Q4 2021 NetEase Inc Earnings Call

But they are welcome to them that if 2021 fourth quarter and full year earnings conference call.

Conference being recorded at this time I would like to turn the conference over to Margaret IR Director of <unk>. Please go ahead ma'am.

Thank you operator. Please note the discussion today will contain forward looking statements.

And then calculate how about intended to qualify for the safe Harbor from liability side.

Stablish U S privacy.

Did you bake in any format.

Such statements.

I do.

Future performance and are subject.

And all of a sudden Pete 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.

A general discussion of the risk factors that could affect <unk> business and financial results is included.

I think of the company with the Securities and Exchange Commission, including its annual report on form 20-F.

We announced the filings on our website of uncle uncle stock Exchange. The company does not undertake any obligation to update this forward looking information except as required by law. During today's call management will also discuss certain non-GAAP financial measures for comparison purposes only.

Explanation of non-GAAP financial measures.

<unk> got to.

And don't get finished results. Please see the 2021 fourth quarter and the full year.

Earnings news 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 that page.

At IR doesn't that the dot com.

Joining us today on the call from that senior management is Mr. William Ding Chief Executive Officer, and Mr. Charles Yang Chief Financial Officer, I will now turn the call over to Charles who will read the prepared remarks William.

Okay.

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.

RMB.

2021 was an eventful year for <unk>.

Online games, we introduced a number of great.

New record Barron category.

No doubt, we quickly and successfully restructured our business in light of the new regulation will be.

The online.

And you are now ready for its next phase of growth.

And our cloud music business.

Streamlet pleased what happened.

Its initial public offering on the call.

16.

In December .

We look forward to growing this business.

Augmented pumps.

Niches.

And bringing more quality music to our users.

For online games, we finished the year with a strong quarter.

Revenues came in at RMB, 17, 4 billion, representing 30% year over year growth.

Our flagship titles continue to demonstrate strong year over year growth after two decades of operation.

We continue to supply our loyal and sustainable base of users.

Can you all content update.

Revenues from our fantasy westward journey and westward journey online saga continues to grow remarkably at double digit rates year over year.

The strengthening their position as China's biggest MMO titles.

In terms of our new game launched during the year narrowed the blade point was a clear standout with international success.

The game quickly broke sales records for buy to play games made by Chinese developers and gain the claim as a top seller on themed best of 2021 games list.

Some of the America played point the excitement in the fourth quarter, followed our ROE out of content updates.

For example, in our crossover with Bruce Lee, We brought a series of themed items based on the legendary Marshalls speaker into the America World.

Letting players unleash the fury of the dragon against their opponents and invigorating the global player community.

Keeping our games fresh with frequent updates.

Narrowed the blade points user base continuously hit new record.

The strong engagement and retention we are seeing today brings us great confidence that <unk> will continue to attract users from all over the world.

We are now working diligently to bring player console version and mobile version of the game, which we look forward to bringing to our players in the very near future.

The highly anticipated release of Harry Potter Magic awakened.

Also took the market by storm as one of the most successful games in China last year.

In champion millions of players and dominating both top download and grossing chart in China. Following its launch in September .

Harry Potter Magic awakened use is the best in class development capabilities of <unk> games to Brean.

Activating gameplay experience with compelling features and in depth collectible card system and beautifully crafted arc style.

After a strong debuted in September we continue to extend the game's popularity by frequently is rolling out captivating update that bring users rash gameplay cosmetic items and card every month.

Rising to the top three position multiple times on China's iOS top grossing game charts during the fourth quarter.

We share an equal excitement for the overseas versions of Harry Potter Magic awakened.

And our localization for other geographies are progressing smoothly too.

Two weeks ago, we kicked off the closed beta testing for overseas players.

Bridging the talent of true gaming and online entertainment power houses, we will work very closely with Warner Brothers games to coast published this amazing game globally.

<unk> in the U S Europe and Japan later this year.

We believe worldwide audiences will be delighted to embark on immersive adventures.

Taking a fantastical journey into the wizarding world of magic and in finite profitability.

In addition to these two blockbuster games. We are proud to have also launched a number of other titles in various brands new genres growing our reach with new players and opening up new possibilities.

We launched <unk> in July our very first self developed racing game.

Ace races, realistic art style and real live racing track create an exciting and differentiated racing experience.

Players can travel to Hangzhou, Chongqing and other places to enjoy their unique and beautiful scenery.

A strong debut of Ace racer marks another leap in our genre expansion given us more confidence in our ability to create more successful titles outside of our comfort zone.

Infinitely grunge our space themed <unk> launched in the third quarter is a great example, showcasing how we expand S. LG genres with its strong debuted in China.

One of our next generation <unk> titles.

Infinite lived runge featured an iconic space simulation experience active.

Activating have caused SIFI players visiting tens of exciting traveled through time and space.

After six months of operation Infinite led round continues to show a healthy upward trend with gradually ramping revenue.

With our strong R&D capability and relentless pursuit of innovation.

We're constantly looking to break into new territories.

Capturing new users that can reach beyond our traditional genres.

Moving into 2022, we have an abundance of new pipeline projects planned for America place point, and Harry Potter Magic awakened as well as a number of other strong titles ready for launch in China and globally.

Diablo immortal has been long anticipated by players community worldwide.

Our pursuit of top quality the game has taken great efforts to create and refine.

We strive to bring our players the most authentic diablo experience restart of popular comeback style and immersive exploration exploration features and create a new story and claim play for the mobile platform.

Luckily for cleared the weight is almost over.

We have concluded the latest round of testing in January with highly positive feedback from players in both China and overseas market.

We are on track for its global launch this year and in China alone, we have already over 10 million players pre registered for this exciting title.

Additionally, Ghost World Nicole our self developed Chinese style Wi Fi RPG is also in the making.

We creatively integrated SIFI style with elements for modern cities and traditional Chinese culture, creating engaging Chinese style SIFI world with a distinct artistic style.

We are working diligently on development and hoping to bring a fresh and differentiated RPG experience to play here.

In the overseas market, we will be launching that by daylight mobile in Asia, which is a mobile version of the famous asymmetrical Battle Arena PC game.

We have to work jointly with behaviour interactive to build this mobile version.

And we are confident that players will find our unrivaled asymmetrical competitive experiences.

Following the games released in the coming months.

As we create a larger presence on the international stage with our top quality games. We are also attracting global top talent into Medici.

In January we announced that we have teamed up with Mazda produce of Tau.

Our sheet hero <unk>.

While produce of yes.

Our crews are one of the most famous and best selling game franchises in Japan.

We are building negotiate studio in Tokyo for the development of high quality games for global audiences.

We share a commitment to unleash the potential of created in an open and inclusive environment.

The new studio will have full authority to manage and create the kinds of gains that they are passionate about and we will be there to provide support throughout.

Over the past few years, we have also attracted top producers including.

<unk>.

<unk> com.

<unk> stood out.

With these top talents joining us we will gain new inspiration and global vision to reach passionate gamers around the globe with high quality and engaging content.

Now turning to Europe , we have.

<unk> completed a smooth business transition in compliance with requirements from regulators and achieved steady growth throughout 2021.

Total net revenues for <unk> were RMB, one 3 billion in the fourth quarter, representing 21% year over year growth.

In addition, we achieved positive non-GAAP net income for the first time since our IPO.

Continuing operating cash flow inflow of RMB $142 million.

In the fourth quarter, we continue to upgrade our steel costs offerings.

Gross billings from Europe , our goal.

<unk> increased by around 130% year over year.

Recently, we launched <unk>.

Yes.

Our game Academy Act, which enables go and chassis learning through AI or person to person matches.

Complementary to our online offerings, we opened our first offline theme center in Beijing last November .

<unk> causes such as our goal.

