Q4 2022 NetEase Inc Earnings Call
Speaker 1: The.
Speaker 2: Today's conference is being recorded.
Speaker 2: At this time, I would like to turn the conference over to Margaret Sure, IR Director of NetEase. Please go ahead. Thank you, operator. Please note that the discussion today will contain four looking statements relating to future performance of the company and are intended to qualify for the safe harbor from liability.
Speaker 2: as established by US Private Securities Dictation Reform Act. Such statements are not guaranteed for future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond competence control and could cause actual results to differ materially from those mentioned in today's press release and in this discussion. A general discussion of the risk factors that could affect the business and financial results is included.
Speaker 2: in certain findings of the company with its securities exchange submission, including its annual report on Form 20-S and announcements on the findings on the West Side of Hong Kong Stock Exchange. The company does not undertake any obligation to update its 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 the definition of the non-GAAP financial measures and the reconciliation of the GAAP to non-GAAP funding results, please see the 2022 fourth quarter and the four-year earnings needs release issued earlier today. As a reminder, this conference is being recorded. In the kitchen, an invested presentation and a webcast replay of this conference call will be available on the next....
Speaker 3: businesses paved the way for meaningful financial gains.
Speaker 3: We achieved another record high net revenues of RMB 96.5 billion for the full year, up 10% year over year, with gains and related value-added services coming in at RMB 74.6 billion for 2020 also up 10% year over year.
Speaker 3: This demonstrates NetEase's unique ability to deliver solid and sustainable growths throughout different macrocycles with time proven track record.
Speaker 3: In the fourth quarter, players continue to show their strong passion for our legacy titles, including Fantasy Westwood Journey Online and the Westwood Journey Online series.
Speaker 3: With our consistent roll out of content updates, these games have been staying at the forefront of the market for almost two decades. I claimed for their robust ecosystem and depth in game design. Adding to their success, we will soon introduce Westwood Journey Returns.
Speaker 3: a more casual and light version of the legacy IP. This game is designed to retain the essence of the franchise and has sparked a resurgence of interest amongst older fans, giving them an opportunity to relive cherished memories. With this new addition,
Speaker 3: We anticipate a further expansion of our user base of the Westwood journey online franchise. Our new game, Aggie Party, took the game market in China by storm in the fourth quarter.
Speaker 3: The game was initially launched in May of last year and the number of daily active users has been continuously growing after a few months of operation and fine-tuning. During the Chinese New Year, Agiparty further grew its user base exponentially through word-of-mouth and scaled new heights to the number three position in China's IT industry.
Speaker 3: which distinguishes itself from other party games through the unique contribution of user-generated content.
Speaker 3: Players of every party are encouraged to take advantage of a diverse toolset available in editor mode to design and publish new levels on the platform. As a result, player engagement with user-generated content has further enriched the content spectrum meet difficult, critical spring
Speaker 3: on top of our in-house PGC content. This setup creates a virtuous cycle that continually adds fresh content to the platform and enhances player engagement and loyalty, with a goal of cultivating a thriving and self-sustaining ecosystem.
Speaker 3: us in terms of our efforts to expanding to casual games.
Speaker 3: We have been steadily building up our capabilities through many great games over the past few years. For example, our award-winning adventure mobile game, Sky, which was launched in 2019, also delivered a strong performance in the fourth quarter.
Speaker 3: Sky offers players a heartwarming gameplay experience and has established a dynamic and passionate fan community.
Speaker 3: With a cool Halloween update during the quarter, Sky also surged to the top position on China's iOS top-grossing charts. While experiencing significant progress in casual games, we have also maintained our strong presence in the hardcore genre. This is evidenced by the sustained popularity of our key titles.
Speaker 3: such as Invincible and the mobile version of New Ghost. Now let's move on to our pipeline. 2023 is exciting. We are set to expand our reach even further with a host of new titles. We have already received license approvals in China for a number of exciting titles, such as Justice Mobile Games, Racing Masters, and Bad Lenders.
