon in the mainstream western market.

We saw that we are not overly concerned about these shop, Tim Volatilities and we are very very optimistic about feet.

The outlook of now these games gross driven by the diversification of new titles as well as diversification of new geographies.

Yeah.

Our next question something like off that study or from tightened in Atlanta Capital Corporation.

Right right the money.

Hi, Good morning, Thanks for taking my question and congratulations on very solid quota or whatever totaling seven she's a adjusted out going T. D. Hi. This is it do you like E T map to combat Hopewell Antamina dialed down if they don't know until a test [laughter] with Honda usually CEO Glenn.

Okay got it 10 days when I think good dialysis Han Yun Kim.

Okay. That's all I use it on your tendon [laughter], where how clearly said to against that but it sounds that sounds home I cannot tell in cases is or how you put up.

Go going they had that them Uh huh that you'll see you can get their holiday deals don't pay Santa domestically, Dallas and Houston Glen Campbell.

I would tell myself. So I have two question that's life regarding the PC games.

So your PC game outperformed the industry. Despite a holiday if a patient often that cafe, which is quite encouraging it would be great. If mention them cashier with us himself out of.

After the <unk> outlook, but that's admin.

And then second wise to guarding Harry Potter. So just wondering if the game if somebody that's still need time to get approval in domestic China market well you decide to wait for that item or will you launches firstly and overseas lesion. Thank you.

Oh, well does that put that out even though.

There's I tell you what are you should see a goal so used to lunch and beyond.

Yeah.

Today's call so good distribution.

Daniel its I chose if I were they owed totals on television.

What was sure she the cool.

Right.

It's sort of just such setting them up how about industry.

Yes, Oh, how do you what are you I believe it or set up with Asia chopped up.

[noise] Kinda talk I went to get up Ah Okay.

Yeah naturally how our translate William's comments for every once in a broader benefits for the Chris This press change and I will answer the patch on Harry Potter.

So firstly Oh, we what we observed if that during the global can damage PCM console games in general has seen a increasing trend as more people are spending time.

Hey at home and or it is not so much.

Correlated to the Internet cafes operation or as you can see from our game result, because our PC games, our legacy titles running for over a decade in in case of after bluejay, we see a record quarter since its fabulous almost 17 years ago and where.

Very confident about the a sustained gross billing popularity of our flagship PC games.

For the time being our main concentration focus of new game development is futures towards mobile games. So so ER launch a new PC games will be opportunistic we do not have a regular agenda like we regularly launch new more.

About games.

So that to your first question second question Harry Potter, we're very excited about Harry Potter It is a strong IP globally.

And we are confident in our R&D ability to convert this high p. into an exciting game title.

I.

I think it's too early to predict about the situation on a regulatory approvals in China and Ah when it comes to the stage when the game is ready for launch a whether we will do a global simultaneous launch or whether we will.

To overseas ER launch first followed by domestic upon the approval both possibilities and we will decide that later when the game it's more advanced.

Got it thank you.

We'll take our next question from <unk>.

Yeah room from Nomura.

Your life.

Uh huh.

Oh, Yes go money management same for taking my questions first of all congratulations on a very solid quota wishing you all insulin or when some of the when he just billion. This other when they didn't want teach out when you saw canola misconduct or when you talk to ensure a woman to eat into that take a yoshi shown in additional let's see how actually something of an uncertain.

Update so now what kind of when do you look like anyone he needed a wanting a woman a 20 million element nvsion made it a little gandria, while he is actually the either penchant to go my some units it sounds to you on him in Nielsen It sounds kinda among kinda, maybe about us all muscle climb out when she.

You know attending a bunch when she only a commendable job.

Yeah, Let me go either Jim will debenture bulk water. So what's the Tumblr and so we felt when it's not just the that'd be the money is I think the the a bench and go multiples I do the job Hi, I'm sure you wake Kinda isn't until you the G actually going way to go home yet and if you then I should go should be largely pay.

Apparently it's also died down you've got Tridien, what's the design. So I have two questions. First question is about notice on Lincoln in business, just wondering how much of a.

That is online gaming revenue was generally what's contributor to buy overseas market. Once you. My second question is about 90, some music business. According to.

Various media reports either seems to me natives music has accelerated the purchase of licensed upon pence things this year, including the recent licensing agreement with a top global record labels as well as the exclusive purchase of some of the hydrated music shows.

I was just wondering why it seems that this means that become more aggressive on content purchase things here.

Thanks, Nick.

I think a they're going to trust me that without might make a why there's a holiday anyway.

Susan.

The other yet.

Shallow first question overseas first quarter, our overseas rave revenue accounted for slightly more than 10% or of our total game revenue consistent with our.

Level of last year, but were very confident to continue to grow and even very strongly to grow this revenue contribution from the overseas or game mock hitting the next three to five years.

Yeah, the when he loved and when you need a bunch and I go to being sourced from Uh Huh.

Hey, Nick.

Total well money well my point, well you easier to sell a cholesterol other young women, so getting to a bit I mean should still too. So go down yes, Paul new they're all quoted by truck bias.

Well my place Howtoons old bunch of our.

Oh watch it shoot coal mine.

Okay. So look like that he or she also give them though.

I'm trying to compete huh.

Well. It is really is like would shoot pendle button Chen.

But once you see your we should go.

Oh really bothered to go back to enjoy.

Ooh that do though well back element.

English as well.

Why even show.

Oh Gee the opposed to other parts of the chair for the call that it was a chair.

What's the though well most days how to handle a new media that's just how do.

Hey, good Linco, you're talking about cap allocation.

Of course will go.

How does that so we'll just have gone to shoot.

You are talking about two though.

Sure.

Oh do go to go shop.

So you usually what I've tried out there that's what you want but you pipeline I can't talk Philadelphia, you should youre going through but you should go says that the though just haven't yet.

Got it.

Well of course each.

So if they go to the sort of it.

Oh, well show that we like.

Boy, Oh, yes, really isn't yet.

Go can job body sheet cut through that totals that.

Well go to yes, Hello, English so I wouldn't call, but she that does on the Darla core this just have dealership.

What's your once you will know well you did did she wants to kinda you though.

Oh, Gee, though while unit size since it because it's just how should you need I saw the Twitch I wish to go to.

Got it like a bulk of course all to go on.

You know shop I should I, usually do that's just how tubular goods, especially what are your body.

Since it.

Oh no provider.

Yeah.

I'll provide a quick translation of Williams remarks, so first of all our dedication to support and promote independent musicians and native I piece I'm not a mutually exclusive with our.

Deep respect and ER and open minded strong collaboration with music label companies in fact in the past or there are obstacles in the industry, preventing us from purchasing music content and music I piece directly from labels.

<unk>.

We are very very active and the in India as collaboration with all these highly regarded label companies in an assets to acquire music eyepiece content copyright and we'll utilize our efficiency.

And our massive use a scale up anatomies called music to distribute their.