<unk> programming and <unk>.

Joseph Villa signing to help improve children's skus in logical thinking unexplored scientific walls.

We expect to expand the learning center with more diversified content in the coming periods.

Growth momentum from our leading smart devices also remained strong with new and improved content and features.

Net revenues from the segment grew 34% year over year to RMB $317 7 million in the fourth quarter.

Through a partnership with the commercial prep Shang reinsure.

The oldest and most influential publishing agency in China.

Exclusive content, including those from Xinhua Dictionary were added to our dictionary pen.

Additionally, in our new upgraded pro version of the Dictionary Pen Personalised, writing assessment and improvement suggestion.

Available for students at various stages of learning based on the vocabulary grammar and composition.

These features again powered by our strong AI technology.

<unk> optical character recognition and natural language processing capability.

As for Education Digitization solution, we have secured strategic partnerships with a number of local municipal including coffee, Jonathan and recently soochow to provide schools and teachers with our smart learning terminal and solution.

Tolerating debt to effectively track students' learning progress and optimize teaching guidelines.

Turning to our cloud music business.

Throughout the year, we continued to make progress on our financial operational and corporate goals is.

Various product and content enhancement, we made strengthen our overall position amidst of healthier industry environment.

May you of online music services is stable in 2021.

In the fourth quarter net revenues increased 24% year over year to RMB, one 9 billion with continued increase in membership paying ratio.

We have managed to improve profitability, along with enhancements to our content library.

Attributable to copyright cost optimization.

In the fourth quarter, we enhanced our margins both year over year and quarter over quarter and achieved positive gross margin for the full year of 2021.

To foster our growing music community, we continued our product innovation initiatives in the fourth quarter.

Some of our upgrades included more individual personalization capabilities on our homepage.

Users can now access showcase their personalities and music preferences.

We also added a musical notation function in November .

Providing music enthusiasts with professional and accurate skoal and services across our music offering.

In addition, we launched our brand new B trading platform in mid December .

Commendation transactions between beat naked and musician as well as music fan.

<unk> platform has the potential to not only allow bead makers to realize commercial value, but also liberate individual musicians creative content.

Enriching our content ecosystem and bonding our users together even more.

On the content side, we secured more high quality music from large IP owners and continues to Micha independent artists.

At the end of the fourth quarter, we were servicing more than 400000 independent musicians.

Meanwhile, we have been making progress on our initiatives to produce music in house, which further diversifies and differentiate our content offering.

Going forward, we hope to bring more quality content to our platform to complement our music library, while working together with.

Other industrial players to benefit all music lovers.

Onto Yan Chen.

As one of the most loved lifestyle brands catering to the new middle class in China.

<unk> is redefining the lifestyles of China's younger generation in.

Intensifying our focus on certain categories. We continue to launch a variety of popular product across core categories, including food electrical appliances household cleaning, Pat and beauty and skincare.

Our useful design led approach has enabled the products on our platform to gain increasing appeal with younger consumers.

As we grow each of our businesses. We are also very conscious of these effect on society and our emphasis on ESG initiatives has greatly increased over the past years.

We are honored to have our efforts acknowledged by MSCI.

Upgraded our ESG rating to an a.

In addition, we Scott 39 points in the Dow Jones sustainability indices, DJ assign more than doubling our score in the prior year.

Sustained than lipsticks ESG risks assessment scale that is received a score of 14 nine points, indicating a low level of ESG risk.

We are recognized by sustained lytic as ESG industry top rated company and also like ESG Regional top rated company.

Along with our leading privacy and data security policies, the human capital development practices, we've made concerted efforts to reduce our carbon emission.

<unk>, our corporate governance and make increased contributions to charitable causes.

The global pandemic and environmental catastrophes have prompt many to find ways to do more for the society.

And we are no exception.

Adding to our recent disaster relief donations following the flats in Shenzhen.

We also committed an additional RMB 10 million to help local residents CCI in the wake of COVID-19.

With our solid financial reserves and continued strong performance improving shareholder return is always on our agenda during.

During 2021, we repurchased around <unk> dollars 2 billion worth of shares.

Paid us $551 million in dividends.

All in all we are pleased with our growth in 2021.

<unk> gained steady growth across each of our verticals positioning <unk> for continued growth in 2022.

Our focus on content creation, and elevating user experience with that is products and services remains at our call.

Moving ahead, we will continue to innovate diversify and expand our reach to generate further value for our users and investor community as a whole.

This concludes William's comments.

I will now provide a very brief review of our 221 fourth quarter and full year financial results.

Given the limited time on today's call I will be presenting some abbreviated financial highlights.

Courage you to read through our press release issued earlier today for more details.

Total net revenues for the year, while RMB $87 6 billion or USD, 13, 7 billion, representing a 19% increase year over year.

We closed the year with fourth quarter revenue of RMB, 24, 4 billion or USD, three 8 billion, representing 23% increase year over year.

For 2021, our net revenues from online game services were RMB $62 8 billion up 15% from 2020.

Revenues accelerated even faster in Q.

To RMB 17, 4 billion up 30% year over year.

The additional growth was primarily due to increased revenue contribution from the launch of new games, such as American plate.

And Harry Potter Magic awakened.

Net revenues from our mobile games accounted for approximately 68, 3% for the full year for the fourth quarter and 74% for the full year.

Net revenues for 2021 reached RMB, five 4 billion up 69% year over year on a quarterly basis net revenue increased by 21% to RMB, one 3 billion in Q4.

Both increases were driven by fast growth of OCR without learning services as well as increased sales of smart devices.

Net revenues from Metis cloud music.

RMB 7 billion for the full year up 43% year over year Q4, net revenue of cloud music increased 24% year over year to RMB, one 9 billion.

Both increases were primarily due to increased revenues from social Entertainment services, particularly audio based live streaming and paid user expansion.

Total revenues for innovative businesses and others were RMB 12 4 billion.

Yes.

13% year over year for the fourth quarter total revenues were flat year over year at RMB, three 8 billion.

Our total gross profit was 53% in the fourth quarter compared with 52% in Q4 of last year.

Looking at our fourth quarter margin in more detail.

Gross profit margin for our online game services remained stable at 64, 1%.

As a reminder, this number is generally stable with some narrow fluctuations based on the revenue mix of mobile and PC titles as well as revenue mix of self developed and licensed games.

Gross margin for the hotel in the fourth quarter was 57%.

Paired with 47, 5% in the same period of prior year.

The growth was primarily attributable to our improved learning services gross margin due to improved economies of scale and continuous optimization of our faculty compensation structure.

Just substantial sales growth of smart learning hardware such as the <unk> Dictionary Pen 3.0 also contributed to these gains.

This line carries a higher gross margin than other product types.

GP margin format is cloud music was positive at four 1% versus a negative margin of seven 1% in the year ago period. This is our third consecutive quarter of positive gross margin the.

The significant increase was primarily due to the strong topline growth as well as improved cost control measures.

Gross profit margin for innovative businesses and others was 26, 8% compared with 28, 2% in Q4 of 220.

The decrease was mainly due to the decreased GP margin from advertising services.

For the full year total operating expenses were RMB 36 billion or 35% of our total net revenues for the fourth quarter total operating expenses were RMB eight 3 billion offset a 4% of <unk> revenues.

Looking at the fourth quarter, selling marketing expenses as a percentage of net revenues was 13, 5%.

<unk> was 14, 1% in the prior year quarter to quarter over quarter decrease was mainly due to decreased marketing spending related to year without <unk>.

R&D expenses, while renminbi, three 8 billion largely stable from the previous quarter.

We remain committed to investing in content creation and product development, which is core to our revenue growth into the sustainable future.

The effective tax rate was 19, 6% for the full year and 14, 2% for the fourth quarter.