Speaker 3: Starting with the Justice mobile game, it complements the success of the PC version and aims to be rolled out later this year. The mobile version will recreate the vivid world of the Sone Dynasty on mobile devices with cutting-edge game technologies such as real-time ray tracing for amazing graphics that bring in-game scenes to life. With the extensive support of a highly skilled and experienced development team,
Speaker 3: Just as mobile games boast a wealth of exciting and engaging content that players can enjoy for a sustained life cycle, equally importantly, as a next generation MMO, this game represents a major evolution beyond the conventional norms of player interaction within the MMO genre, offering a truly unique gaming experience. We think the captivating and immersive open world experiences we have created with just this mobile game.
Speaker 3: will continue to raise the bar for both MMOs and the broader mobile game industry. Second, the launch of Racing Master is also on track.
Speaker 3: As our second car racing game, Racing Master boasts a AAA quality racing stimulation. Players can expect an authentic racing experience with dynamic car handling and performance. With a range of over 100 licensed vehicles from renowned car brands globally, players can fully immerse themselves in the thrilling world of racing.
Speaker 3: and experience it like never before. As for Badlanders, it is our next generation looter shooting mobile game.
Speaker 3: featuring a brand new escape mechanism and exciting looting experience on the battlefield. We will go through rounds of testing and hope we can bring this game to life soon. On the international front, we are preparing the highly anticipated global launch of our Harry Potter Magic Awakened. Our team is making dedicated efforts to continue enhancing and refining its gameplay
Speaker 3: and user experience. Ensuring that our global players will live the amazing wizardry life on both mobile and PC. At the same time, we are also working on the series of expansion packs that will be ready to go so that our global players will always have plenty of engaging content. Looking beyond these launches, we continue to enhance our robust pipeline and are actively working on a variety of exciting new game titles, including narratively point mobile version.
Speaker 3: These pipeline games are making solid progress and show great potential. In the fourth quarter, we have also made further progress in our global expansion efforts. For example, we are thrilled to welcome Canadian-based Skybox Labs to the NetEase Games family. Skybox Labs has an impressive track record in game development and has contributed to some of the industry's most renowned franchises such as Halo Infinity, Minecraft, and Fallout 76. and has measured soil prices earlier this month.
Speaker 3: We also announced the establishment of Spliced, a new global game studio. Spliced is driven by a talented group of passionate industry gurus from a variety of backgrounds, including participating in the development of major game franchises like GTA, Call of Duty, The Sims, Rocket League, and Red Dead Redemption. We value their dedication and innovative approach and look forward to supporting the development.
Speaker 3: of their latest project, which seeks to redefine gaming and how we engage with it. We are excited to see what thrill the splice will bring to the industry and the impact they will have on the gaming landscape. After years of planning, we've built up a robust portfolio of NetEase Global Game Studios, spanning multiple continents, and established strong connections with the best-in-class talent within the global developers community. As we further expand our global ambition, we will continue to grow our business.
Speaker 3: We are unwavering in our commitment to providing the support and resources needed to unleash the full potential of gains and more broadly speaking interactive entertainment. In 2023, we will remain dedicated to fostering an environment where our talented developers can harness their full ability and bring their innovative ideas to life. With the ultimate goal of creating uplifting experiences and next-generation blockbuster game franchises for our global players. Moving on to your thoughts. During the fourth quarter, your thoughts achieved rapid-breaking net revenues of RMB 1.5 billion and for the first time ever a positive income from operations.
Speaker 3: which totaled RMB 25 million. This impressive outcome is a testament to our constant efforts to provide cutting-edge updates for our smart devices and enhance our learning services. Net revenues from smart devices hit RMB 407 million. The eight percent year over year in Q4, thanks to the successful launch of new products. Our new product, Yozal Dictionary 10P5, now has translation capabilities across more than 100 languages and expands our dictionary vocabulary in 16 professional fields such as economics, law, medicine and computer science. Its user experience is further improved.
Speaker 3: with even greater recognition accuracy, leveraging our natural language processing technology. We also launched EODEL Smart Learning Pack X10 with an improved learning dashboard, supported by AI for better personalized learning experiences. These sharpened iterations of our smart devices have garnered robust demand from customers, translating directly to substantial growth in sales.
Speaker 3: Our STEAM courses delivered another quarter of strong growth. In Q4, we collaborated with Minecraft Education Edition and successfully launched Enriched Updates to Youdao Literature. Youdao Literature is an online learning app that provides an immersive learning experience aimed at developing a comprehensive range of skills.