Music content to a group of music enthusiast lovers.

And Oh, we also wants to reiterates that we hope that the whole industry in China and all the players in China can spend more focused effort and resources into promoting native IP organic music from independent musicians, because I think it is going to be a much bigger.

Ambition for the entire industry to see the rising of Chinese music Chinese musicians as a whole to play a much bigger role on the global audience on the global stage.

Oh.

Okay. What our next question from the line off at email from Bank of America Mailer Beach.

Good morning.

And so on either win T. Brian you a woman seals see dug into Twoq walk.

He channels, you can see and pulling Tom.

On the end whole each outdoorsy no she couldn't home and she is home to buffet your yep BB shop with heat up call.

So if someone new windows.

10 years, Swanton sewer and beat up body. He doesn't yet yeah thoughts you know she so he can each on gaucher <unk> a bunch of promotion lots of marketing Oh, Okay give me a either either alpha Golodryga horribly game quite good news.

And then take a she's on took on for your dilute the auto.

So my question is about the Neil game launch historically, when we have things like yeah off a lot of bookings to be launched it typically the marketing spending ratio would go up so just wondering what could be the patent is here.

And I went out there with the different ways to promote deal games I think it.

Oh whenever that they're going to go what I do think Oh Gee how that.

Right.

Okay, Yes, Andy Oh, I see it okay. How do your question is on our outlook of marketing expenses.

I want to reemphasize one point.

Now these games a focus as a loss self developed in house developed games.

As such we are always excited about our lineups of new games whenever we consider promoting a new game. It is always a retained driven exercise internally depending on our projections of the games performance and expectations of the gross billing then we allocate a marketing resources Inc.

Very sensible way that is why I seem to in the prior quarters' I also made remarks that trying also look too much into the quarter over quarter fluctuations of marketing spending dollars. In fact, if you look at my marketing.

As a percentage of the overall revenue on the full year trend last year, we control there at around 10% a significant decrease from.

The prior two years, however, absolute dollars, it's not shrinking that is because we are more sensible we're more conscious about the retain generation online marketing dollars with more new game titles, yes, we are going to spend more marketing dollars, but we are even more optimistic that we effect.

Promotion, the new games are going to generate even faster return for us at the top line. So on the financial planning Aspac now these remains prudent and and sensible.

Got that Ah think of terms.

Hey, let's take all next question from July of last new from China Rightness Huh.

So.

You bet.

It's actually running Tyler I will now than he Eagle if you strip, where you wanted to take the.

Since then that you could.

That's for sure.

Nothing too on the Openshift and you know if at all how how a chance attitude or changing the balance it sounds like a whole wet treat our that's usually a dollar tree we called.

Two down the street without leaving.

Sure well go Crazy, we go to ascertain hook, although she gets you haven't seen us anyway.

Ah Ah, Seattle, and future should show or whatever but oh, okay. How if at all quite phenomenal franchise. You mentioned that you didn't jump off probably kind of others, Patrick <unk> PC or.

Mobile game that trigger to yet the should end up with whole should be okay watching.

Monthly myself and my first question is on a cash allocation.

We have very good passion for our core business and I'm also very solid cash balance, but it just wondering or should we think about a enlarged stock repurchase program.

And then perhaps you know a further stock repurchase program as the more occurring a practice down the road.

And the second question is on a deferred revenue deferred revenue balance it looks very strong this quarter and I was wondering if the management or give some color around the world and or whether it's due to the big change between PCM. Okay. Thank you.

I.

And to be in what to do I played out.

Okay. Okay.

Okay.

Okay.

Hi, Alex for your first question I well, our tragedy policy is always very prudent and we are one of the very very few tech companies globally that pays a regular dividends in fact, we've been paying a regular dividend since 2013 and we.

We will continue to do so returning value to our shareholders, especially long term shareholders was being supporting us in the journey of the grows over the last two decade de stock buyback programs is also a regular exercise for a couple of years and when the situation reply.

Yes, and then within our ability we can go back to the board just like this time seeking for their authorization of enhanced dollar amount for the overall a stock buyback. So that is on the that is on the treasury cash management aspect.

For your deferred revenue, we don't further breakdown exactly on the composition, but I think you're right to one if I remember correctly. It is probably another record.

Quarter for both my recognize revenue as well as deferred revenue and again, largely it's underpinned by the gross billing and the gross of both my PC lines as well as mobile lines of games are largely consistent with what you I see in the year over year gross for the.

I recognize revenue.

Yeah I'll also contributed.

Southern extend up cost, but then you can refer to the yourselves or public filings for the deferred revenue incremental caution.

Understood. Thank you very much.

Our next question from done my off Binnie Wong from HSBC.

Hi.

I really am Chuck.

Thank you good money really amtrust okay.

Thank you very sharply turns usually only time you can so still a man Coco Cola should highlight we see that used to kind of thought they took wow nice launch a salary Felicia eco Uh huh.

Joel penetration that you were Oh, so she is how long lunch or should I wasn't a a couple anything you know pipeline launch spatial Harry Potter Diablo la put them on a nice yet because it doesn't I you shake it would seem like it he or she does show. It usually takes every time. She died June I, he or she actually the teacher tradition.

He or she will now wait Compliantly Nadal took about Oh, hi, which has shed a tear sheet ancient Oh, yeah, I should just navigation because it would be outside Oh you can't.

Take him oftentimes Hammer shibani.

Oh I quickly translate myself post the alcoholic Nike do you think that actually changes in terms of how we view our overseas came to expansion plan.

What are the new opportunities you also see a and how can we see our takeaway in the next the five years, how does that change all that we need to see.

In terms of your upcoming game launches I wish one mistake because they have all very highly anticipated I wish I do think that we probably see launches shooting and then in terms of I C. D Askins huh.

I'll start with Ah. Thank you.

Are you going up without the chooses to use up reaching Hello.

Oh the trends you are they go what couldn't do it I travel you thought that job you don't see though you though.

Yeah, Paul should.

Sure the harder shows.

Sure you become dog they tell you my presentation to the accounting.

She gave with didn't huh has simply Libyans huh.

Hi, I wish that should take with kids country.

Sure.

Oh, good brought them and we got a judicial because well oh that value true yeah.

Digital who don't know ULA Hum.

Well, there that you're doing really sure a little youre sure I'm too.

Two girls are truly to where they want to talk about your own which would you like Hulu she.

Hi, why the Jewish.

Lucia <unk> Ah that yet you enjoy because everybody Adobe is the house just propofol, that's usually little or.

No you go through a walk along or do you go watch element to negotiate set out to be shopko kept out of course is she she would you would have thought they put on the she though treaty.

Oh, how did you guys users or we're really.

A woman who walk into their she's interested call.

Good to.

No way that additional Geo ship quota for the shot you dialed into the who do a function.

Do they do you have got him that they're going to Oh.

How about.

Tissue.

Uh huh.