As a reminder, the effective tax rate is presented on an accrual basis and the tax credits differ from each of our entities at different time periods, depending on applicable policy and our operation results.

Our non-GAAP net income attributable to our shareholders for the fourth quarter of 2021 totaled RMB six 6 billion all U S dollars 104 billion non.

non-GAAP basic earnings per ads for the quarter was <unk> 1858, or U S dollar 0.32 per share.

Our cash position remains strong as of year end, our total cash and cash equivalents current and non current time deposits and short term investment balance totaled RMB $103 4 billion compared with RMB 101 billion as of.

December 31st 2020.

In accordance with our dividend policy. We are pleased to report that our board of directors has approved a dividend of U S. Dollar 0.081 per share our U S dollar zero four.

Zero five per avs.

Lastly, under our share repurchase program approximately 18 $5 million has been repurchased as of December 31st 2021 for a total cost of approximately approximately U S. Dollar $1 8 billion means.

Meanwhile, and and that is your.

Share purchase program approximately 0.6 million Aes has been purchased for a total cost of eight 2 million U S dollars as of the year end.

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

Please go to Q&A.

Yeah.

Thank you if you would like to ask a question you may signal by pressing 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.

Once again star one for questions. If you ask your question.

If you wish to ask your question in Chinese Please immediately repeat your question in English.

We will take our first question from Joe <unk> with Nomura.

Good evening management, Thanks for taking my questions congratulations on the solid quarter.

When he is going to take.

<unk> all got Charles CAGR, the element Youll push on <unk>.

Sean <unk>, Johnny you talked about many times, which element.

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And I.

Jacob bout Hajime accurately and knowledgeable tea, the Diablo Immortal mentioned DARPA.

Hello.

Dominant and one in Tom.

John you talked to the Diablo Immortal Taichung science in it.

And again similar email J D.

<unk>. My question is about games pop line, just wonder if management can provide an update on.

The latest game pipeline for this year and how many of the new games have already received license and will be released this year.

The new game Diablo Immortal, which has already received a license in China can management provide an update on it.

Launch timeline. Thank you.

Okay.

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Peer laboratory.

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So as a positive.

Thank you.

Hi.

Sure.

We're aiming to launch timeline in the first half of this year and obviously for dial Diablo, we already have the license approval, we're going to launch it in China.

Well it globally.

Additionally, we're also going to any issue.

The overseas version of Harry Potter.

Thank you Kayla.

Okay.

Okay.

Thank you we'll take our next question from Kenneth Fong with Credit Suisse.

Alright, Thank Joe Charles Margaret.

So this is just order to you would you continue with ICU patients.

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<unk> highlights.

Okay cool, thank Gianni Tucci dosage Npls, we should simply to true high Orlando somewhat Scully Omar.

Well, it's easy for Asia.

Thank you management for taking my questions and congrats on another solid set of results.

Our user sets of Harry Potter Magic on the weekend in China bus our view on the longevity of the game and the timeline strategy in region for the overseas launches. Thank you very much.

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<unk> that we have.

<unk> experience in running our games for Lumpier over time and some of the examples at the other day that the Jay and on EOG and so have Carter. This is the type of game that's about consuming content.

Longevity is very much linked to how much content is available to the to the game plan.

So we will continue to de lever I don't think exciting content to keep our users engaged in terms of overseas.

<unk>, we are aiming to issue it in the middle of the year.

Thank you.

Thank you we'll take our next question from Alicia Yap with Citi.

Hi, Thank you Juanita why Shanghai TCE of DSO.

That's the one I'll, let Daniel J <unk>.

<unk>. So why do you turn that I go a month.

Sure Thanks for that.

Thank you Joe.

Yeah.

Carl Lee Joseph Schwartz.

See you soon.

Sure sure.

Hi, finally, why you got that right now.

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And you saw that yet.

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You're seeing that show up on your China, Paul just.

<unk> sure.

Thank you Dan.

Sure.

Ginger, which I should so go ahead.

Yes.

Does that sound.

Yeah.

I have two questions one is regarding <unk>.

So can management.

Chevy thoughts why do you think about Matt Albert would you consider adding some Matt opex.

<unk> actually seen gains or launch.

Russia.

Some of the existing game in the Mab members secondly.

Second question is related to cloud music can you comment on the pricing trend for this next question and also overall infrastructure growth pocket and the margin trends for the business. Thank you.

Okay.

There's a host of an illiquid asset range Omar.

Yeah.

Okay.

Hey, Jordan.

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<unk> okay.

John This fascinating subsidiary.

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Shutdown border John appreciate it.

Okay.

For Matt.

Our understanding is that most of it.

Is that integration between the virtual world and in reality and for Nike as SG&A. We have many many years of operating and then RPG game and MMORPG games.

Heavy social elements and necessary sophisticated economic system.

Certainly in certain ways, you can regard it as a module prototype format.

So we will continue.

In that way and secondly, based on our existing technology will also it will also be explored.

Exploring possible new game until metal that thank you.

So anyway, that's my view.

Any of the.

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Okay.

Firstly.

Cloud needs. It will continue to grow through comprehensive content offering and one of that is is to is still have to continue to produce high quality and exclusive content and much of it will be self produced.

Bye bye ourselves in house, and I believe and we believe that everything will be able to deliver to the Chinese consumer.

Lots of the high quality Chinese pop music for.

For them and this is content.

Content strategy is our.

What is the main focus for both our growth and expansion.

Thank you.

We will take our next question from Natalie <unk> with Haitong International.

Hi, this is.

Ronnie condition with <unk> <unk> co.

<unk>, Okay. Thank you Ed.

Seeing no questions today.

Now I will turn it to you.

Thank you.

Sean Nguyen.

And tied to Betty that thing down.

Each of the Hawaiian <unk>, Chicago and La <unk>.

I will translate myself.

Thanks for taking my question and congratulations on very solid quarter is like the upcoming 2022 will be a full point year to date.

Doing all of those quality names in your pipeline.

My question is regarding the headline.

Comp plan for this year, just wondering which business line has the most incremental plan and regarding the global expansion.

What which southern regions out of most of the major target markets that you cannot put.

At this time thank you.

Hey, you're left with is it wouldn't either.

Okay.

Alright.

Thanks for taking the proceeds from the IPO with Samsung.

I'll translate by collateral type.

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Something with Ikea.

Thank you.

Florida.

The team leaders, which is what it is.

Okay.

So it's not one year.

<unk> syndrome.

When I say the appointment.

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Sure.

Okay.

<unk> industrial design.

Yeah.

In terms of head Count plan I think our focus this year will be on.

Our global talent.

As we mentioned in our prepared remarks last year, we managed to attract many of the top talent.

Globally, and we will continue to invest in this area and so there is seeing publicly BC more of the global talent joining joining Nike in terms of.

The hiring plans in China, it should be no change from previous yet thank you.

Yeah.

We'll go next to Thomas Chong with Jefferies.

Okay.

So let me talk.

What it <unk>.

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I had reported outcome.

So you wanted.

Let me talk a little bit.

I'm not sure I'm going to outsource.

Thanks management for taking my questions.

Can we discuss about the upcoming new games to be developed in multiple devices like console PC and mobile in order to target the global audience in different regions and my second question is about our core competence in developing a high quality titles on a consistent basis like Harry Potter.

Thank you.

Yeah.

Yes.

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Okay.

So what are you guys really else.

So it doesn't mean necessarily wanted to shipments.

I'm not sure on the go also.

Apologies.

So it's a total stockholder return.

Sure Phil.

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Tom.

Chongqing through tissue.

Okay.

Okay. Thank you.

So Thomas the first question in terms of.

In new types of games.

In addition to mobile game PC and console will also be an important area for us and so any media you think you can imagine.

