Q3 2021 NetEase Inc Earnings Call
Good day and work with the <unk> 2021 church quotient earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mark a cheat IR director of <unk>. Please go ahead.
Thank you operator.
Note that the discussion today will contain forward looking statements relating to future performance of the company and are intended to qualify for the safe Harbor from liability as established by the U S. Private Securities Litigation Reform Act.
Such statements are not guarantees of future performance and are subject to certain risks and uncertainties assumptions and other factors.
Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.
A general discussion of the risk factors that could affect that keeps the business and our financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on form 20-F.
Those minutes filings on our website, the Hong Kong stock exchange the.
The company does not undertake any obligation to update this forward looking information except as required by law.
During today's call management or discuss certain non-GAAP financial measures comparison purposes, only for a definition of non-GAAP financial measures.
Okay.
Okay.
Reconciliation of GAAP to non-GAAP financial results. Please see the 2021 third quarter earnings release issued earlier today. As a reminder, this conference is being recorded in addition, an investor presentation and a webcast replay of this conference call will be available on <unk> corporate website at IR E.
Com joining us today on the call that you see senior management is Mr. William Ding, Chief Executive Officer, and Mr. Charles Yang Chief Financial Officer.
Now I'll turn the call over to Charles who will read the prepared remarks on behalf of William.
Thank you Margaret and thank you everyone for participating in today's call before we begin I would like to remind everyone that all percentages are based on RMB.
Third quarter was an exciting one for <unk>, we launched a number of top ranking games, bringing our game revenues to a new record of RMB 15 9 billion.
Our other business segment also grew robustly supporting our total net revenues growth of around 19% year over year, reaching $22 2 billion RMB.
Well online games, our flagship titles continues to demonstrate strong growth after nearly two decades of operation.
Revenues from fantasy westward journey online and westward journey online both grew at double digit rates year over year in the third quarter. The mobile versions of these two legacy saga showed resilience year over year growth as well.
Adding to our strong portfolio of PC games, our new hip gains narrow calculate point, a nightmare breaker to cover PC games revenue to a new record high in the third quarter growing by 30% year over year far outpacing industry growth.
Featuring unchanged millet comeback maritime placed points has taken the PC games market by Stoll reinvigorating the stable battle Royale genre with exciting noble ideas.
It's global success showcased our ability to bring first raise games to the world stage.
By November 10th we have already sold more than 6 million copies of America Blake point worldwide in just four months time, making it one of the top sellers ever being platform.
Players in both China, and global Marquee, our Haley Mehrotra blade point for soybean combat experience. So.
So far in America Blade point has retained its 80% positive review right.
Which naturally leads to excellent user retention and continued user growth.
We believe America blade points will experience the same level of longevity as many other than that its flagship titles. We work hard to keep all the games fresh and plan to continuously introduce more exciting new content.
<unk>, new modes heroes and maps to add to the enthusiasm. We are also currently working around the clock to extent the game offering to console and mobile platforms. We expect to bring clear. These exciting version in the next year.
On the heels of the merits ablate points deal, we launched another PC game nights me a breaker in September.
It is an action based competitive fighting games, taking place in a fantasy setting players can choose from a variety of roles with unique ability to backfill against dark horses and save the world.
As a game with unique gameplay.
Nice may a break to further expand our base of PC players.
Turning on to the mobile side, our new Chief game, Harry Potter Magic awakened, having chunk to millions of players going viral across China.
Instantly dominantly to post top downloads chart and top grossing chart in China. Following its launch in September.
Harry Potter Magic awakened contours of charming wizardry world touching the heart of millions.
The game has attracted a large crowd from young generation.
For us the game up community, it's elaborate design without gaining great acclaim.
<unk> iconic European Retro picture books, and interesting cost base come back in.
Infused with abundant competitive gameplay, we hope Harry Potter Magic awakened will continue to gain as a ratio from players in China, making me its popularity over the longer term as many of our other titles too.
We are equally excited for its global launch.
On the nostalgia of generations of Harry Potter fans. We believe this game has great potential for extensive popularity across the globe.
Currently we are working hard on its localization for other geographies with plans to formally launch Harry Potter Magic awakened in some of the major overseas market next year.