<unk>.

Oh.

Well on anything else I use that Ah I will provide a brief translation of Williams remarks, so firstly called a pandemic situation globally with a back our thinking of getting promotions, particularly in the overseas market Williams comment is that deep generally speaking the pin down.

Issue with pious people to spend more time Inc.'s house. So it is a structural tailwind for overall activities that happened at whole playing video games watching drama et cetera.

And that we think is going to also benefit thing in our game promotions. Because this content is having a mall user time, so to speak on a global scale and we are not particularly concerned about the pandemic situation.

Disrupting our plan our original plan of game launches, especially for these a mature overseas my Kid users out more attracted and emphasizing a lot game quality I think that is our biggest selling point. It is the quantity up in that east.

Games and second you asked on the approval process and our expectation on the overseas games, it's really difficult for us to do a false ranking which one is number one which one is number two because for all these projects since the inception of of the project business.

Planning.

We think they are all great products, representing highest quality in their respective genre to a hockey.

To a very different segment of Hoggatt uses so we are very excited some of the games can be launched as early as the middle of this year and some might have to wait until the second half later parts of this year and William a a job. It's also a closing.

<unk> that he himself personally threw out and given the pandemic situation. He is actually being thinking I, giving a lot of more thoughts in terms of in terms of how game content can be designed and developed and how game content can be.

Distribute it to fuel a battery social responsibility and talent to families to people around the globe.

Thank you. Thank you William interest that's very helpful.

Well take our next question from don't lay off PAMA song from Jeffery.

Your life about fiscal high.

Hi, Good morning sends me down Charles.

The question a question back with a music business I'm getting to Fracs that.

I'll be happy in Oh, the monetizing that like streaming business models.

Can you comment about how we should think about the competition like screaming space as well, but but competition.

For me deal.

Sure be them trials and my but just how would it he went oh.

Yes, so what you saw Joe's true woman, I'd say, but more than a jupin sandal father since.

Hi, good buttons on the good yeah, Ohio, seeping that you've got competition.

That's it.

Oh.

Take a what's your that supports what we did sell its also but what's the way you that users.

Oh, what trends you always have easier for me the picture there with the Julie to go quickly.

Sure so until the order book and ship, which as you all equally probably all tool.

You too but hold up.

Oh, sorry, a more centralized well just so you got this yet that will wait out to the prime country, but do they just as you see sure cool weather system placement.

Well Michel to a halt why you get to just since about over the years hardly at all.

Oh and outdoor that you'll go upping, though to the chances you did make or John make an injury, which I thought you attribute to the today.

Oh, Hey, what.

Just to go.

Hi, warm and I'm going to probably a teacher to other sure.

Sure button trim or would you feel a little bit.

True gold I couldn't bunch I wish it up another one that she was here.

Yes, it's yet to.

<unk>.

Nor does it get back on track.

But you seem to that got sold.

She got Dragon.

Hey, what have you don't see.

Uh huh.

There's a.

So you didn't feel at this year, because there isn't cheap choose your woman that you will see.

Ah somebody wishes the freed up I can basically the sorry emotion said that the transit I sure those are some horrible.

She has done like what is your goals has this issue.

So don't Philida, Adam Beatty virtuous cycle.

Well certainly minutes ago give away rather do that you're going to jump in Shaanxi, sorry, just a little more says you see that you've gotta catch it.

Okay.

Around you know lifestyle.

Mm.

How about 10 type element Kunesh again, Penske well I mean part comes on you saw that Calpine.

So in the interests of time I'll provide a brief translation of Williams remarks, just now so broadcasting is just one way of us thinking how we can monetize.

Our now these cloud and music platform it is not.

The only way and we're.

Continue to explore different and innovative and diversified ways of monetization in a sensible and use the appealing way and but the absence of us Egypt, the biggest ambition and the mission of us doing the plan.

That is called music platform is that he wants to contribute whenever we can within our ability to help promote and that's saying homes D. Chinese music industry as a whole if my to look very different from mature market in the western world, but we think.

Ah Chinese.

Music My Kid is huge with huge upside potential and or add to it could or allow multiple players to develop its respective differentiated competitiveness advantage and Anj Singh collectively, making chinas online music industry.

Back to and and the more promising industry.

Thank you.

Due to tight limits that Congress today's question and answer session. At this time I would tend to conference back to my question for any additional closing remarks.

Thank you once again for joining us today, if you have any further questions. Please feel free to come to us that Randy will ticketing regulations have a great. Thank you.

Oh, okay.

Okay.

Thank you everyone.

Oh, that's today's conference and we like where their participation you may now disconnect.

[music].

[music].

[music].

Good day and welcome to <unk>, it's called <unk>.

This conference call today's topic.

I would like to.

Mike So.

<unk> is please go ahead.

Thank you operator. Please note the discussion today will contain forward looking statements relating to future performance the company.

Tended to quantify that they pop up and reliability I just got blessed by the U.S. Private Securities Litigation Reform Act.

I look I went to eat a future performance and that's subject you suddenly with no such as he assumptions and other factors.

Some of these rigs appeal companies control.

Actual results could differ materially from those mentioning todays press release and this discussion.

No just go shop, the risk factors that could affect that you can say business and financial result, it's included it doesn't look bought into the company with the Securities Exchange Commission, including I never thought Oh form 20-F, the company's does not undertake.

Publication update 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 definition of Nongaap financial measures and a reconciliation of GAAP to non-GAAP financial results. Please see the 12 Twentytwenty fourth quarter earnings news release.

Issued earlier today.

I think we're buying good this conference is being it being recorded in addition, they let the presentation and a webcast replay of this coking coal will be available on net corporate website at <unk> Dot com.

Joining us today I'm a calls on that is a senior management it missed or would emptying chief Executive Officer, Mr. choppy, all Chief Financial Officer, I noted that he'll go quite coke, but then doesn't that these games I will now turn the call over to child, who agreed to prepared remarks on behalf of William.

Thank you migrate and thank you everyone for participating on today's call before we begin I would like to remind everyone that all percentage is based on renminbi.

Like every company around the globe, we stopped yeah, we saw a great deal of uncertainty among one of the world's worst health crisis.

I am pleased to say that we have worked very hard to address the effects of the pin dynamic providing health, where we can and making the appropriate adjustments to our businesses to ensure the safety of I wouldn't that east family.

We believe many companies inside and outside of China will overcome this can dynamic and come out stronger.

We had a good quanta, increasing our net revenues by 80% to Renminbi 17.1 billion and our net income from continuing operations attributes of both to our shareholders was up by 30% to Renminbi 3.6 billion, both on a year over year basis.

Well I'll online games net revenues reached Renminbi 13.5 billion in the first quarter on the back of our existing title Astana performances growing 14% year over year, even though why Q2 thousand 19 was itself a very strong quarter for our game services.

Yeah go.