<unk> is an area that we want to explore.

It's why we want to create game content for in terms of it.

Regional focus both China and international market.

Very important to us overseas is going to be the next.

Focus.

And in terms of your second question on our core competence and I think in the last two decades, you can see that net.

Is a company that was focused and dedicated in content creation and secondly is that we value our talents and thirdly is that is that we are very much.

High quality driven.

So we know when we think about creating games, we're not thinking about just in China, but also lithium that we're also taking a global vision, we want to be able to serve the global market as well and and then all in all we think that talent.

Perhaps the most important thing for us.

Our sustainable growth and we want to continue to attract and retain talent that share our passion in game creation. Thank you.

Thank you.

We'll take our next question from Alex Poon with Morgan Stanley .

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So if you go to the one one call it would take to check it out to go to some roadblocks you guys Youre speaking Ty.

C&I there you go.

It's just an existing client.

It's something that you may have.

So what was the actual sounds yet.

Yes.

Thanks management for taking my question two questions.

First question is related to our legacy titles.

Recently macro environment has not been very good and consumption advertising, it's not been doing well.

This was driven by CRO environment affects our legacy titles.

Especially those high paying users and also there have been some daily limits on the loot box.

Awesome gains.

This change affect our growth of our legacy titles and the second question is related to the status of Lord of the rings and the roadblocks like platform that we discussed before in December .

Is there any chance that these two games will come out in Asia in first off thank you very much.

Nick <unk>.

Corporate lawyers take quite.

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So no time to participate on that.

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Meanwhile, client installment, you'll just see that the lesser known 2019 the Copa Com.

For the user scenario.

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So starting in the front here.

So Alex for your first question is from.

We are seeing our legacy titles are actually growing very well.

Throughout last year.

And I think what you mentioned about the price Joy actually has very little impact on us.

We've been very conservative in terms of how we monetize.

And.

Well games by actively Jay if you remember is actually a time based.

Type of game.

Your second question lot of things, we are going to release that game in Hong Kong, Macau and Taiwan.

And for your first question, we are going to have.

Actually and developing some of the UGC.

Good game.

And then so systemically will be.

HD introduced two to that to the players.

We'll go next to Ashish, Thank you very much TICC.

Consequently, the transition whether to go see how it comes in.

John can you tell us how close you will know.

Hi.

Sugar <unk> tomo.

So that you can use <unk> to coordinate that you got that walk you downsizing the <unk> tender that you get a T shirt Chen CFO question.

Hi, Thanks management for taking my question and congrats on your great performance.

One is how should we expect the impact of observation acquired by Microsoft on their cooperation with Matty ice.

Especially for the past arrangement of licensed games and your cooperation on tableau and for them more.

The potential IP license. Thank you.

Great.

<unk>.

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From China, Australia, EMEA, social one E.

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Microsoft's.

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So Sebastian so really office how cute.

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John .

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China.

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Yeah, So both Microsoft actually Blitz have been better.

Partnership with Netease as a cost and we.

We've been operating and <unk>.

The main crop.

In conjunction with Microsoft and with which delivered.

Our strong results and we congratulate Microsoft Activision Blizzard.

Coming together and Microsoft David one of the largest gaming platforms in a world with Activision Blizzard is one of the best game creators in the World and we believe that that partnership will create.

Great synergy and it will create a positive impact on the game industry.

And in China.

We.

Have a close relationship with both of them and we believe that the partnership between purchase of Actavis is Activision plays that will also yield and strong positive impactful philosophy in China too.

From our perspective with also a lofty four explore more possibilities of working with lately with Microsoft.

Thank you.

Thank you we'll take our next question from Gary Wong with Citi.

Hello.

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Johan.

Yes.

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I hope.

You realize that to the market Q2 junior and you'll see that.

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At that time.

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You're talking about.

No if you find yourself.

Under the terms of the situation of the Master again industry.

Many game companies have also talked to our pipelines all optimized.

Optimize the resource allocation.

I would like to offer one of the probably the domestic and overseas market at the moment.

Not as well developed these are these jobs through key game categories driving to Yahoo resource allocation.

We approach our future pipeline.

Thank you.

Okay.

Steve.

Okay.

Got it.

Johan.

Jim.

Bill.

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Well my hands, all Joes jeans at poetry trend.

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Collaboration.

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However, it's just how that kind of tool.

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Charles.

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Okay.

Okay.

Yes.

So you had been a while since we saw new license approval for that either way.

Game content creator and we've been preparing for the overseas market for a long time for the past couple of years, you've seen some highlights.

Gains in Japan, and you're seeing us being able to attract some of that.

<unk> global talent to that team, we are committed to investing in a global market hopefully in the next two to three years, you will see some huge blockbuster titles being produced by Nike.

In the global on the global stage, whether it's self developed by us or it's in a partnership with some of our patent trend over the last 20 years, we have accumulated tons of experience in game development in terms of marketing operation in terms of R&D engine and all of those.

That will give us that strong edge in creating creating.

Globally successful game. Thank you.

Okay.

That will conclude our question and answer session. At this time I would like to turn the call back over to management for additional any additional or closing remarks.

Thank you again for joining us today, if you have any further questions. Please feel free to contact us directly or TPG Investor relations. Thank you have a great day.

Thank you everyone.

That will conclude today's call. We appreciate your participation.

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Good day and welcome to the net is 2021 fourth quarter and full year earnings Conference call. Today's conference being recorded at this time I would like to turn the conference over to market share.

Please go ahead ma'am.

Thank you operator. Please note the discussion today will contain forward looking statements.

The performance of the company and are intended to qualify for the safe Harbor some liabilities.

Tablets.

Privacy.

It's baked in reform.

Such statements.

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.

Discussion of the risk factors that could affect <unk> business and financial results is included in <unk>.

<unk> of the company with the Securities Exchange Commission, including its annual report on form 20-F, and announcements and filings on our website of Hong Kong Hong Kong stock Exchange. The company does not undertake any obligation to update these forward looking information except as required by law.

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

Reconciliation of GAAP to non-GAAP financial results. Please see the 2021 fourth quarter and full year earnings news 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 the net.

At IR at <unk> Dot com joining.

Joining us today on the call from net.

Senior management is Mr. William Ding, Chief Executive Officer, and Mr. Charles Yang Chief Financial Officer, I will now turn the call over to Charles.

The prepared remarks 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.

RMB.

2021 was an eventful year for <unk>.

For online games.

It used a number of prolific games, breaking new records and dairy categories.

Now, we quickly and successfully restructured our business.

<unk> of the new regulation will be.

Right.

And Youll now ready for its next phase of growth.

And for our cloud music business we're in.

Extremely pleased to have completed its initial public offering on the Hong Kong stock.

<unk> in December .

We look forward to growing this business further augmented pumps.

And aegis and.

And bringing more quality music to our users.

Sure.

For online games, we finished the year with a strong project.

Revenues came in at RMB, 17, 4 billion, representing 30% year over year growth.

Our flagship titles continue to demonstrate strong year over year growth after two decades of operation.

We continue to supply our loyal and sustainable base of users.

New content update.

Revenues from our fantasy westward journey and westward journey online saga continues to grow remarkably at double digit rates year over year.

The strengthening their position as China's biggest MMO titles.

In terms of our new game launched during the year narrowed a blade point was a clear standout with international success.

The game quickly broke sales records for buy to play gains made by Chinese developers and gained a claim as a top seller on themed best of 2021 games list.

Some of the America played point the excitement in the fourth quarter, followed our ROE out of content update.

For example, in our crossover with Bruce Lee, We brought a series of themed items based on the legendary Marshall Speaker into the America World.

Letting players unleash the fury of the dragon against their opponents and invigorating the global player community.