As another title we launched in the domestic market our space themed S. L. G game infinitely grunge also had a strong start in China in the third quarter.
Hi Fi fans were captivated by the gains in tanks and exciting travel through time and space.
In time, we believe infinitely grunge will continue to earn respect from even more players extending our strengths in the S allergy market through its super immersive basic theory.
On the international problems, we introduced the Lord of the rings right to walk through the U S Europe and several other overseas markets.
Making a strong debut at the end of the third quarter.
A lot of the rings rights to wall has amassed a huge user base across the globe with engaging and thought provoking game play as well as the strong appeal of the Lord of the rings IP, we see great potential for the growth of its users.
We expect a lot of the rings rights to walk to behave similarly to our other time proven S algae typo in baseball.
Revenue ramping up gradually and showing an upward trend over time with a long lasting lifecycle.
Complementary to our in house R&D capabilities, we have also been deepening our overseas footprint through strategic investments and partnerships. We are looking for talent and teams that complement our R&D skus on a global scale.
Over the past few years, we've invested in top teams, including Bungee Quantic Dream second dinner and theory crafts as well as the recently announced strategic funding and catalyst.
The acquisition of <unk> in Japan.
With these partnerships, we plan to share our knowhow in R&D and operations.
Gaming new inspiration from the creative minds of these overseas studios as well as a deeper understanding of overseas users and their preferences.
Together, we share the same passion and vision to abuse. The next sensational blockbuster four players worldwide.
In addition, we have launched a few game studios in places such as Montreal, Tokyo and L. A with an aim to attract the best international talent to further broaden our R&D capabilities.
Moving to our game pipeline as I mentioned earlier in the next year, we plan to launch Harry Potter Magic awakened, even more overseas region as well as bringing players console and mobile versions of narrowcast late.
Very soon we will be introducing another highly anticipated game the showpiece Dream chaser.
Our self developed showpiece simulation game.
Catering mainly to emerging female uses this game provides players with a new road playing experience as an actor or actress and the world of showbiz.
Key players gets to live their dreams of Fame and explore the exciting life of a format in the entertainment industry.
Highly acclaimed for its distinctive setting.
First we've experienced and after that we believe the showpiece dream chaser could open up a new genre with great market potential for that east.
Our pipeline also includes Diablo immortal and Ghost World Chronicle.
Moving ahead, we will continue to bring players inspiring new games that stands the test of time in China and worldwide.
Turning to Europe, we have made solid progress with our transition to better align your business with the latest regulatory guidelines, which aim to alleviate excessive academic pressure on Chinese youth.
While we are in the process of disposing.
Of our academic after school tutoring business, we are making excellent progress with our other killer the future growth, including steam causes adult learning smart devices and applications Digitization solution.
Total net revenues for you without in the third quarter, while RMB, one 4 billion, representing a 55% growth year over year.
Revenues from the after school academics tutoring classes in China's compulsory education system.
But around 25% of Europe total net revenues.
In the third quarter, we continued to grow our steam course offerings.
Full year without go you'll always see its gross billings and user engagement has been growing rapidly since its launch last year.
During the quarter, we upgraded its current AI system during the period, given our students a more efficient platform for practices.
So I called your domicile tooling, which prepares children for programming agitation launched Python courses in this quarter and became a member of China Computer Federation programming train the accreditation.
Our reach in the adult <unk> patient base is also expanding as encouraged IV authority.
For example, our extraordinary memory feedstock cost.
Cost retained its leading position with gross billions approaching RMB $100 million in a single quarter.
We also recently announced a collaboration with Amazon Web services AWS to bring its free digital training courses to Chinese users.
It is possible.
Learning devices remain robust with record high revenues of RMB $255 million, a 56% increase year over year.
Without continuously upgrade and enriches its product offerings to facilitate efficient learning under different scenarios.
In the first quarter call.
Collaborating with the peoples agitation electronic and audio visual correct.
We launched a new version of our award winning dictionary pen containing over 4000 original song from textbooks published by the press.
We also rolled out our Europe, our listening pod in September which helped improve students' English skills in listening speaking and reading through real time intelligence, scoring and pronunciation correction functions in.