Speaker 3: Using artificial intelligence technology, Yodao literature delivers a wealth of engaging learning materials that combine literature, traditional culture, and stories, as well as tours of iconic architectures globally. The highly positive reception from learners and parents.
Speaker 3: is evidenced by the app's impressive subscription rate and renewal rate. In addition, we strengthened our Youdao Gold Course offerings by introducing the Champion class, led by Ke Ge, a world champion in gold tournaments. Our Champion class is part of a comprehensive learning path that covers everything from entry-level to advanced.
Speaker 3: and culminates in the champion level classes. This new offering was met with great success, bolstering growth billings by more than 50% in Q4 year-over-year, along with a remarkable retention rate. Looking ahead, we will continue to focus on technological innovation and leverage our cutting-edge technology to ensure the long-term success of our smart devices and learning services amongst others.
Speaker 3: Now, let's look at our cloud music business. In 2022, we achieved record financial results while enhancing our music-inspired offerings and differentiated music ecosystem. Total net revenues for cloud music in 2022 were RMB9 billion, representing 29% growth year over year.
Speaker 3: Due to steady sales growth rate and an optimized cost structure, we continue to see strong growth margin expansion, which reached 14.4% for the year and 17.8% in Q4, up from just 2% and 4.1% respectively from the previous year. We've continued efforts to provide better user experiences and bring music lovers broader music listening scenarios. Our total MAUs for 2022 was 189.
Speaker 3: being music, which produces music for nationally renowned stars, including Mayday, and pop Japanese music labels, Pony Canyon. Additionally, we renewed our cooperation with SpaceX, one of the 10's largest music labels. Throughout 2022, we also established partnerships with other leading Asian labels.
Speaker 3: including FM Entertainment, YG Entertainment, Emperor Entertainment Group, China Records Group, Feng Pa Qiu Shi, Modern Sky, and Yue Hua Entertainment. By continuously expanding our music library, we are working to provide even broader selection of offerings.
Speaker 3: to our community of music enthusiasts. Digital albums, particularly those from well-renowned artists such as Hua Chenyu and Jihyo witnessed impressive sales in Q4, demonstrating high-quality audience base, deep user engagement, and users' increasing willingness to pay for premium content on our cloud music platform.
Speaker 3: Meanwhile, the top 10 best selling digital albums of 2022 on our platform spend diverse music categories including Chinese pop, K-pop, Western pop, Chinese folk songs and alternative rock showcasing the personalized music taste of our young and diversified user base. With an unwavering commitment to fostering an inspiring environment.
Speaker 3: in which musicians are encouraged and empowered to create. We introduced several new forums to support this effort. We launched Music Talk, an online column that allows musicians to exchange ideas on professional topics that help with creation. We also rolled out the Original Music Zone and the Local Zone to help music lovers explore new music content and expand independent artists' exposure.
Speaker 3: By the end of 2022, the number of registered independent artists on our platform has surpassed 600,000. Our in-house music studios also made solid progress, popularizing a batch of hit songs, including Goodbyem Monica, Ruobani, Pa Saihu, and demonstrating our ability to produce excellent music content organically. And this one of the many reasons that set our platform unique.
Speaker 3: Going forward, we will continue to prioritize product innovation and content creation to further grow our community. Moving on to Yenshan. In the fourth quarter, our private label consumer brand launched more popular products through diversified channels. Adding to our concentrated categories like pet supplies, home cleaning products, and home furniture, we released popular items such as detergents, bathroom fragrances, and Chinese New Year gift boxes.
Speaker 3: We will continue to focus on original design, facilitating present lifestyle options for consumers. Looking at our business as a whole, we are honored to have been recognized for our contributions to society in terms of our environmental, social and governance practices. We are recently added to the 2022 Dow Jones Sustainability Index.
Speaker 3: and continue to obtain outstanding ESG scores on MSCI and Sustainalytics. Furthermore, our dedication to diversity and equality has led to our second year of inclusion in the Bloomberg Gender Equality Index.
Speaker 3: We remain committed to continuing the work of advancing equality, diversity and inclusion, and building a company where people are treated with the respect and dignity they deserve. We believe a truly inclusive workplace will be viewed with creativity, innovation and development. And this motivates us to push forward. We are committed to continuing the work of advancing equality and inclusion, and building a company where people are treated with the respect and dignity they deserve.