Keeping our games fresh with frequent updates.

Narrowed the blade points user base continuously hit new record.

The strong engagement and retention we are seeing today brings us great confidence that America <unk> point, we'll continue to attract users from all over the world.

We are now working diligently to bring players console version and mobile version of the game, which we look forward to bringing to our players in the very near future.

The highly anticipated release of Harry Potter Magic awakened.

Also took the market by storm as one of the most successful games in China last year.

Chanting millions of players and dominating both top download and grossing chart in China. Following its launch in September .

Harry Potter Magic awakened use is the best in class development capabilities of <unk> gains to bring players are captivating gameplay experience with compelling features.

In depth collectible card system and beautifully crafted arc style.

After a strong debuted in September we continue to extend the game's popularity by frequently eroding our captivating update that bring users rash gameplay cosmetic items and card every month.

Rising to the top three position multiple times on China's iOS top grossing game charts during the fourth quarter.

We share an equal excitement for the overseas versions of Harry Potter Magic awakened.

And our localization for other geography are progressing smoothly too.

Two weeks ago, we kicked off the closed beta testing for overseas players.

Average and the talent of two gaming and online entertainment powerhouses, we will work very closely with one of the brothers gains to coast published this amazing game globally, including in the U S Europe and Japan later this year.

We believe worldwide audiences will be delighted to embark on immersive adventures.

Taking a fantastical journey into the wizarding world of magic and in finite profitability.

In addition to these two blockbuster games. We are proud to have also launched a number of other titles in various brands new genres.

In our rich with new players and opening up new possibilities.

We launched <unk> in July our very first self developed racing game.

Ace races, realistic art style and real live racing track create an exciting and differentiated racing experience.

Players can travel to Hangzhou, Chongqing and other places to enjoy their unique and beautiful scenery.

A strong debut of Ace racer marks another leap in our genre expansion given that more confidence in our ability to create more successful titles outside of our comfort zone.

Infinitely grunge our space themed LG game launched in the third quarter is a great example, showcasing how we expand S. LG genres with its strong debuted in China.

One of our next generation <unk> titles.

Infinitely runge features an iconic space simulation experience active.

Activating hot cause SIFI players with its intense and exciting travel through time and space.

After six months of operation Infinite led round continues to show a healthy upward trend with gradually ramping revenue.

With our strong R&D capabilities and relentless pursuit of innovation.

We're constantly looking to break into new territories captive capturing new uses that reach beyond our traditional genres.

Moving into 2022, we have an abundance of new pipeline projects planned for <unk> point, and Harry Potter Magic awakened as well as a number of other strong titles ready for launch in China and globally.

Diablo immortal has been long anticipated by players community worldwide.

Our pursuit of top quality the game has taken us great efforts to create and refine.

We strive to bring our players the most authentic diablo experience restart of popular comeback style and immersive exploration exploration features and create a new story and claim play for the mobile platform.

Luckily for cleared the weight is almost over.

We have concluded the latest round of testing in January with highly positive feedback from players in both China and overseas market.

We are on track for its global launch this year and in China alone, we have already over 10 million players pre registered for this exciting title.

Additionally, Ghost World Nicole our self developed Chinese style Wi Fi RPG is also in the making.

We creatively integrated SIFI style with elements for modern cities and traditional Chinese culture, creating engaging Chinese style SIFI world with a distinct artistic style.

We are working diligently on development and hoping to bring a fresh and differentiated RPG experience to play here.

In the overseas market, we will be launching that by daylight mobile in Asia, which is the mobile version of the famous asymmetrical Battle Arena PC game.

We have to work jointly with behaviour interactive to build this mobile version.

And we are confident that players will find unrivaled asymmetrical competitive experiences.

Following the games released in the coming months.

As we create a larger presence on the international stage with our top quality games. We are also attracting global top talent into Medici.

In January we announced that we have teamed up with Mazda produce up.

Our sheet hero <unk>.

I'm a producer of Dr. Chris that one of the most famous and best selling game franchises in Japan.

We are building negotiate studio in Tokyo for the development of high quality games for global audiences.

We share a commitment to unleash the potential of created in an open and inclusive environment.

The new studio will have full authority to manage and create the kinds of gains that they are passionate about and we will be there to provide support throughout.

Over the past few years, we have also attracted top producers including.

<unk>.

Costco Com and <unk> stood out with these top talents joining us we will gain new inspiration and global vision to reach passionate gamers around the globe with high quality and engaging content.

Now turning to yourself.

Have completed a smooth business transition in compliance with requirements from regulators and achieved steady growth throughout 2021.

Total net revenues for <unk>.

RMB, one 3 billion in the fourth quarter, representing 21% year over year growth.

In addition, we achieved positive non-GAAP net income for the first time since our IPO.

Continuing operating cash flow inflow of RMB $142 million.

In the fourth quarter, we continued to upgrade our steam cost offerings.

Gross billings from our goal.

<unk> increased by around 130% year over year.

Recently, we launched <unk>.

So in chassis learning.

Through AI or person to person matches.

Complementary to our online offerings, we opened our first offline theme center in Beijing last November .

Offering courses such as our goal.

I called programming and <unk>.

So Sheila science to help improve children's skus in logical thinking unexplored scientific work.

We expect to expand the learning center with more diversified content in the coming periods.

Growth momentum from our leading smart devices also remained strong with new and improved content and features.

Net revenues from the segment grew 34% year over year to RMB $317 7 million in the fourth quarter.

Through a partnership with the commercial prep Shang reinsure.

The oldest and most influential publishing agency in China.

Exclusive content, including those from Xinhua Dictionary were added to our dictionary pen.

Additionally, in our new upgraded pro version of the Dictionary pen Personalised rioting assessment and improvement suggestion.

Our available for students at various stages of learning based on the vocabulary grammar and competition.

These features again powered by our strong AI technology.

<unk> optical character recognition and natural language processing capability.

As for Education Digitization solution, we have secured strategic partnerships with a number of local municipal including coffee Sharman and recently soochow to provide schools and teachers with our smart learning terminal and solution.

Powering that to effectively track students' learning progress and optimize teaching guidelines.

Turning to our cloud music business.

Throughout the year, we continues to make progress on our financial operational and corporate goals is.

Various product and content enhancement, we made strengthen our overall position amidst a healthier industry environment.

May you of online music services is stable in 2021 in.

In the fourth quarter net revenues increased 24% year over year to RMB, one 9 billion with continued increase in membership paying ratio.

We have managed to improve profitability, along with enhancements to our content library.

Attributable to copyright cost optimization.

In the fourth quarter, we enhanced our margins both year over year and quarter over quarter and achieved positive gross margin for the full year of 2021.

To foster our growing music community, we continued our product innovation initiatives in the fourth quarter.

Some of our upgrades included more individual personalization capabilities on our homepage.

Users can now access showcase their personalities and music preferences.

We also added a music colocation function in November .

Providing music enthusiasts with professional and accurate skull and services across our music offering.

In addition, we launched our brand new be trading platform in mid December .

Common data and transactions between deep makers and musician as well as music fan.

This platform has the potential to not only allow bead makers to realize commercial value, but also liberate individual musicians creative content enriching our content ecosystem and bonding our users together even more.

On the content side, we secured more high quality music from large IP owners and continues to mature independent artists.

By the end of the fourth quarter, we were servicing more than 400000 independent musicians.

Meanwhile, we have been making progress on our initiatives to produce music in house, which further diversifies and differentiates our content offering.

Going forward, we hope to bring more quality content to our platform to complement our music library, while working together.

Other industrial players to benefit all music lovers.

And to gain share.

One of the most loved lifestyle brands catering to the new middle class in China.

<unk> is redefining the lifestyles of China younger generation in.