Our legacy PC tyco's, such as the fantasy westward journey and new westward journey online to continued strong performances in the first Waukesha WIS new expansion packs launched for the Chinese new year holidays, introducing a series of new content.

Hopefully revenues for these gains broke new record keeping another all time high seeing stepped that huge almost two decades ago.

Momentum for legacy Mobile games was also strong as we continued to supply dislodging sustainable user base. We just couldn't can your content updates.

Take a fantasy westward journey mobile game as an example, where we introduced a brand new character, which quickly gained popularity and was a strong driver for gross billings.

While we continue to dominate the most genre. Many of our recent titles in categories that are relatively new for US have also shown remarkable both success and sustainability.

Providing us with steady revenue streams in what is now very diverse game portfolio.

Visible Ami Oh, Gee I think at this time and life posture launched in 2015, 16, 18, and 18, respectively. So that's good examples of our superior game longevity, we've been different game genres.

Things of all our 2015 launch hit another.

Record quarter high gross billing and active users.

We are pleased to see the games strong traction in the S algae market.

After more than five years of successful operations within baseball, we have accumulated the solid SLG fan base and extensive expertise in this field, we look forward to developing more innovative games to delight, our users in DC engaging and thought provoking genre.

Ami LG continues to show remarkable longevity as we consistently introduced new characters. These additions are resonating well with new game players further solidifying the reach of Onmyoji as a leading hcg game.

At the first of our younger the IP. So we have created in house our goals Armijo GE is to have an even larger and deeper impact on the vibrant community of young users.

In addition to Onmyoji the cost game the clock to bulk Hocking, we launched last year and the upcoming simulation game Ami Oh Gee Yokoyama planned for later this year, we have more exciting new games install based on the only LG IP.

It's it's a day this evening Beijing time at our May plan Keith game Day event, we will introduced two new Onmyoji spinoff games in brand new genres.

Launched in 2018 identity five unlike posture also a few of our newer typos, attracting a large base of young fans and starting to demonstrate sustains longevity.

Breaking its second Anniversarying April we the theories of content updates identified reached a milestone up 200 million registered users.

Attracting players, we've it's characteristic odd style and innovative game slate.

With life to thinks its initial phase of stabilization gross billings has been picking up steadily over the past few months asked we launched a couple of highly popular expansion packs, introducing a series of new themes and innovative gameplay.

We believe that life off two will be another one of our titles that resonates with fangs for many years to calm.

In terms of new titles fantasy westward journey three D. was launched at the end of 2019 and delivered a stable performance in the first quarter further expanding the reach of the asked capital J. French highs as a whole I'm captivating, both returning fans as well as a new audience in.

April we launched on the volumes in China previously known as age Ohio.

As our new with memo RPG, featuring sandbox game play the game tops the iOS apps downloads child soon after its launch and was featured by the iOS App stall.

In overseas markets, we continue to gain market share in Japan.

Knives out and identity five remain at the forefront of Japan's top grossing games chops and the use a basis for both games are growing at a strong paid.

The success of these games has helped us to gain a much better understanding of Japanese users and their preferences, allowing us to bat to tailor our games for the Japanese market.

We have integrated the success, we experienced and know how into the design of other now these games enhancing our ability to deliver popular titles to global audience.

At the end of 2019, we began operating invincible in Japan ourselves with our proficiency in operating this game domestically along with our newly acquired understanding of Japanese user preferences. We saw steady increase in drinks are both revenues in the first call.

Okay.

Now turning to our game pipeline.

Many of the games on the development has the potential to achieve mass audience appeal, transcending geography, geography, and spanning multiple genres. We have a number of these exciting new releases planned for 2000, Punky, which we expect to help us getting more brand recognition in the broad.

Other global markets, particularly in the U.S. and European market.

As announced two days ago TV at Kohl's is ready for global launch in August.

Additionally, other exciting upcoming titles include fantasy westward journey H five version King of Hunters P. S class managers.

Oh, Gee Yo Kai co young.

Ghosts World Chronicle revelation mobile game.

Harry Potter Magic awaken.

The Abelow immortal Tocumen craft and Malvo tool.

Now for our education business Yodles stopped as the year on a strong note with healthy gains across many of its primary financial metrics.

Total net revenues accelerated 540% year over year to renminbi 541 million.

And operating cash flow turned positive for the first time.

We are seeing on increasing adoption rate of online education due in large part to the structural effects of the pen damage.

Online courses generated gross billions of Reminbi 519 million up 287% year over year.

Primarily due to continued enhancements to our cost content and product.

To match the needs of newly enrolled students during the pandemic youre down quickly developed and refined new product.

Helping students receive the most effective teaching online.

Especially for those taking entrance exam this year.

In language the growing enrollments, we carefully crafted a few more products, including junior High School Matt.

Hi School English courses, which received wide popularity.

We also expanded our education team to over 1000, ending structures and teaching assistants, who are well trained and incentivized to give our students the most payload and personal support they need.

During the quarter, we further enhanced our technology offering with the launch of AI assay assessment in our Dictionary Act a feature that automatically grades and offers suggestions to improve English writing.

Going forward Yoda, we'll continue to build up it's largely scalable business model and provide users with effective educational experiences in powered by great content and technology.

Well our cloud music business. We are also growing I'm proud to have celebrated that is cloud musics seventh anniversary in April.

Revenue from our cloud music platform continue to accelerate with high speed, achieving triple digit growth year over year in the first quarter and record high membership revenue.

Live streaming revenue is also growing at a rapid pace.

In the first quarter, we released several online live event, that's what that's what particular leave appointment during the pandemic outbreak and helps to support our independent musician and their ability to distribute.

These include the bathroom live music festival washing their tier well well known musicians performed at home buyer live streaming and being the line in the life a high quality broadcast of independent grant.

Ben to live shows.

While we maintain a competitive averaging our regional music with now over 160000 independent musicians on our platform. We are also looking to provide music from all over the globe to expand our music library.

In March we added popular Japanese music to our platform through our distribution agreement with studio Ghibli, one of the most acclaimed animation studios in the world.

Further adding to our CAD log of songs, we recently signed a strategic partners the chip with rock record one of the largest record labels in China.

All with all as with all of our businesses innovation is key.

Along these lines our music platforms largest progression includes a newly launched karaoke offering for our young people. Moving ahead, we will continue to make sense about investments in content and innovation to remain relevant and competitive and exciting load of music.

Turning our focus so yes.

After a shot for years, we have developed a distinct and recognizable brand with a number of notable self developed products that appeal to a wide range of consumers.

In particular yen chat has made a name for itself with distinctive offerings in housing personal care and food categories.

During the first quarter, we upgraded our membership offering to approach membership to include more benefit.

Attracting a considerable new constituency.

New memberships rose by 138% year over year owning to our innovative marketing approaches such as collaborating with top live streaming celebrities.

Meanwhile, our inventory has been managed to a healthy level as we continuously optimize our procurement and reduced obsolete inventory.