Speaker 3: During 2022, we continued strong performance in each of our business lines and made new progress in each major vertical we operate in. Our extensive portfolio of products and services are reaching audience on a broader scale as we move forward to our global aspirations.
Speaker 3: And with the solid ground we gained across our businesses, we believe that we are well positioned to achieve even more in 2023 and beyond. Looking forward, we will continue to innovate, diversify, and expand our reach to generate value to our users and the broader stakeholder community. This concludes William's comment.
Speaker 3: I will now provide a very brief review of 2022 annual results with a focus on the fourth quarter. Given the limited time on today's call, I will be presenting some abbreviated financial highlights.
Speaker 3: We encourage you to read through our press release issued earlier today for further details. Our total net revenues for 2022 were RMB$96.5 billion or USD$14 billion, representing a 10% increase year-over-year. For the fourth quarter, total revenues were RMB$25.4 billion or USD$3.7 billion, up 4% year-over-year.
Speaker 3: For 2022, our net revenues from gains and related value-added services will RMB $74.6 billion, up 10% from 2021.
Speaker 3: Despite a high base in 2021, total net revenues from our gains and related VAS continued year-over-year growth in the fourth quarter, reaching RMB 19.1 billion, an increase of 2% year-over-year. The growth was primarily due to increased revenue contribution.
Speaker 3: from both our existing games such as Fantasy Westwood Journey Online and Fantasy Westwood Journey Mobile Games and our new Bloodbuster Hit, the Avlo Immortal, which we introduced mid of the year last year. Revenue from Mobile Games continue to make up a line share of our games' businesses.
Speaker 3: accounting for 66% of our total net revenues in the fourth quarter and 67% for the full year. The adult net revenues for 2022 reached RMB 5 billion and in the fourth quarter were up 9% year over year to reach 1.5 billion RMB.
Speaker 3: primarily due to increased sales of our new services and smart devices. NetEase Cloud Music's net revenues were RMB 9 billion for the full year, up 29% year over year, and up 26% year over year in the fourth quarter to reach RMB 2.4 billion. The increase was mainly due to the contribution from membership subscriptions.
Speaker 3: and digital album sales. Total revenues for innovative businesses and others were RMB 7.9 billion for the year, up 7% year-over-year. And in Q4, this segment recorded RMB 2.4 billion net revenues, up 3% year-over-year, mainly due to increased revenue contribution from Yencheng.
Speaker 3: Our total gross profit margin was relatively flat in the fourth quarter at 52.2% compared with 53% for the same period in 2021. Looking at our fourth quarter margins in more details, GP margin was 59.1% for our games and related VAS compared with 60.9% in the same period of last year.
Speaker 3: The slight decrease was mainly due to the one-off recognition of royalty fees related to certain licensed games. Improved margins in our smart devices segment drove Yodao's GP margin expansion to 53.3% in the fourth quarter compared with 50.7% in the same period of last year. The year-over-year increase was mainly due to the robust sales of new smart devices which carry higher GP margins. Growth profit margin for cloud music continues to improve in the fourth quarter, climbing to 17.8%.
Speaker 3: versus 4.1% in the same period a year ago. The significant margin improvement primarily resulted from strong pipeline growth, as well as improved efficiency in content investment. For our innovative businesses and others, GP margin was 31.5% in the fourth quarter, slightly improved from 30.5% in the same period of previous year. Total operating expenses for the fourth quarter was RMB 8.8 billion or 35% of our total mass revenues. Taking a closer look. I was setting a margin expenses as a percentage of total net revenues.
Speaker 3: we remain committed to investing in content creation and product development.
Speaker 3: We are also seeing leverage in our R&D investments in the longer term. Our other income was R&D 343 million for the fourth quarter compared with 3 billion last quarter. The high base from last quarter was mainly due to one-off gain resulting from the disposal of the investment.
Speaker 3: as well as financial gains resulting from fluctuation in exchange rate. Effective tax rate was 20.7 for the full year and 20.2 for the fourth quarter. As a general reminder, our effective tax rate is presented on a plural basis, and the tax credit is deferred from each of our legal entities at different time periods, depending on the tool.