In addition, we are working with local schools experimenting with different Digitization solution, which gave school teachers more automated teaching and grading tools and facilities, enabling more efficient teaching.
Now looking at our cloud music business.
We continue to improve our differentiated music community ecosystem by our product and content enhancements to keep US ahead of the curve.
We are now better positioned amid a healthier industry development.
Our top line growth drive solid margins in the third quarter, representing our second consecutive quarter of positive gross margins.
Some of our innovations include upgrading our main cloud music homepage in August adding new community features.
Users are also enjoying our newly launched music gift function, which opens the video creation capacity to individual users, allowing them to distribute with customized content to frame it.
In addition, we launched village citizenship cod, given each of our users a personalized IV and cloud village, allowing them to few of fresh sense of belonging this created a lot of the.
The social media further extending our brand influence.
In combination with other <unk>.
Industry players, we are actively working to secure more high quality content with past the hour.
Especially following the recent favorable industry changes.
In the third quarter, we completed a direct agreement with one of the music group, which means we now have direct digital distribution contracts with all the three of the world's largest record recording label groups.
We are also pleased to see such favorable collaborations with big labels at a more reasonable cost structure, providing us with the flexibility to optimize our content investments using our more disciplined.
Predictable approach.
Meanwhile, we are also actively competing completing our major Chinese music library recently, adding several new copyright, including modest Sky one of China's largest independent record labels and Emperor Entertainment group one of the largest entertainment.
Groups in Hong Kong.
Our negotiations with our major music labels are close to being finalized and we expect more to come.
Further complementing our song library offering.
Turning onto yet shot.
As Matt East private label Consumer brand <unk> continues to build its brand awareness I regularly launching highly popular products by our diversified channels.
Apart from solid sales growth from external E. Commerce channels. We now have seen strong momentum from short video platforms, such as Boeing and I'm quite sure with some popular products like bostrom fragrance and coffee practice.
Our advanced and differentiated original design products are being very well received by the users and the market.
In Q3, we successfully launched several of our original design series across categories, including clothing, dining and kitchen home furnishing and personal hygiene and maternity.
We are gaining increasing recognition for excellence design and creative style.
We won two prestigious Red Dot award for our Dear John Battery design and yen Shang Chuang Museum key packaging design.
Competing amongst thousands of design submission that came from more than 60 countries and regions.
These actually add to that is the engine increasing number of award and Amit.
Which includes 2021 German.
Design Awards, along with many other international awards and recognitions from the design industry.
During the double 11 promotion, we recorded over 100 million GSV through Taobao and Tmall channels and on JD. We will also the number one brand for baby goods and products.
Commensurate with our extensive growth across our businesses our capacity to give back has grown as well, enabling us to amplify our ability to help our communities.
Our resolve towards social responsibility has also been heightened by the immediate needs of those who have fallen victim to natural disasters and public health crisis.
Most recently, we were deeply saddened by the destruction and loss felt by those in Shanxi and Goodnight provinces.
To help these floods in Sweden areas Rappist by natural disaster <unk> has donated over 50 million to nine and RMB 20 million to <unk> to support much needed relief access and posted that reconstruction.
The mounting natural disasters tell us that we all must become Patrick custodian of the Earth.
Corporate citizen, Matt is as committed to environmentally responsible action.
In addition to our financial contributions towards natural disaster alleviation and risk duration, we are leveraging our strengths and resources for environmental protection. We believe games has the power to raise awareness among billions of people across the globe about in viral.
Mental conservation and restoration.
In the third quarter life off to one of our flagship titles joined the second annual Green game Jam organized by the U N facilitated claim for the Planet Alliance clear needs to go to the far east in the game to put out the forest fire during the activation.
Our participation in this alliance represents net is increased social responsibility using games as a tool to create environmental awareness to help protect our planet.
As we continue to advance our environmental and social pursuits, we are thankful for our growing business that allows us the financial capability and social Influencers to support these efforts.
Moving ahead, we will continue to cultivate our business by exploring more creative practices to enrich our broad content increase our product exposure and bring even more diverse and engaging experiences to our users while leveraging our strengths to enact.
Positive social and environmental change.
This concludes William's comments.
I will now provide a brief review of our third quarter 2021 financial results.