Overall, we had a strong starts to 2020.

Our primary business lines grew during the first quarter and we're pleased to have advanced our mission to bring inspiring leading products and services to our growing community of followers.

We will press forward as we have down for the past two decades with our eyes on the long term and plans to rich incremental gains along the way.

This concludes Williams prepared remarks, I will now provide a brief review of our 2000 Plenti first quarter financial results given the limited time on todays call I will be presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today.

For further details.

Total net revenues for the first quarter, where renminbi 17.1 billion or U.S. dollar 2.4 billion, representing 18% increase year over year.

Net revenue from online game services, where renminbi 13.5 billion up 14% year over year. This increase was primarily driven by the strong performance of our flagship titles in FWJ franchises, new westward journey to as well as blizzards world of Warcraft.

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

Net revenues from Yodle also increased hundred 40% year over year in the first quarter, reaching renminbi 541 million, primarily due to increased net revenues from online courses with a rapid increase in K 12 paid enrollment and sales of intelligence learned.

Devices.

Net revenues from innovative businesses and others were renminbi 3 billion for the first quarter up 28% year over year, mainly due to increased contribution from that is clouds music NCC live streaming.

Overall gross margin was 55% in the first quarter GP margin for our online game services for the first quarter was 64.1%.

Our gross margin for online games is generally stable fluctuate from quarter to quarter within a narrow band with based on the revenue mix of mobile and PC as well as self develop and licensed games.

Those gross margin expanded sharply to 43.5% answers Potter a vast improvement from 29.8 in the last quarter. This was primarily driven by the achievement of economies of scale and that'll start cookie compensation structure.

Gross margin for innovative businesses and others for the first quarter was 15.8% up from 5.7% year over year. The improvement comes primarily from significantly increased revenue from our Navvis cloud music business.

For the first quarter total operating expenses were renminbi 4.9 billion, our selling and marketing expenses as a percentage of net revenue was 10.9% compared with 13.7% in the prior quarter.

The quarter over quarter decrease was a result of less spending in online game promotion and cloud music during this quarter.

R&D expenses were renminbi 2.1 billion up 5% year over year.

We remain committed to investing innovative content creation and product development, which is watts defining us as a technology company.

Effective tax rate was 22% for the first part to relatively flat with the prior period and down from 31% in the first quarter of 2019.

Non-GAAP net income from continuing operations attributable to our shareholders for the first quarter was renminbi 4.2 billion or U.S. dollar 595 million, representing an increase of 15% quarter over quarter and nearly 26% year over year.

Our non-GAAP diluted earnings per eight yes, some continuing operations were renminbi 32.17, our US dollars 4.5 for for the first quarter 2000 punky.

Our cash position remains strong.

As of 31st as of March 31st 2000, Punky, our total cash and cash equivalents current and non current time deposits and short term investments balance totaled renminbi 79.3 billion compared with RMB 74.4 billion as of the end of last.

Yes.

In accordance with our dividend policy. We are pleased to report that our board of directors has approved a dividend of US dollars 1.16 per ABS for this quarter. This represents a regular dividend paying stream since 2013.

On February 26, 2020, we announced the board approval for a new share repurchase program for up to 1 billion U.S. dollar is of our outstanding Adss, and we announced an amendment to such program earlier today to increase the total authorized repurchase amount.

From the original 1 billion to 2 billion in us dollars.

As of March 31st 2000, Punky, approximately 1.1 billion Ats has been repurchased for a total consideration of U.S. dollar 342 million.

Thank you for your attention we would like now to open the call to your questions. Operator. Please go ahead with Q anyway.

Thank you if it would like to asset classes piece by pressing star like I've had different key Pat if you're using a speaker phone is material meal fanfare and after that you'll see that the with equipment for the benefit of all participants on today's call. If you wish to ask your question to management in Chinese.

Ill repeat your question in English due to that they meet that type of today's call. It also waste why question. Each time you guys. If you have more questions. Please rejoin the queue. The apostle adjustable bed to live what Apple activity to pick up a question.

We would take our first question from July of Alex <unk> from Morgan Stanley.

Right, Okay Dutch auction.

Terrific on its own coffee figure out how to yet.

When do you have when you've got quite a few you always see.

England, Turkey.

In Turkish again.

Oh, yes, if you don't see suitable must receive Darby Russo.

So soon we'll learn to enable RPG mobile order, so DRC, Todd dosing Lacy and be able to occupy you'll see Susan Yossi thought a lot harder.

Say it triggered using virtusa holds I sort of go see I saw you want to halt shoes to circle your mail you've seen us alpha.

Just a few NTT I'm going to show any shop, Ginger Tobin trigger so don't John I should affect our Lehigh though.

Got one is such a good canteen qlogic five John sorry, senior and Joel So much Alpha Hydro took a margin ascent attrition that guy similar shipping.

Yeah.

Translate my questions first first question is regarding.

The lessons learned from covert 19.

Regarding the game business.

Manage game genres have become very popular during this period no matter it is mobile or shooting games and also casual games.

As well so in terms of user acquisition retention game genres development strategy do we have some new thoughts new ideas. After this coffee 19, and my second question is regarding the music business.

Topline growth is very strong how should we think about the product development and margin trend in 2020, thanks very much.

Thank you Alex.

Yes, yes, yes.

Yes.

Say that agents using our local losses for.

You should assume it's Josh.

Both.

Okay and all that.

John.

Good.

The guy who undergo.

So going door the.

You should quite as well.

Sure you the ecosystem Debbie Hello.

Oh I you should this is a bit.

Yeah good.

Hi, it'll go Sue.

Oh I.

That does that job or your children, but that should Uh huh.

So it will come about.

Yeah that is why do it.

Well, Joe Wahoo here, how should we Tim.

Well, so gorda duty lit up who will go into a new Oh.

Well, well located goodwill coupled to come to outdoor though.

Overall legal.

That sounds shoot particles in Chicago.

Yes, I know what slow.

Right you can get the target.

On Hawaii.

Oh, two clubs and all I can talk.

Good to have that.

[music].

What you're at the time today, what would Wovens, Florida, Google liquidity Lager.

We want blue coat will mature.

Sorry.

Okay Institute you leave.

I just got all that out.

Our goal I like our provide a brief translation of Williams remarks.

Firstly on game so during the pandemic we have.

Seeing games, becoming a sense event for family members staying together in house. So they have more time spent together.

As a family as a whole together joy and excess excitement and some relief from a game as a broad entertainment. It is also a boost to new game users during the.

Last quarter.

These will be obviously translated into our thinking of how to focus more on R&D self development of games that can create a bonding opportunity for family members as a whole going forward for the music and William emphasizing fact reemphasize from his prior remarks.

The ambition the mission of Ninetys cloud music platform is we want to create a basket environment to support the abandonment of China's independent musicians people with pilot, who can express themselves and distribute their product to a group of music and she.