Intensifying our focus on certain categories. We continue to launch a variety of popular product across core categories, including food electrical appliances household cleaning, Pat and beauty and skincare.

Our useful design led approach has enabled the products on our platform to gain increasing appeal with younger consumers.

As we grow each of our businesses. We are also very conscious of these effect on society and our emphasis on ESG initiatives has greatly increased over the past years.

We are honored to have our efforts acknowledged by MSCI.

Upgraded our ESG rating to aid.

In addition, we Scott 39 points in the Dow Jones sustainability indices, DJ assign more than doubling our score in the prior year.

Sustained than lipsticks ESG risks assessment scale that is received a score of 14 nine points, indicating a low level of ESG risk.

We are recognized by sustained led to.

SG industry top rated company and also like ESG Regional top rated company.

Along with our leading privacy and data security policies, the human capital development practices, we've made concerted efforts to reduce our carbon emission.

Prove our corporate governance and make increased contributions to charitable causes.

The global pandemic and environmental catastrophes have prompt many to find ways to do more for the society and we are no exception.

Adding to our recent disaster relief donations following the flats in Shenzhen.

We also committed an additional RMB 10 million to help local residents CCI in the wake of COVID-19.

With our solid financial reserves and continued strong performance improving shareholder return is always on our agenda during.

During 2021, we repurchased around <unk> dollars 2 billion worth of shares.

Paid us $551 million in dividends.

All in all we are pleased with our growth in 2021.

<unk> gained steady growth across each of our verticals positioning that is for continued growth in 2022.

Our focus on content creation, and elevating user experience with that is products and services remains at our call.

Moving ahead, we will continue to innovate diversify and expand our reach to generate further value for our users and investor community as a whole.

This concludes William's comments.

I will now provide a very brief review of our 221 fourth quarter and full year financial results.

Given the limited time on today's call I will be presenting some abbreviated financial highlights.

Courage you to read through our press release issued earlier today for more details.

Total net revenues for the year, while RMB $87 6 billion.

$13 7 billion, representing a 19% increase year over year.

We closed the year with fourth quarter revenue of RMB 24 4 billion.

$3 8 billion, representing 23% increase year over year.

For 2021, our net revenues from online game services were RMB $62 8 billion up 15% from 2020.

Revenues accelerated even faster in Q2.

To RMB 17, 4 billion up 30% year over year.

The additional growth was primarily due to increased revenue contribution from the launch of new games, such as American plate.

And Harry Potter Magic awakened.

Net revenues from our mobile games accounted for approximately 68, 3% for the full year for the fourth quarter and 74% for the full year.

Net revenues for 2021 reached RMB, five 4 billion up 69% year over year on a quarterly basis net revenue increased by 21% to RMB, one 3 billion in Q4.

Both increases were driven by fast growth of both your without learning services as well as increased sales of smart devices.

Net revenues from Metis cloud music.

RMB 7 billion for the full year up 43% year over year Q4, net revenue of cloud music increased 24% year over year to RMB, one 9 billion.

Both increases were primarily due to increased revenues from social Entertainment services, particularly audio based live streaming and paid user expansion.

Total revenues for innovative businesses and others were RMB 12 4 billion.

Yes.

13% year over year for the fourth quarter total revenues were flat year over year at RMB, three 8 billion.

Our total gross profit was 53% in the fourth quarter compared with 52% in Q4 of last year.

Looking at our fourth quarter margin in more detail.

Gross profit margin for our online game services remained stable at 64, 1%.

As a reminder, this number is generally stable with some narrow fluctuations based on the revenue mix of mobile and PC titles as well as revenue mix of self developed and licensed games.

Gross margin for the hotel in the fourth quarter was 57%.

<unk> was 47, 5% in the same period of prior year.

The growth was primarily attributable to our improved learning services gross margin due to improved economies of scale and continuous optimization of our faculty compensation structure.

Just substantial sales growth of smart learning hardware such as the <unk> Dictionary pen three zero also contributed to these gains.

This line carries a higher gross margin than other product lines.

GP margin format is cloud music was positive at four 1% versus a negative margin of seven 1% in the year ago period. This is our third consecutive quarter of positive gross margin.

<unk> increase was primarily due to the strong topline growth as well as improved cost control measures.

Gross profit margin for innovative businesses and others was 26, 8% compared with 28, 2% in Q4 of 2020.

The decrease was mainly due to the decreased GP margin from advertising services.

For the full year total operating expenses were RMB 36 billion or 35% of our total net revenues for the fourth quarter total operating expenses were RMB, eight 3 billion or 34% of match revenues.

Looking at the fourth quarter, selling marketing expenses as a percentage of net revenues was 13, 5%.

Paired with 14, 1% in the prior year quarter to quarter over quarter decrease was mainly due to decreased marketing spending related to Utah.

R&D expenses, while renminbi, three 8 billion largely stable from the previous quarter.

We remain committed to investing in content creation and product development, which is core to our revenue growth into the sustainable future.

The effective tax rate was 19, 6% for the full year and 14, 2% for the fourth quarter.

As a reminder, the effective tax rate is presented on an accrual basis and the tax credits differ from each of our entities at different time periods, depending on applicable policies and our operation results.

Our non-GAAP net income attributable to our shareholders for the fourth quarter of 2021 totaled RMB six 6 billion all U S dollars 1.04 billion non.

non-GAAP basic earnings per ads for the quarter was U S dollar 1858 or U S dollar euro.

32 per share.

Our cash position remains strong as of year end, our total cash and cash equivalents current and non current time deposits and short term investment balance totaled RMB $103 4 billion compared with RMB 101 billion as of.

December 31st 2020.

In accordance with our dividend policy. We are pleased to report that our board of directors has approved a dividend of U S. Dollar 0.081 per share our U S dollar 0405 per avs.

Lastly, under our share repurchase program approximately 18 $5 million has been repurchased as of December 31st 2021 for a total cost of approximately approximately USD one 8 billion means.

Meanwhile, under Matt is your.

Share purchase program approximately 0.6 million Aes has been purchased for a total cost of eight 2 million U S dollars as of the year end.

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

Please go to Q&A.

Yeah.

Thank you if you would like to ask a question you may signal by pressing 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. Once again star one for questions. If you ask your question.

If you wish to ask your question in Chinese Please immediately repeat your question in English.

We'll take our first question from Joe <unk> with Nomura.

Good evening management, Thanks for taking my questions congratulations on the solid quarter.

Well no one is going to take.

<unk> all got Charles <unk>.

Sean <unk>, Johnny you talked about anytime to assortment HSE meals.

And I.

Now I'll dig up on Hajime accurately sounds in the balance sheet, you'll see the Diablo immortal and genotype.

All right.

I mentioned one of your tongue.

John you talked to the Diablo Immortal Taichung science in it.

And again similar email J D.

<unk>. My question is about games pop line, just wondering if management can provide an update on the latest game pipeline for this year and humming up then Youll games have already received license and will be released this year called one of the new game Diablo Immortal, which has already received a license in China, Canada.

Management provides an update on its launch timeline. Thank you.

Okay.

Okay.

Maybe a woman.

<unk>.

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Clear laboratory.

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Total lift towards the positive.

I know you are watching.

Hi.

Sure.

Aiming to launch timelines in the first half of this year and obviously for Diablo, we already have the license approval, we're going to launch it in China.

As well as globally. Additionally, also going to any issue.

The overseas version of Harry Potter.

Thank you della.

Okay.

Oh.

Thank you we'll take our next question from Kenneth Fong with Credit Suisse.

Alright, Thank you Charles.

This is just sort of to you would you continue with ICU Zalviso <unk>.

It wasn't.

<unk> had a quota, which I pointed to the container technical vivo tissue woman you guys to Mercury's chunk to go Yoshida, so I'm going to cheat.