Speaker 3: depending on applicable policies and our operations. Our non-GAAP net income from continuing operations attributable to shareholders for the fourth quarter totaled RMB 4.8 billion or US dollar 698 million. non-GAAP basic earnings per ABS from continuing operations for the fourth quarter.
Speaker 3: USD 1.08 or USD 0.22 per common share. Additionally, our cash position remains strong. As of year end, our net cash position was about RMB 95.6 billion compared with 85.6 billion at the end of 2021. In accordance with our dividend policy, we are very pleased to report that our board of directors
Speaker 3: has approved a dividend of US$0.054 per common share on US$0.27 per ADS. Lastly, we continue to buy back shares during the period. Under our prior share repurchase program for up to US$3 billion, which was completed, on January the 9, 2023, approximately 34 million ADS has been repurchased under this program. And our board has announced a new share repurchase program of up to US$5 billion of the company's ADS and ordinary shares in open market transactions for a period not to exceed 36 months, commencing on January the 10, 2023. Meanwhile, under netizens purchased programs for up to US$50 million of US$0.80 billion. Netizens purchased approximately 2.7 million of US$0.80 billion for a total cost of about 22 million.
Speaker 3: as of December 31, 2022. Thank you for your attention. We would like now to open the call to your questions. Operator, let's go to the Q&A. Thank you. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. For the benefit of all participants on today's call, if you wish to ask your question to the management in Chinese, please immediately repeat your question in English. Please limit your questions to one at a time.
Speaker 3: If you wish to have follow-up questions, please rejoin the queue. Your first question comes from Alicia Yap with Citigroup. Please go ahead.
Speaker 2: I hope I will Class of 2021 brutally appreciate I place a lot of energy into even though I was able to whole loop.
Speaker 2: diagment. Don't go. You see one the other of the see. You see judicing one you don't. As you sho off with backcome border see and found that high. Why you see KA. What do find? Can management comment on the domestic gaming landscape? So, with domestic gains approval process normalizing will, that is, reallocate more resources to domestic gain development or will put more resource in content that is targeted specifically towardsa Chinese schema, or will you actually still retain your strategy of putting more resource into the overseas games development? Thank you.
Speaker 3: Let's put that in perspective with any....agkhun drives the lunch. I'll see you back, folks.
Speaker 3: Many years have passed, andimerkions of international tourism has entered the minutes ago. This has for us groundbreaking news. When choices are brought up, we can't do it. talented
Speaker 2: The last few months, the process of the license of FUAMAN has started to be normalized, which is very good news for us. So I think in the past, we've always had the same focus on both the China market and the global market, so there's no real change in direction. We'll continue to place this equal emphasis on both the China market and the global market. Thank you.
Speaker 3: Thank you. Your next question comes from Yang Bai from CICC. Please go ahead. Great, thanks.
Speaker 4: Think that some the among ality, little you an AL. If Y two for woman, I what how you will H an port? Don not long for you may the year will transformit it. Time to who, when that course should, that is your EM poers, long se in the high also number perbound. That okay, can you? Can you comment on the?
Speaker 4: can be created between domestic and overseas. Are there any products and their developments we share with us? Thank you. So, actually, Taiwan is a very good place. The dream come true. It's a very good place. Over the country.
Speaker 3: The driving skills and innovation, they are helping them with urgently
Speaker 3: to get rid of all of the information without even communicating the internet. So it's a very simple task. I'll leave each with their6 questions. Absolutely good, I think I'm going to be able to transition to a new room with a dialogue in the field ofificent communication. Now this safe space, please remember that I cannot give you a available doctor's aid date. No use of any training again and press the integral icon to reach normal access in your week minutes.
Speaker 3: Sure here the local sports, yes
Speaker 3: I was trying to be why those are dar change the routine. Where actually your, our woman, we there.
Speaker 2: It definitely requires the game to start things up. You can set the level of Fire in real life. Thanks for your viewing! Before we are observing, it's currently that overseas games are actually very different. But what's the gameplay as they prefer PC games and console games, for them the mobile games are more of the casual types.
Speaker 2: For the Japanese market, we think the players will accept both PC games and mobile games. For China market, obviously, they are more inclined to play mobile games. So in terms of content creation, PC games and mobile games are very different in design and in developing. So it is a challenge, but I'm very confident that Ease will find a solution to create games that appeal to both the China market and the international audience. Thank you.