Yes, with passion Wilson with the with the exploration of the new diversified.

Different genres of songs and I think for the foreseeable future that is.

Our our chief focus of development.

You also asked about margin trend I think that's as we continue to grow the scale and diversification of our music.

Revenue stream possibilities will naturally benefit a lot from economies of scale with the enhancement of margin trend and I think on the margin trend. We are also I'm optimistic.

I hope that answers your question Alex.

Thank you very much.

We will take our next question from.

Yes from sufficient.

Yeah.

Hello Shake out.

Please go ahead.

Hi, Thank you.

Good morning medium and towers congrats on the reads out thanks for taking my questions.

My question on your gaming business as many of the company has seen the normalizing trained.

The gamers traffic activity post Ah you know the lockdown lift off how does that trend looking for Nike School and how should we think about the offsetting factors, we flipped defer revenue for the second quarter and also deadlock mountain overseas that might benefit the always seeking.

Well.

Thank you.

Okay. Elisha do you want to translate your question or yourself.

Sure.

So you take Juanita all weather when he said you should note the you'll see Jerusalem, Palo Alto Tiet, how you see gaucher, yet you shouldn't.

Good she should uses for that.

In the Uh huh.

Youre right.

The whole usually the transaction is say judges Frankel frugal food had the that handle KLA <unk> Oh, the traffic Tc issue.

Then the level so usual line you'll see.

That I want to most certainly ellman before revenue visible gold rush out with Elmo dollar took a Q, though I took a revenue now.

Uh huh.

Hi lie that you can compete.

Hi, good.

Hello.

Highlights before we got a genius, you're hoping to fall on the acute benefit Dod yourself, so I see here.

I'm sorry to go.

So why are you.

You know that lymphoma do the palm illnesses.

Uh huh.

So you got to Oklahoma.

Yeah, the probably answers on the computer shill, where that's going to hurt you.

HM.

Sure.

That's helpful Machine that you can better this year should Alex you lose the Halifax.

Sure.

We took a strong today, so oh hello.

Oh it wouldn't you so Craig you lot television dice Jim.

Touching yamana has.

Between Fulghum Fibres since June two though.

She has that changed.

And then go system and.

He will.

Sure.

Yeah.

I will provide a brief translation.

Of Williams remarks, so he commented I wish I think your observation is right I, rather that is a shotgun volatility I think across the board as you mentioned other game companies and das might be seeing how are the William emphasize that the growth engine of Ninetys gains.

He is our ability to continuously a long produce in house and launch new game titles as well as our ambition of becoming a mall globalized game company with more exciting titles launched in two overseas market such as Japan.

And hopefully very soon in the mainstream western market.

These are that we are not overly concerned about these shop, Tim Volatilities and we are very very optimistic about the.

The outlook of now these games gross driven by the diversification of new titles as well as diversification of new geographies.

Good.

Our next question comes on line of that study or from China in dimension a capital Corporation.

Michael Hi, demanding.

Hi, Good morning, Thanks for taking my question and congratulations on very solid quota.

Well, Joe Jolson, Sabbah, She's a delta downs on key ego Hi, this is.

Thematic battleground Antamina diode, Jonathan until were tested with Honda, usually seen yogurt canteen Clarington day, when I think good dialysis Tony has been in Ohio, Okay. That's all I can use it on your attendance.

Well I have clearly said to you on Saturday sounds that dish until now.

The other Cowen cases is or how do you put up.

Go going they had that them Uh Huh, Daniel you think about how they deal with Genentech Shana diminish that LFN has done Glen Campbell.

I would tell myself, so I have two questions firstly regarding the PC games.

PC game outperformed industry. Despite a hospital outpatient medical fake which is quite encouraging would be great. If mentioned them cashier, Lisa some thoughts about the of the future outlook, but that said man and a second one is still guarding Holly polota.

Just wondering if the game is ratty, that's still need time to get approval in domestic China market well you decide to wait for that item or will you launches firstly and overseas Legion. Thank you.

So what does it goes I got even though.

There's I tell you what are you should see a goal so used to lunch and beyond.

Yeah.

To the console game continues.

Daniel its I chose as you're probably Oh totals.

Vision.

What was source you the go up.

Got it to the sort of just such several will probably the street.

The other Oh, how do you what are you I believe it's a set up with Asia Chopra.

Hi, I'm going to get up Ah Okay.

Yeah naturally how our translate William's comments for every once in a broader benefits for the Chris This press channel and our onset of patch on Harry Potter.

So firstly, we what we observed if that during the global can damage PCM console games in general has seen increasing trend as more people are spending time.

Hey at home and or it is not so much.

Correlated to the Internet cafes arbitration or as you can see from our game result, because our PC games, our legacy titles running for over a decade in in case of after bluejay, we see a record quarter since its bad viewed almost 17 years ago and.

Thats very confident about the sustained gross billing popularity of our flagship PC games.

For the time being our main concentration focus of new game development is futures towards mobile games. So so ER launch of new PC games will be opportunistic we do not have a regular agenda like we regularly launch new mode.

While games so that to your first question second question Harry Potter, we're very excited about Harry Potter It is a strong IP globally.

And we are confident in our R&D ability to convert this high p. into an exciting game title.

I.

I think it's too early to predict abbas be situation on a regulatory approvals in China and when it comes to the stage when the game is ready for launch a whether we will do a global simultaneous launch or whether we will do overseas ER launch first followed by domestic ups.

On the approval both possibilities and we will decide that later when the game it's more advanced.

Got it thank you.

Well take our next question from.

Jeremy from Nomura.

Your line open pits okay.

Oh, Yes go money management same for taking my questions first of all congratulations on a very solid quarter wishing you all insulin waned a little when he Justin and I saw that when the deal when teach out Lisa canola, Mysql oil, which on the wage pressure.

Linda you didn't do that uptick yoshi shown in additional let's see how I should comment them unknown threats in update so I went down one disclaim any one he did a onetime woman.

The only now you know among countries in may to the other gandria, while he is actually the either bunch in Tacoma is I'm units it sounds to be one in meeting the town panel, Montana, maybe about a four month will climb out Glenn sure attending debenture, yet we're committed to data it legal even a Jim.

Debenture bulk water. So was it sounds Lauren silvernail wage I, just I'm trying to figure out why he is I think the the a bench and go multiples are going to jump quite.

Sure you wake and all these years until I get a geographic one way to the hung it as an inpatient well she actually pay.

Well it goes without you are digesting, what's the design. So I have two questions. First question is about net is on Lincoln and business just wondering how much of a.

That is online gaming rather than it was general was contributed by overseas market. One Q. My second question is about near to the music business. According to.

Various media reports either seems to me net is music has accelerated the purchase of licensed upon pence things this year, including the recent licensing agreement with top global record labels as well as the exclusive purchase of some of the hydrated music.

Yes, I was just wondering why it seems notice means that become more aggressive on tomtom purchase things here.