Dr <unk>, who I thought, but woven okay cool, thanks, Alisha <unk> dosage Npls, where should I go for Josh simply to true high Orlando Some what's called me on my sheet here.

Well, it's easy for Asia.

Thank you management for taking my questions and congrats on another solid set of results.

Q2 sets of Harry Potter Magic on the weekend in China bus our view on the longevity of the game and the timeline strategy in region for the overseas launches. Thank you very much.

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<unk> had a quota.

Thanks.

Okay.

As you know <unk>, we have lots of experience in running our games for a long period of time and some of the examples are at the other day that the Jay and on EOG and so have Carter. This is a type of games, that's about consuming content and sorry that longevity is very much linked to how much content is available to the to the game.

Play it.

So we will continue to de lever are there things exciting content to keep our users engaged in terms of overseas.

We are aiming to issue it.

In the middle of the year.

Thank you.

Thank you we'll take our next question from Alicia Yap with Citi.

Hi, Thank you and Glen Ito why Shanghai can you take this all weather.

One Oh, what Danielle <unk>.

<unk>, so Q1 ton that I go a month.

Thanks, guys as usual Joe.

Totally E.

Carl Lee Joseph Schwartz Daniel.

C <unk>.

Sure sure sure play Fi Tim.

Tien Chinese high finding why you've got that right now.

So again you saw that again now.

When I got home quite that you thought you were saying that well Joshua Gladney time, Paul just circling wallman Pinoy casual shoe for GCI that you cant Cleveland Fiat and Ashish.

Ginger, which I should go go ahead. Thanks.

Yes.

Does that sound.

What's that.

Yeah. So I have two questions one is regarding the matter.

The care management.

Chevy, but why do you think about Mad dog was would you consider adding some Matt opex.

Into existing games or launch.

Work off some of the existing team in the Mab members. Secondly, the second question is related to cloud music can you comment on the pricing trend for the second question and also overall infrastructure growth target at the margin trend for the business. Thank you.

Okay.

Okay.

Quick question on Angola.

Okay.

Okay.

Hey, Jordan.

Sure.

It's just that Delta.

<unk> shown you our assurances as Jay <unk>.

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While he is suitable Mrs.

And I see Jeanne Johns thoughts.

And then more attitude.

And then to the balance sheet.

John Gallina to year happens.

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Any sort of surgery.

We're seeing particular pricing.

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So the new hall that Jeff I'm going to use some of the other function cohorts in passports.

Dr functional effects Youll see Lee Jagoda CJS.

Shout out to John again.

Sure.

Yes.

Shareholder interest anyway.

Solid tissue.

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John This fascinating subsidiary.

Cancel it.

Shutdown quarter Jonathan.

Yes.

Thank you.

Our understanding is that most of it is that.

<unk> between the virtual world and reality.

<unk> SG&A, we have many many years of operating and then RPG game and MMORPG games, it's very heavy social elements unnecessary sophisticated economic system and in some uncertainty in certain ways you can have it got it.

Although our prototype format of it.

And so we will continue and in that way and then secondly.

Just on our existing technology will also it will also be exploring possible new game format today.

Sure.

So anyway I just wanted to be.

Alright.

Hi, John .

One.

Well Lisa Tor.

Sure.

Two job a needle just literally assortments.

Hi.

Slide.

Joe Allman.

Cool.

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So you'll go towards Gulfstream.

<unk>.

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Neither.

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Ashish.

Cool.

So sort of looking for a seasonally give ya.

Sure.

Okay.

Firstly.

Calvin is it will continue to grow through comprehensive content offering and one of that is to continue to produce high quality and exclusive content and much of it will be self produced.

Bye bye ourselves in house, and I believe and we believe that everything will be able to deliver to the Chinese consumer.

A lot of the high quality Chinese pop music and.

For them and this is Tom.

Content strategy is our.

What is the main focus so comfortable profile with wells make pension.

Thank you.

We will take our next question from Natalie <unk> with Haitong International.

Hi, Ronnie.

Ronnie conditional with win T.

Go see them accounting of Yankee.

Seeing no question and do that today.

Darren if you why you're taking you're not so much on the agenda.

And then tied to better you get them down.

You too.

Hi, <unk>.

Yes.

<unk>.

Yes.

I will translate myself.

Thanks for taking my question and congratulations on very solid quarter is like the upcoming 2022 will be a full point year, considering all those quality names in your pipeline. So my question is regarding the headline.

Head Count plan for this year, just wondering which business line has the most account incremental plan and regarding the global expansion, what which southern regions out of most of our major target markets that you cannot put.

Most at this time thank you.

But hey look what other ones here.

Yes.

Okay.

Alright. Thanks.

That's a big focus on me and fully equipped.

Yes.

Transfer date.

So about <unk> yet.

Hello <unk>.

Tim It's a useful.

Sure.

<unk> had a contract with Samsung to take questions.

Something with Ikea.

Current quarter trends.

Hosting researchers.

Sure.

So it's not one year.

Okay.

<unk> syndrome.

When I say appointments.

Yes.

Sure.

Okay.

<unk> industrial design.

Yeah.

Yeah.

In terms of head Count plan I think our focus this year will be.

Global talent as you can.

As we mentioned in our prepared remarks last year, we managed to attract many of the top talent globally and that will continue to invest in this area and so very soon probably be see more of the global talent joining joining Matt in terms of.

The hiring plans in China, it should be no change from previous yet thank you.

We'll go next to Thomas Chong with Jefferies.

Okay.

So you said one is holding.

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Pete.

One woman.

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In the Eagle project.

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Is there a limit on enrollment those ship with hang that again.

<unk>.

We reported a lockup.

So I'm glad you.

So I wanted to talk a little bit first on this album and natural <unk>.

Thanks management for taking my questions.

Can we discuss about the upcoming new games to be wrapped up in multiple devices like console PC and mobile in order to target the global audiences in different regions and my second question is about our core competence in developing a high quality titles on a consistent basis like Henry Potter.

Thank you.

Yes.

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So unless you see fast songs.

We like.

Sure sure sure.

GC Council.

Sure.

Sylvia.

Sure.

Highway assortment of sodium.

So I mean, let's just sort.

So it's just how much unrealized sure let me go at Silicon Julia cholesterol in Mississauga.

So be that sure John the way you should also be a woman.

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No.

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Partially alto Yoshida.

Literally all sorts of Melissa.

While usually the physical chunky consumer charges.

Took a yoshi linear.

On social impact as well.

First of all sorts of options.

Thanks, a lot.

Yeah.

The rewards.

Well listen as a true highway you Alfonso.

<unk>.

Sure sure sure.

Are you guys really else.

So does that mean thats usually on the shipment.

Well I'm not sure on the go also.

So would you.

Josef just south of the room.

Hello.

Until mid July .

Sure.

Vitol Chongqing.

Tissue.

Okay.

Okay. Thank you.

So Thomas the first question in terms of.

A new type of games.

In addition to mobile game PC and console will also be an important area for us and so any media you think you can imagine.

<unk> is an area that we want to explore.

It's why we want to create game content for in terms of.

Regional focus both China and international market that we're in.

Important to us overseas is going to be the next.

Focus.

And in terms of your second question on our core competence I think in the last two decades, you can see that net.

Is a company that is focused and dedicated.

Content creation, and secondly is that we value our talent and thirdly is that is that we are there.

As much high quality driven.

So we know when we think about creating games, we're not thinking about just in China, but also linking that we're also taking a global vision, we want to be able to serve the global market as well and and then all in all we think that talent.

Perhaps the most important thing for us.

Our sustainable growth and we want to continue to attract and retain talent that share our passion in game creation. Thank you.

Thank you.

We'll take our next question from Alex Poon with Morgan Stanley .