Given the limited time on today's call I will be presenting some abbreviated financial highlights.
We encourage you to read through our press release issued earlier today for further details.
Total net revenues for third quarter were RMB $22 2 billion, while U S. Dollar three 4 billion, representing a 19% increase year over year.
Net revenues from online game services were RMB, 15, 9 billion up 15% year over year.
Year over year increase was primarily due to our newly launched games, such as America Blade point, and Harry Potter Magic awakened as well as from existing games, such as fantasy westward journey online and westward journey online too.
Net revenues from our mobile games accounted for approximately 69% of the total net revenues from online game services.
Sure.
<unk> net revenues reached RMB, one 4 billion up 55% year over year, driven by fast growth of both Europe Q3 services as well as increased sales of intelligent learning devices.
Of the Q3 total revenues about 105% of that relates to academic subject courses in China is compulsory agitation system.
Net revenues from innovative businesses and others were RMB four 9 billion for the third quarter of 221 up 26% year over year, mainly due to increased contribution from Metis cloud music for.
Our cloud music both membership in live streaming revenues maintained solid growth momentum driven by robust paying user expansion.
Our total gross profit margin was 53, 2% in this quarter with a breakdown as follows.
Gross profit margin for our online games services was 64, 5%.
As a reminder, this number is generally stable with some narrow fluctuation based on the revenue mix of mobile and PC titles as well as self developed and licensed games.
Gross profit margin for <unk> was 56, 6% compared with 45, 9% in the same period of last year.
Significant growth was primarily attributable to the improved learning services gross margin due to improved economies of scale and continuous optimization of our faculty compensation structure.
Substantial sales growth of the smart learning hardware such as our U without dictionary Pen 3.0 also contributed to these games at this line carries a higher gross margin than other product lines.
Gross profit margin for innovative businesses and others was 15, 6% compared with 16, 8% last year. The decrease was mainly due to decreased gross profit margin from the games streaming business Cc live streaming.
And that is cloud music, Colorado enjoyed its second consecutive quarter of positive GP margin.
For the third quarter total operating expenses were RMB 8 billion or 36% of our total net revenues.
Our selling and marketing expenses as a percent.
<unk> net revenues were 14, 1% compared with 14, 7% in the prior quarter.
Quarter over quarter decrease was mainly due to decreased marketing spending related to Europe.
R&D expenses were RMB, three 8 billion the third party with our seasonally high quarter for R&D as our new campus hires graduate and commenced their career with US we remain committed to investing in content creation and product development, which is key.
Core to our sustainable future growth.
The effective tax rate was 19, 6%.
The effective tax rate is presented on an accrual basis and the tax rebate differ from each of our entities at different time periods, depending on applicable policies and our operation.
Non-GAAP net income attributable to our shareholders for the third quarter totaled RMB, three 9 billion or <unk> dollars $599 million, our non-GAAP basic earnings per well.
U S dollar 0.9 or 0.18 per share.
Our cash position remains strong as of September 30 years, our total cash and cash equivalents current and non current time deposits and short term investment islands totaled RMB 98 billion compared with RMB 100 billion as of end of last year.
In accordance with our dividend policy. We are very pleased to report that our board of directors has approved a dividend of U S. Dollar zero claim 045 per share or U S. Dollar zero climbed to two five.
Lastly, under the current two year share repurchase program approximately $13 5 million Aes has been repurchased asset as of September 30th for a total cost of approximately $1 3 billion U S dollars.
Meanwhile, on the net is youll adult share purchase program.
<unk> zero declined $1 million.
<unk> has been purchased for a total cost of U S dollar $1 8 million as of September <unk>.
Thank you for your attention we would like to open the call to your question operator, Please go to Q&A.
Thank you.
I'd like to ask a question. Please press star one on your telephone keypad.
If you're using a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
For the beneficial to all participants on today's call.
Wished asking a question to the management and Chinese piece immediately repeat your question in English.
Please limit your questions to one at a time.
If you wish to have follow up questions. Please rejoin the queue.
We will now take a question from Alex Poon from Morgan Stanley. Please go ahead.
Yeah.
Okay.
William Charles Smart grid countries, maybe lets say time counting the year Youll see to bake with Eagle one T cell <unk> is highly water.