Thanks, Nick.

Are you going to try to get up without bye bye.

How long it anyway.

Yes, just like.

Oh, yes.

Hello, My first question overseas first quarter, our oldest these rave revenue accounted for slightly more than 10% or of our total game revenue consistent with our.

And level of last year, but we're very confident to continue to grow and even very strongly to grow this revenue contribution from the overseas.

Mark hitting the next three to five years.

Yeah, the when he loved and probably the only a bunch and I go to being sourced from Uh Huh.

Hey, Nick.

Got it all women well that's why you either she was all got lots for the young women. So again to operate how it should still too so good news.

New they're all quoted by truck bias.

I'm, a pretty thompsons old bunch of again.

A watershed shoot coal mine.

Okay. So looks like he or she also give them into a bunch of countries.

Well, there's this really is like would shoot pendle.

On Chen bombarded wouldn't you see your we should go through.

Little Darla, though.

Sure enjoy.

Ooh that do though well back element.

It was as well.

Why you didn't show.

Oh, Gee that sort of lots of its here for the call about him it was a mature.

Well sure well most pays hunters until a new that it's just how do.

I think a little could you talk much about like teaching.

Good to go.

How about that so we'll just have gone to shoot.

You are talking about to go.

Sure.

Oh, you got to go shop.

So usually watch how guy this is really warm and new pipeline I can't talk Chili's. We are you sure youre going to use your goal says that the though just haven't yet.

Got it.

Core teach.

Just to go to the sort of it.

Thank you all that we like.

Good how are you is really isn't yet.

Looking job body sheet cut through that towards that.

Don't go to Yeah, I'm told you. This Oh, we'll circle back and see that there's a lot, but not for the systems dealership.

Why don't you will know well you did did show on the Kinda you got.

Two though why do you live I should just because it's just that should you need a patient on the Trish.

What's the golf.

Absolutely I thought because all the though.

Well shop I should I, usually do that's just how tubular goods, especially what are your body.

Since it.

Oh no provider.

[music].

I'll provide a quick translation of Williams remarks, so first of all our dedication to support and promote independent musicians and native eyepiece are not a mutually exclusive with our.

Deep respect and ER and open minded strong collaboration with music label companies in fact in the past or there are obstacles facing the industry, preventing us from purchasing music content and music I piece directly from label.

We are very very active and being in India as collaboration with all these highly regarded levo companies in an access to acquire music eyepiece content copyright and we'll utilize our efficient.

C and our massive user scale up and that is called music to distribute their.

Music content to a group of music enthusiasts lovers.

And Oh, we also wants to reiterate that we hope that the whole industry in China and all the players in China can spend more focus efforts in resources into promoting JT of IP organic music from independent musicians, because I think it is going to be a much bigger.

Ambition for the entire industry to see the rising of Chinese music Chinese musicians as a whole to play a much bigger role on the global audience on the global stage.

Oh.

Okay, what to our next question from the line off at email from Bank of America Merrill Lynch.

Good morning, Johnson and someone either win T. Glenn you a woman seals seed a year or two qual.

You can look tons in.

Tom.

On the end whole each outdoorsy no she couldn't home and she is home to buffet your yep TV shop with heat up call.

Someone new windows.

10 years Swanton, So maybe talk about either the until the outsourcing. She so he can each on gaucher.

Until promotion marketing Oh, Okay give me a he does seem to alpha Golodryga was really quite good news.

And then take a shift from took on for your dilute the auto.

My question is about the Neil game launch historically, when we have things like yeah off a lot appeal games to be launched at typically the marketing spending ratio would go up so just wondering what could be the patent is here.

And I went out there would be different ways to promote deal games I think it.

Oh whenever that is all logical what I do think Oh Gee how that.

Right.

Okay, I'm, sorry, yes, I'd Ah youre asking it okay. How do your question is on our outlook of marketing expenses I I wants to reemphasize one point.

Now these games our focus is a loss self developed in house developed games.

As such we are always excited about our lineups of new games whenever we consider promoting a new game. It is always a retained driven exercise internally depending on our projections of the games performance and expect patients up the gross billion then we allocate a marketing resources.

In the very sensible way that is why I seem to in the prior quarters' I also made remarks that trying also look too much into the quarter over quarter fluctuations of the marketing spending dollars. In fact, if you look at my marketing dollars as a percentage of the overall revenue.

On a full year trend or last year, we control did at around 10% a significant decrease from.

The prior two years, however, absolute dollars, it's not shrinking that is because we are more festival. We are more cautious about to retain generation amide marketing dollars with more new game titles, yes, we are going to spend more marketing dollars, but we are even more optimistic that we effect.

Promotion, the new games are going to generate even faster return for us at the top line. So on the financial planning Aspac Nobody's remains prudent and and sensible.

Got to think of terms.

We will take all next question from the line of Alex Neal from China right now.

The light.

You bet.

As they say about in Colorado.

You should play woman to take the.

Since then that you could.

Sure sure.

No.

Pensions and you know if at all hot real how a chance attitude or changing the balance it found that.

Without limiting allergy we thought.

She down industrial without doing.

The Kishore, although clearly we've got to answer to your whole Carlos you get some choppiness anyway.

Oh, Yeah, one teacher should show, which are quite a.

Capital going Solomonoff inside shot you mentioned, if you can jump off.

Touching a whole PC or the mobile game that trigger theindustry agenda poultry. What's your question I'll translate myself and my first question is on a cash allocation.

We have very good for our core business and I'm also very solid cash balance that's just wondering or should we think about the enlarge the stock repurchase program.

And perhaps you know a further stock repurchase program as the more occurring.

Practice down the road.

The second question is on a deferred revenue deferred revenue balance of us very strong this quarter and I was wondering if the management or give some color around the world and or whether it's due to the big change between TCM. Okay. Thank you.

Yes.

Rob and to be in what is your life way not.

Okay. Okay.

Okay.

Okay.

Hi, Alex for your first question, our our Treasurer policy is always very prudent.

Hey, we're one of the very very few tech companies globally that pays a regular dividends in fact, we've been paying a regular dividend since 2013, and we Oh, we will continue to do so returning value to our shareholders, especially long term shareholders.

Spring supporting us in the journey of the grows over the last two decade de stock buyback programs is also a regular exercise for a couple of years and when the situation reply is and then within our ability. We can go back to the board just like this time.

Looking for their authorization of enhanced dollar amount for the overall stock buyback. So that is on the that is on the treasury cash management aspect for your deferred revenue. We don't further breakdown exactly on the composition, but I think.

You're right to one if I remember correctly it is probably another record.

Quarter for both my recognized revenue as well its deferred revenue and again largely is underpinned by the gross billing and the growth of both my P.C. lines as well as mobile lines of games.

Largely consistent with what you I see in the year over year gross.

For the recognize revenue.

Yeah I'll also contributed.

So then extend up cost, but then you can refer to the Youre dolls are public filings for the deferred revenue incremental caution.