Okay perfect.

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Switching homeland Synchondrosis be job Huron.

Guangzhou <unk>, some time ago kind of ECA southward to guide them through our self audits.

So.

When you're traveling now youll see.

So you found annual meal, so Dr. Jacob <unk>, selling OTC to $6 from failure.

Perfect.

Yeah.

Jai <unk> types of condo converter yossi types.

Shallow <unk> diabetes, so cobalt cell phone in.

It just seems as though you're a woman that now you'll see some other things.

<unk>.

So if you go to the one one call it would take to check it out to go to some roadblocks you guys Youre speaking Ty.

C&I there you go.

Within existing clients.

Something that you may have.

So what was it sounds good.

Yes.

Thanks management for taking my question two questions first question is related to our legacy titles.

Recently macro environment has not been very good and consumption advertising, it's not been doing well.

We come back row environment affects our legacy titles.

Especially those high paying users and also.

Have been some daily limits on the loot box.

Gains.

This change affect our growth of our legacy titles.

Question is related to the status of Lord of the rings.

The roadblocks like platform that we discussed before in December .

Is there any chance that these two games will come out in Asia in first half. Thank you very much.

Okay.

Nick Cave.

Yes.

Biologics take quiet well listen carefully.

Hey, Lisa.

So no time to participate.

Trillium bulk authorizing and transit.

John .

Can you sort of went.

Went up I think you said it yourself.

Popcorn.

Languages COBOL assembler.

So now were little lower usage.

Software to a quite sure sure sure.

Could for them, so it's really quite a sensible to do so.

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Sure.

Traditional leads digital upon their lawyers, who don't have come.

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Continue with.

The article two.

Symptom.

Sure sure.

Meanwhile, client install number youll see thats, a quite well listen are you with 2019 the Copa <unk>.

For the UGC needle.

Clearly, you'll just see little gel foam for the time to push pricing and CRM solutions here.

So Alex for your first question is from.

What we are seeing our legacy titles are actually growing very well.

Throughout last year.

Thank you would you mentioned about the price Joy actually has very little impact on us because we've been very conservative in terms of how we monetize.

And in four games by actively Jay if you remember is actually a time based.

Type of game and your second question lot of things, we are going to release that game in Hong Kong, Macau and Taiwan.

And for your third question, we are going to have.

We're actually developing some of the UGC oriented game.

And then so you said some of them will be.

HD introduced two to that to the players.

We'll go next to Sanjay Thank you very much TICC.

Consequently, the transition with <unk>.

John can you tell us that gives you a woman who come back they ran sugar Deutsche about time until you close whether you can use <unk> to coordinate that you got that walk you downsizing that <unk> turns out that you get a T shirt Chen CFO question.

Hi, Thanks management for taking my question and congrats on your great performance.

One is how should we expect the impact of activation acquired by Microsoft on their cooperation with Nettie.

Especially Florida past arrangement of licensed games, and your cooperation on tableau and for them more.

The potential IP license. Thank you.

Great.

Post about should sorry of course sure.

China, Australia those Hawaii.

Please <unk>.

Okay.

Neil.

Mike.

Okay.

<unk>.

Question, please on mature shampoo sugar.

Yes sure.

The <unk>.

Limo vehicles.

Uh huh.

The dose departure.

You can go to the chart.

So the Wuhan social sources, just to just show that.

The budgets were three <unk>.

Either you're shipping.

So first of all.

And that she really office, how cute, Florida, you will show that.

Actually the legal or should I.

If you can comment on that.

In addition, though.

It's related to the.

Yoshida.

Without the Plaza.

Shiga.

Could you please.

Sure.

It's just so much that goes with Geneva.

The Java Swiss chocolate bar.

Well essentially.

Jeff Hammond.

So go to amortize over the year with the farther out you see a result sunshine.

So on China.

Just a woman.

Each year.

First of all I E.

Okay.

We are.

Most of our share.

How do you how does that go.

Our daughter.

So we the hedge will assist you.

Yeah. So both Microsoft Azure pillars have been very close partnership with Netease as a cost.

And we've been a we've been operating.

The main crop.

In conjunction with Microsoft and we delivered that.

Our strong results and we congratulate Microsoft Activision Blizzard.

Coming together and Microsoft data one of the largest gaming platforms in a world with while Activision Blizzard at one of the best game creators in the World and we believe that.

The partnership.

Great synergy and it will create positive impact on the industry.

And in China.

Have a close relationship with both of them and we believe that the partnership between pockets of activism. Activision plays that will also yield and strong positive impactful for us in China too.

From our perspective would also love to explore more possibilities of working with lately with Microsoft.

Thank you.

Thank you we'll take our next question from Gary Wong with Citi.

Hello.

Yeah Okay.

Okay.

How long do you wait a holds hello, okay.

Okay Noma.

Yes.

Okay.

Thank you.

Yes.

Thank you too.

No we are looking for options.

We kind of assume that until they get the weather. It was just what your problem is you can't go up.

As you can see that's all of them.

Cool.

Yes.

I'm.

Johan.

Yes.

There's nothing that would cause us to go coincides with when they go sometimes it's on the shelf.

So there should be but as youll see the cohort on constantly telling me what the unlocked a whole album.

You will I go to the Apache junior and you'll see that.

Pedro Colleagues' agenda.

T Gallazzi doubtful that we will see the tonnage.

Thank you.

<unk>.

No it's easy to find jobs.

Under the current situation of the mastic and industry.

Many game companies have also taught their pipelines all optimized.

Optimize the resource allocation.

I would like to.

Probably the market on the overseas.

Most of that environment, how not as well developed these are these jobs through key game categories strategy also resource allocation.

The future pipeline.

Thank you.

Okay.

And then on Wednesday.

Okay.

Got it.

Johan.

Jim.

Bill.

The Hawaii Lashawn, let's see the fashion this year.

Well my hands, all Joes jeans at poetry.

And showed us how potentially impact.

So you can kind of course.

You bet.

You should assume rollout.

Yes.

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No.

Should have Asia Guadiana Tulsa.

Sure Linda.

So Jordan your Chicago.

Sure Michael.

Okay.

Womens.

Hi, This is Kate Hall.

However.

Jordan.

Hello, Jim.

Okay.

So the freestyle.

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Southern zone.

We'll miss you on time.

I was wondering any hope.

Hello, This is <unk>.

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That is helpful.

Why is this so that you will see high silica.

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Charles.

Sure.

Got that.

Hi.

Should that should let us see.

That's you won't see that sushi.

Yes, Hi, Seamus.

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Sure.

So again.

Youll see kind of a father.

Jim here.

In Q2.

Hey, Paul.

<unk> yeah.

So this is all turned on Virginia changing is so critical especially with Honda to Jordan.

And jacko shoulder Boucher.

Sure.

Okay.

Yes.

Yes.

So you have been awhile since we saw new license approval for that either way.

Game content creator and we've been preparing for the overseas market for a long time for the past couple of years, you've seen some highly successful games in Japan, and Youre seeing us being able to attract some of the biggest global talent to that is we are committed to investing in a global market.

Hopefully in the next two to three years, you will see some huge blockbuster titles being produced by Nike.

The global on the global stage, whether it's self developed by US is in a partnership with some of our pattern over the last 20 years, we have accumulated tons of experience in game development in terms of marketing operation in terms of R&D engine and all of those.

That will give us that strong edge in creating creating.

Globally successful game. Thank you.

Okay.

That will conclude our question and answer session. At this time I would like to turn the call back over to management for additional any additional or closing remarks.

Thank you again for joining us today, if you have any further questions. Please feel free to contact us directly or TPG Investor relations. Thank you have a great day.

Thank you everyone.

That will conclude today's call. We appreciate your participation.