To what do you see a guy hi, why phosphine goes again to Alex's GTT go you go some other two o'clock.
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You go through.
<unk> City unveil DLP resources, you would see the odd people.
Makes you.
Yet each you see Youll all my life I've seen in a wholesale way Scott that Nate Olmstead sheep and Declawed Gainesville for me and the team done like I said something like out there.
Do you hold your suite.
Why you'll see that just took a high white, so whether you'd see dayco, you'll see sogou. So be took a company that's been calling.
Kind of few months.
My question is.
First of all congratulation on a very strong results and game pipeline. My question is regarding a report on overseas release schedule do.
Do we have some more specific timeline for different regions.
For for release next year, how is the progress of content localization and community localization et cetera.
How.
Do we have a revenue expectation for overseas.
How is it compared with China revenue. Thank you very much.
Okay.
Well thank you Alex.
Let me answer your question directly in English, we have a strong pipeline.
And our.
Harry Potter is one of them and are right.
Right now we are.
Subject to obviously the progress of localization, we intend to launch Harry Potter to some overseas market as early as first half of next year.
And.
Given the huge fan base of the Harry Potter IP worldwide, and particularly encouraged by the very strong performance of Harry Potter.
In China, we are hopeful that this game would become a worldwide sensation.
<unk> publishing right is a commercial arrangement between Matti.
<unk> and time Warner it for some of the market and that is will be in charge of our publishing whereby a majority of the overseas market.
Publishing will will belong to a timeline on that.
60, Charles Thank you.
Thank you see what I would take our next question from Alicia Yap from Citi. Please go ahead.
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When we thought about any changes you're sure you may just intriguing.
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When he casual floor.
Just quickly can you say how much you see yes. Thank you.
So far yes.
Our whole local play Wow.
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The lease yet.
Yeah.
Management on that question it is related to <unk> cloud.
So how do you see the overall competitive landscape and also the time spent dilution from the short video platform.
Why are we spending.
Video platform like <unk>.
And to have more aggressively.
Online music content that could actually post from Prem to cloud music over time.
And also affect the user time spent on thank you.
Okay.
But she did.
Can you just.
So it kind of bounces all searching for shipping simple.
So with that.
Cool.
Jake.
So it is just as Jim touched on it in China.
I mean, because it puts us so you can do.
<unk>.
She'd how does this year.
So what you saw sequentially, though for the time.
That's it.
Well, Michelle King you agree with the switching.
To that reality posture.
You need a nasal simply a lot of them that she shield.
Corning.
Clubs from Zynga.
Yes.
Just a few years.
So if you're able to that but you have any <unk> or herself.
How do you and truly be a U haul.
Kimberly on your commercial team here at <unk> Suisse.
So it does suggest to the Xiaomi is a patient.
Hi, Scott.
Yes.
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Yeah.
Okay.
Alicia So yes, we would.
You have said that you're at least in the short term short format video DAU. Other general video formats have taken and some of the user time spent and that not only knew that but also in games and other forms of entertainment, but what's the major difference between music and the video is that new that create that residents between uses it creates.
It creates an immersive experience for users.
So video you put when you ask you, which one video you probably don't want to watch it again, but the music you tend to want to listen to it over and over again is the cheese Pizza music you love.
The second question on potential new competitors enter the market. Our view is that this is a very open market.
We very much welcome others to join and help those independent musicians in China to be a nice Edwin Thank you.
She said William Pitsenbarger.
We will now take our next question from Natalie <unk> from Haitong International. Please go ahead.
Thank you.
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One child Margaret She said you know what if you once you take ocean anytime you may yet no.
The one thing I should go away until we can show.
So I was just going to demonstrate my copy Nagel at Ada show will be leak since that change from National Bank.
So nowadays that you should see that address you Dan I can shoot auto shop detail actually watching show Chi on for Jason.
Sure.
Hey, Jonathan its Jacob when attempting to call you'll see that you are assuming you don't see that.
Thank you for taking my question and congratulations on a solid quarter.
Quarter. So my question is regarding telecom Blake point, just wanted to get an update there.