Understood. Thank you very much.

Our next question from done my off Binnie Wong from HSBC.

Hi.

In China.

Thank you good money really amtrust, okay sounds very sharply turns usually you only 22, so still a man Coco Cola should highlight she they used to kind of Oh. They took one iota nice launch it sounds like you can you go down.

John and I understand that you were Oh Gee, if someone wants your she's Taiwan, Linda I'll cover anything you know pipeline launch spatial Harry Potter Diablo La hook them on a nice you need to it and I. Appreciate your machine waited till she those shows just how should I say touchy died.

Your next he or she actually the teacher judicious Ichi shit, well now where can I ask me Nadal took about Oh, I owe to shed a tear sheet ancient Oh, My God I should just and I realize you said there would be outside of course, you are taking one oftentimes hammer shibani.

I'll quickly translate myself post the Alkyls at Nike do you think that actually changes in terms of how we view our office. He came to expansion plan what are the new opportunities you also see a and how do we see our talk at in the next the five years, how does that change all that remain the same.

And then in terms of your upcoming game launches a wish one mistake because they are all very highly anticipated I wish when do you think that are we publish Lucy.

Launches shooting and then in terms of C D.

If kids all Oh, so thank you.

Are you going up with Abbott chooses to use up into the holiday.

Oh the trends here.

Welcome to it I travel all geared towards that Saudi don't do that.

She M posture.

The other shows.

Sure you become dog that value my presentation to the accounting.

Thanks, Jay who didn't huh.

Absolutely yes.

I don't.

Hi, I wish that Suzanne Karpick country.

You guys just for a couldn't toward them is a good idea. So question well Oh that galley too yeah, [laughter] digital who don't know ULA Uh huh.

But there that you do what lies shore.

Well Neal Youre today should hunting.

Got you got to not only to where they look without body Rome, Georgia Tech how do you see a high latitude.

Lucia groups.

That yet you Angelakas shabaniyah doorways directional Pampa, that's usually will walk.

No you got going up I walked along a figure out what's your element to negotiate that out to be shopko have had of course is a here. She would have thought they put on the she's on treaty.

Oh, how did you guys residual literally.

A woman who I can do this is interest to call.

Good.

No way that initial Geo ship weather for the shot you divested who the function.

Do they do you work with a deduction that they're going to end user Oh, how about issue.

Uh huh.

[laughter] Oh.

Oh.

Well on anything else I use that Ah. So I will provide a brief translation of Williams remarks, so firstly, how the pandemic situation globally would affect our thinking of getting promotions, particularly in the overseas market Williams comment is that the generally speaking depends.

The issue with pious people to spend more time Inc.'s house. So it is a structural tailwind for overall activities that happened at whole playing video games watching drama et cetera.

And that we think is going to also benefit thing in our game promotions. Because this content is having a more user time, so to speak on a global scale and and we are not particularly concerned about the pandemic situation.

Disrupting our plan our original plan of game launches, especially for these a mature overseas market users out more attracted and emphasizing a lot game quality I think that is our biggest selling point. It is the quantity, but then that east.

Gains and secondly, you asked on the approval process and our expectation on the overseas games, it's really difficult for us to do a force ranking which one is number one which one is number two speakers for all these projects since the inception of of the project business.

Planning.

We think they are all great products, representing highest quality in their respective genre to a hockey.

Two.

Very different segment of Huggett uses so we are very excited some of the games can be launched as early as the middle of this year and some might have to wait until the second half later parts of this year and William a a job. It's also a closing remark that he can.

So personally threw out and given the pandemic situation. He is actually being thinking I, giving a lot of more thoughts in terms of in terms of how game content can be designed and developed and how game content can be distribute it took.

Few abaxis, social responsibility and highly two families to people around the globe.

Thank you. Thank you William interest that's very helpful.

Well take our next question from the my off PAMA song from Jeffery.

Well I thought about fiscal high.

Hi, Good morning, Friends me down child, and my bad.

Question, a question back to the music business I'm getting to Fracs that.

We have been Oh, the monetizing like streaming business models.

Can you comment about how we should think about the competition like human space as well but competition.

For me deal.

Sure be them trials am I, but just how would it here, but oh, yes.

Yes, so what you saw Joe's true woman decided but more than a true bins and while that since I went back and what kind of buttons on the good you know higher cpms that you've got competition.

That's it.

Oh.

Take a what's your that supports what we did till it's also but what's the way you that users.

Well I wish I feel there's an easier for me it appears that should it be Julie to go quickly.

Sure zones or the people didn't ship, which is you are you could probably all too.

You bet hold up.

Oh, sorry, a more centralized oh, just so you got this yet so we'll wait out to the continue to do that again since you sure cold weather says how pleased about well Michel to a halt why you get to just such a bunch of what are you guys hardly at all.

No 'cause outdoor that you'll go upping dollar to the chances you just made the core job make an injury, which is not yet to you today today.

Okay what.

Just to go.

I wanted to.

<unk> decreased to two other ship.

Sure button trim.

Did you feel a little bit.

True gold I couldn't bunch I wish it up and how they don't know she was yet.

Yes, it's yet to.

<unk>.

A little Delozier Patrick.

But you seem to that but certainly not she got driving.

Hey, what's I agree with your Darcy.

A little bigger.

To go so you didn't shipments this year because you have some cheap Jewish I remember you shoot.

And what he wishes to freed up I can basically the soluble ship so that they tested geological those are some public you'd have thought she has done like what is your goals that had sufficient.

Khalida, Adam Beatty investors sorry.

We are starting to lose.

We'd rather do that Jim Jim Shaw, sorry, just a little more should he or she was without a culture.

Okay.

Rounding out the time file.

<unk>.

[laughter] Labatt I cant I've element Kunesh again, thank you.

I'm going back on each other getting alpine.

So in the interests of time I'll provide a brief translation of Williams remarks, just now so broadcasting is just one way of us thinking how we can monetize a our now these cloud and music platform. It is not.

The only way.

And ER, we will continue to explore different and innovative and diversified ways of monetization in a sensible and use the appealing way and but the absence of us Egypt, the biggest ambition and the mission of us doing the plan.

Now these called music platform is that we wants to contribute whenever we can within our ability to help promote and batting homes. The Chinese music industry as a whole it might look very different from mature market in the western world, but we've seen.

And Chinese.

Music market is huge with huge upside potential and add to it could or allow multiple players to develop its respective differentiated competitiveness advantage and Anj Singh collectively, making chinas online music industry.

A better and and the more promising industry.

Thank you.

Due to tightly me that Congress today's question and answer session. At this time pellet tend to conference back to my question for any additional closing remarks.

Thank you once again for joining us today, if you have any further questions. Please.

As I read your ticketing regulations have a great. Thank you.

Oh, okay.

Okay.

Thank you everyone.

Okay Today's conference and we like where the participation you may now disconnect.