Speaker 3: Thank you. Your next question comes from Lincoln Kong with Goldman Sachs. Please go ahead. Big One to sum up and 1976. I am just reminding you of time, Michael, MCOK to meet you, and consider your future dream, give you your real wonderful lot already. In 2017, Michael, MCOK, MCOK was the first major he played during the finishing day of his country life, joining his country's economy in fundamental situations for decades, and protecting Japan.
Speaker 3: You without economy should has you have another onmo which can that to surgeing canders to go to FA each ID the heart some ania quite.
Speaker 4: Because I'd be in bothers only. So hoi I Can shut down just one daughter. She's a ignite
Speaker 3: We can quite expect it to help to demonstrate more genetic results equipped with the concentration of technology and innovations. Same applies to other products, so it is more OliveIle or strategies that are mostly affects. It is an umbilical matter in real life, rather than remember.
Speaker 2: So yes, we got the license approval in January and we're going through the final phase of testing now and hopefully we'll be able to introduce the game to you in the third half of this year. In terms of our mobile game version, I think we are more focused on the game experience in terms of that we're trying to make every...
Speaker 2: to vote for our gay men. Thank you.
Speaker 4: Thank you. Next question, please. The next question is from Natalie Wu with Taitung International. Please go ahead. Hello, everyone. Hello, everyone.
Speaker 4: You you will Ho of I whe I how have a to issue go the B high to like that to go. You see how not to change ona, not some to how to to come end of me actually them do I PRI whole to be. I there Fort to not other hard but our part. But you have to what commission that I P woman number. If we had fun like tiversion do.
Speaker 4: I will translate myself. Good evening, my Twitter for clicking my question. We noticed that Abby's party recorded a part of the session. We're really just wondering how should we think about the success. As a matter of fact, we noticed that Abby has been giving us obvious surprises with the worker of the first week.
Speaker 4: successful launch of new things, more frequently impact the several fields. Or should I say that may show up to the most become higher with your smaller companies. That makes us wondering if it is more suitable to view the added study as randomly single title success or it is as a result of our refined development and operation skills. So just wondering any kind of new things in your pipeline. And that's.
Speaker 4: to their compounding every party, this year that we can expect. Another question for the games longevity. Actually, some of your games enjoy quite great longevity like SFBJ, but some free titles may fade in several months. So just curious from 91 point of view, if there is a good way for us to have a better judgment on the games longevity going forward, let's say, how should we think about that longevity thing of every party? Thank you. As I have this one, you face on time. __
Speaker 3: I could should seian ia and that twentsee pay on to iing the 1, which I think that will like person. Way woman to way way. Thank you to eachand to the federal told person.
Speaker 3: I'm going to go to the next few months. I'm going to be very careful. I believe that the future will not happen. Because we will not continue to do this before the development. We hope this game will continue.
Speaker 3: Now I don't put that like you, try J under here. Woman, quick Ho, get out order. Find Te to of the heart of the see seethe. But to the consciist, are SME shing the to much? See lastst.
Speaker 3: I'm going to leave it there. I'm going to leave it there. Thank you.
Speaker 2: So any party is one of the very successful games we recently launched. And it is the type of game that you have fun with with your friends and family. So we think what you worry about probably won't happen, because we learn from our mistakes. So we hope this is a game that will continue to bring joy to our gamers. We will dedicate more resources onto the game to ensure a longevity of that game. When we talk about longevity, we mean at least 10 years. Games like FWJ have been running for more than two decades. So we hope to replicate the similar type of longevity in all of our games. Thank you. Thank you. Your next question comes from Alex Spoon with Morgan Stanley . Please go ahead.
Speaker 3: Allow I second 1, it coms what 2, one or so things, when you when Don Don T get spox the leg alth, how you whole woman 4, five have we have F the you been done higher woman. So father, you get been done for you didach a hold, since you certain and you vers can down number from conttime. What the other 1, you see, when you or ter T GE Y find asking and leggo margins you, how do governwoman highi are, and we mean when found may val year and and the margin is you which Gu. So you, through other factors, woman in that of how you asking in a margin.
Speaker 3: Thanks, management, for taking my question. My first question is related to Naraka, BladePoint, the console performance on Xbox, and our future plans with PS4, PS5, and the mobile version, and the international launch. My second question is related to our overall margin trend in the next 22 years. Considering we have Yodel and music, they are improving their margins, and gaming business, we are investing more R&D and GNA in overseas market. Thank you very much.