<unk> Bank accounts Japanese contribution Douglas in game revenue contribution at the point of 6 million copies worldwide.
And also for each part.
How should we understand the deferral treatment in terms of the revenue recognition.
So if management can share with us.
Some thoughts on the longevity of this gain that would be great. Thank you.
Okay.
In the interest of time I'll answer that question directly.
Please so firstly on your question on revenue recognition.
So Bose bogie.
A copy of sales as well as the in App purchase we adopt the <unk>.
Revenue deferral treatment.
Oh, but unexpected lifespan. So this is consistent with our revenue.
Recognition treatment, either PC and mobile games.
Obviously, we use the games being launched a few months back now.
More than that.
The gross billings will come more and more from the in App purchases.
Which we are very confident that America blade point, just like many of our other nineties.
<unk> flagship titles will have a very.
Time proven longevity, we think a combination of stellar global sales record book copies as well as our.
Longevity through operations through a content update this will create a unique.
Hum.
Our model for the global PC games in terms of proving the longevity and sustainability of the gross billions over the longer term.
Hopefully that answers your question.
Yes, very clear thank you Charles.
We will now take our next question is from Kenneth Fong from Credit Suisse. Please go ahead.
Alright, Thank thing Joe Charles Smokeless.
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<unk> patients have seen they can't cheat Io have reported so corny to own changes Hong Kong well.
When do you see when you hear it.
What kind of woman sign and I took a big Fiona.
Susan you Timna I think we can on Zillow.
While home and you can go to MS. Chung changes have seemed up on trying to do so.
I will not do a woman and you had a bunch of them, but I am much I think I can Michele how many young Sheldon.
Thank you management for taking my question I have a question on the net use cloud music <unk> looked at our we have obtained a full copyright authorization from my employer Entertainment recently and also the big three so how should we think about the pace of signing up new copyrights and impact and benefit on our content costs and the margin.
Forward. Thank you.
Yes.
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Great Great question.
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I thought you heard that you watch that.
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Which is just so much ultra truvada.
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So what should we see a shot.
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Yeah.
Over the last few years. So they are the key messages in China has not been perfect, which is why the industry players in music interest you have in place I think.
Paying a much more expensive price to the labor company than anywhere else in a world.
Everybody have seen on July 24th and authorities have gave guidelines to southern company and asked them to <unk> to keep up exclusive right. So I think overall we.
We would like to see is that it.
We'd like to see to be able to pay them a fair price to the labor companies across the world and we.
We are confident onto that might that under the right direction from the authority that the Chinese tried to music industry will continue to converge into it in the same right.
And in the right direction.
And secondly, we think that every music company in the company in China should you really be focusing on helping independent musicians to create good music to create could you relate and positive.
Messages.
As a socially responsible company and that is cloud music testing.
He knows preparation and what doesn't.
That is our agenda and it's not used that will go.
Yeah.
Oh tissue. Thank you.
Cleveland now take our next question from Thomas Chong from Jefferies. Please go ahead.
Well I'll take that one.
He told me they saw what you read and you can see different times in the Yankee, what's going <unk>. So when you sort of quantify woman M&A John Lewis.
Hello, Joe Shareable been realized I think in the.
Hmm.
<unk> expenses.
Expenses pardon me so sure.
If people will just somebody like you bought it you did well, but the opex. So while a couple of quick it goes back up on the site.
But that kind of.
Thanks management for taking my questions and congratulations on another strong set of choppy. So my.
My question is about our M&A strategies as well as the use of cash.
In addition, our care management share about the force in terms of the trend in operating expenses. Thank you.
Thank you Thomas I'll answer your question directly in English so firstly for our M&A strategy and that is as always being a very Ah. We're always very focused in our core pillars of businesses games.
Online music online education.
Private label brands gain share so.
Our business development will be concentrated in our major verticals and we obviously prefer and for the past two decades or so we've been growing organically, but we also remain highly active to explore opportunistic.
Opportunities to deploy our M&A to further supplement our growth so that's that.
That's always been our consistent approach towards M&A in terms of the cash proceeds are used.
Again, we invest most of the.
Cash into our cells, leading to our talent acquisition and retention into our content creation and it takes patience and it takes commitment for instance, a major title of next blockbuster game can easily take a few years.
Budgets to get balanced I think this is also one of our competitive edge that as a major gating a powerhouse that we can afford and we can be determined to focus on what we are really good at and what we really want to create opex trend is.
It is I think that is has been lifted for over 21 years and we've always had a very consistent approach into our expense management.
We focus greatly.
Return.
Given our strong cash balance sheet, we are not shy to spend money I'll wrap up we never burn cash for the sake of spending money whenever we spend money in terms of setting marketing into RMB. It is ultimately.
Given that we wanted to make sure that the money. We spent today may not necessarily give us the top client returns within the same quarter, but we will be handsomely rewarded as such we expect that we maintain a prudent yet healthy level of selling and marketing.
On the R&D front, we are committed to spend more that is also encouraged by the authorities and I think that is also what our long term sustainable technology company should do.
Amit that's the answer to your question.
Thank you and goodbye.
I know you said it was on a strong quarter again.
Thank you Thomas.
We will now take our next question from Eddie Leung from Bank of America. Please go ahead.
And medium patch, how that Margaret a onetime.
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Lindsay Guangxi.
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I gave me shoot of the transformation myself, how they follow up question on your pipeline.
For the overseas game market, we understand that a good gains should be popular across different regions.
They are also a cultural and Matt can actually differences. So just wondering besides working with overseas studios.
If you are trying to do deals. We will also be involved he gained projects. These finders specifically for the overseas market. Thank you.
So how could I start with you.
Well, let me say that I apologize.
What are the kind of thing.
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Okay.
Joe.
Thank you the answer comes from Japan.
Yeah.
Our China based team there of note.
The main focus is on the Chinese themed game that they know well.
The Chinese speaking countries and separately. We also we have been putting a lot of energy and resources in.
In games that complicated political will launch so far.
Those games would you think about the gameplay that will do it.
A world view and all the details in a in a global manner.
And so those types of games is typically joined developed by our China based team and.
Some of our overseas games for example, our Montreal.
Suddenly we also.
The as I said, they will also have games, that's being developed solely by the overseas game teams.
Who will be working on games that you buy it at that.
That is by then and have targeted them.
In the markets that they know they know the most of the welding and so altogether, we hope to introduce.
Two the global audience, and more and more exciting games to play.
Thank you.
Yes.
Thank you.
We will now take our next question from two long sheet from Nomura Securities. Please go ahead.
Our women's health Margaret She says given all of that so we can go into your Gulf of downtown.
Q3, yes.
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Oh no.
Okay.
When they come up with something in corneal Endo conference phone call, you'll hear calls an adult.
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So it's actually not just Europe, one is home demand.
So we see a hung yeh ballet, that's unknown to you what a whole number of employees how long EQT at $19 billion is all from me.
So my apology.
I will translate myself. So my question is about a man of our switches the very hot new area at this space and lots of companies are planning to invest heavily in this field can management share with us your nation, all none of us under one of the potential growth opportunities. It may bring to the <unk>.
And gaming industry and what are your strategies to tap this opportunity. Thank you.
Okay.
Yeah, Tony Hawk.
They're just chasing a pick up.
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Sam you want to use football games.
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Yeah.
So it's just.
Okay, Chris I'll cavy that Kim Kardashian.
Sure.
Thats useful.
We've talked about some yourself.
Why do you do to Hudson deal.
I will then come in with a much controller Quaker associates, so much couture cheese.
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So.
What actions are they're probably going to see a chunk of them need here.
I'm a broker neutral thing.
Yes.
So the choice out Youll, probably see the.
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Most of US is indeed that the new Buffalo Butler.
[laughter] ever what today, but then but on the other hand, I think nobody has actually had some time to get it in what it is.
And but that's either we are technologically ready we know how to accumulate the relevant knowhow the relevant skill sets when that when that date come and tell you I think when that eventually comes in we'll probably be one of the fastest ilana.
And the message I think lets say.
Yeah.
Thank you Carlo.
At this time I would like to turn the conference back to macro cheap for any additional or closing remarks.
Thank you once again for joining US today, you should have any further questions. Please feel free to contact us directly or TPG investor relations have a great day. Thank you.
Okay.
Okay.
Okay.
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