Speaker 3: and the CFPB is a key tool for the development of the CFPB and the development of the CFPB and the development of the CFPB is a key tool to develop CFPB and the development of the CFPB is a key tool to improve the development of the
Speaker 2: So our network play point was launched last June on Xbox and we are pleased to have joined the XETP program. And the thing is that we have seen a huge number of gamers trying our game and we have been optimizing usage experience based on their feedback and we've been working tirelessly with our Montreal Office to ensure we can deliver the best experience for our usage.
Speaker 2: And based on those efforts, we have an even more improved version with our PS5 version. So we are going through testing for the PS5 version. And in terms of mobile games, also we are going through testing stages for that game. And we hope that, we are pretty confident that the mobile game will replicate the same level of use experience as one would on the original PC version. Thank you.
Speaker 3: Right, Alex, and to your second question on the margin outlook, in the next two to three years, our game margin will remain relatively stable. You are right that for our overseas studios, they are in the investment phase, and likely the gains developed by our overseas game studios will only come into the market in 2025 and beyond. However, we do have a very strong and sizeable existing portfolio of games that provides...
Speaker 3: a very, very strong support to cash flow, to profitability, to the margin. And for our subsidiaries like Cloud Music, YoDao, they have already demonstrated a clear trend of narrowing down the losses. We are very confident, give them another six to eight quarters. Both businesses are very, very optimistic to be self-sustainable and breaking even. So all in all, I think in the next two to three years.
Speaker 3: our margins will be steady and slightly improving with positive surprises coming in in 2025 and beyond which will then primarily be fueled by the commercial launch of our overseas games.
Speaker 3: be steady and slightly improving with positive surprises coming in in 2025 beyond which will then primarily be fueled by the commercial launch of our overseas games that currently in the development phase.
Speaker 2: Thank you. Next question, please. Thank you very much. Thank you. Your next question comes from Felix Liu with UBS. Please go ahead. Hello, everyone. My name is Felix Liu. I am the director of the Global Development Organization. I am the director of the Global Development Organization. I am the director of the Global Development Organization.
Speaker 2: We have a chance to go home and show a few things that we have to do. Let me translate myself. Thank you for your question. You mentioned the cool regulation outlook in China about getting license. We're definitely happy to see that. Outside of the license games by you already mentioned, if we look into second half this year at maybe 2024, could you give us some further large titles or big genres that you have a big title on board? Thank you. 3. Olympic Games Games Theme Round Euros ???? ?? 2. Olympic Games Theme Round Euros 3. Olympic Games Theme Round Euros
Speaker 3: so we know that the final assessment is ?????fur. So we know that, a very normal performance in matches continues to play its role during the development process.
Speaker 3: And then you, So to seeyou time nxogenicthe whichyou jit sh.
Speaker 3: Many So the C time mogeningthe whichesgenuated J Cho and not main, come off.
Speaker 3: all the difficulties and difficulties of the future. We can all play big handed Maya into election day. In SH norms from 30 to." this conversation, I am talking about people who are finally able to come to Nicolayost forendom, at least. I am talking about people who are finally able to come to Nicolayost forendom, at least.
Speaker 4: I'm sure this year and next year and many years ahead we will continue to see more games be launched, exciting new games be launched from their ease. The subject innovation is perpetual and we will continue to focus on innovating our game play and our game quality. And you've seen we are confident we will continue to be able to deliver strong blockbuster games to the market year after year. Last year we had amazing blockbuster narrative play point, this year we have Aggie party. So those are breakthroughs that would be equally successful in the code work and type of.
Speaker 4: at Marvajoo Games and we are equally successful in the casual games that you play with family and friends. So I'm very confident you will continue to see new exciting innovative games coming from different rounders out of many. Thank you. Thank you and that concludes the question and answer session. I would like to turn the conference back over to the management for any additional or closing comments. Thank you again for joining us today. If you have any further questions, please feel free to contact us directly or the percentage financial communication. Have a great day. Thank you. Thank you. That does conclude our conference for today.
Speaker 1: Thank you for participating. You may now disconnect.
Speaker 1: I.
Speaker 1: I.
Quest.