Q2 2019 Earnings Call
Good day and welcome to <unk> second quarter 2019 earnings Conference call. Today's conference is being recorded at this I would like to turn the conference over to Margaret Shi did I entendre off net east preschool hit men.
Thank you operator. Please note the discussion today will contain forward looking statements relating to future performance of the company and are intended to qualify for the safe Harbor from liability as established by U.S. Private Securities Litigation Reform Act such statements are not guarantees of future performance and are subject to certain risks uncertainties assumptions and other factors.
Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.
A general discussion of the risk factors that could cause net this is business and the financial results is included in this in a certain filings of the company the Securities and Exchange Commission, including its annual report on form 20-F.
The company does not undertake any obligation to update its forward looking information, except as required by law during today's call management or discuss certain non-GAAP financial measures for comparison purposes only.
So a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results. Please see the 2019 second quarter financial results News release issued earlier today as a reminder, this conference is being recorded.
In addition, an investor presentation and the webcast a replay of this conference call will be available on Netease corporate website at IR Dot net east dotcom.
Joining us today on the call from Netease Senior management is Mr., William Ding Chief Executive Officer, Mr., Charles Young Chief Financial Officer, and Mr. Hilton Quake co president of Netease games.
I will now turn the call over to Mr. Young who will read the prepared remarks on behalf of Mr. Dean.
Thank you Margaret and thank you everyone for participating in todays call.
Before we begin I would like to remind everyone that all vintages are based on renminbi.
We are very pleased to report another quarter of financial and operational growth across our businesses with a 15% increase in revenue and 46% growth in our net income on a year over year basis.
Online games remain the cornerstone of our business.
Despite a seasonally slower period in the second quarter, the steady performance of our game portfolio marks the fifth consecutive quarter that we have exceeded Reminbi 10 billion in online game revenues.
Our flagship titles continue to provide solid support to our online games business.
Throughout the years. These titles have remained relevant to each generation of users as we diligently explore and create innovative new elements to our games keeping our content fresh.
Take fantasy westward journey online as an example over the course of the last 15 years since its initial launch we have introduced close to 30 major expansion packs.
Averaging approximately two major expansion packs per year.
With many smaller scale updates along the way.
For FWJ mobile version, we have made even more frequent updates with nearly 40 major update since its initial launch four years ago.
Beyond the substantial game overhauls and additions we consistently look for various ways to keep our users engaged.
During the quarter, we held a number of FWJ east spots tournament, which helped boost our user stickiness and drive continued revenue contribution for future periods.
The expertise we have gained from operating the flagship titles over the long term has been deployed in developing our newer games, providing us with more steady revenue streams in what is now a very diverse game portfolio.
Invincible Ami org and identity five.
Launched in 2015, 16, and 18, respectively serve as good examples of our superior game longevity with different game genres.
Invincible continues to grow steadily in terms of revenue and number of active users achieving new records in the second quarter.
Ami Org Pops, the iOS grossing chart in China twice in the second quarter as we launched a hit expansion pack in Q2 that featured a rich and captivating story line.
Item three to five is also growing steadily after more than a year of operation.
During the quarter. We also launched an updated version of two Lucia and remain the most sensation into or about John who.
The update came with a full fledged overhaul of the game, including improved graphics, new characters and new social systems.
As a groundbreaking game in the mall ARPG genre, the our regional CLX impress the market Adex initial launch over a year ago with its best in class graphics and high degree of freedom for users to customize and design their own characters and story lines.
The game quickly accumulated a large and loyal community of users.
Particularly among the younger generation.
Now with the relaunch we are thrilled to delight players even without the games our original IP.
Our strong content, an amazing team of designers captures the spirit of the game well breathing new life into this massive favorite.
As a result, all about John who is attracting a growing user base and generating increased revenue contribution quarter over quarter.
Our growing portfolio of games has generated a solid fan base.
Our goal is to have an even larger and deeper impact on the vibrant community of game users.
Onmyoji is the first of these younger IP that we are cultivating.
In order to expand the reach of Army Orgies IP. We are currently working on four new Onmyoji games.
These include the Japanese collectible card game Cod Onmyoji the card game.
A simulation game card or Muji Yo Kai calia and two other spinoff games.
In July we also launched the Onmyoji cafe and shop in Guam Joel.
Featuring popular Army orgy characters. This location has become a must see destination for many young fans.
We are confident that these initiatives will further strengthen our increasingly valuable game IP and further enhance our recognition among younger generations.
In terms of newer titles, we most recently launched beauty bulkier and Sky in China, and a few other games overseas.
The Topia is a real time creative shooting game parking the iOS download chart within a day of its launch.
And Sky is an adventure game.
Bringing users a heartwarming experience and receiving multiple recommendations from the Apple store. We also launched an updated version of Tom and Jerry which prove instantly popular among younger players taking the game to the top of the iOS download chart sharply after its launch and continues to trend well with a growing user base.
Globally, we continue to advance our games and make inroads that expand our reach knives out remains popular in Japan and pop the conscious highest grossing games chart multiple times in May and June .
Additionally, identify was ranked for the first time on Japan's Iowa top three grossing chart in July following our collaboration with famous Japanese Comics.
The success of these games has helped us to gain a much better understanding of Japanese users and their preferences, allowing us to better tailor our games for the Japanese market.
Some of the titles, we recently introduced in Japan also show promising signs of popularity.
We now have three more titles in Japan, which alive. After previously known as night for survival.
Cyber Hunter as well as Supermac, Our Champions America, Anomie shooting game, which we just released in July .
All three of these games top Japan's iOS download chart shortly after the launches.
And the second quarter, our overseas games revenue accounted for more than 10% of our total games net revenue.
Having the right products is the key to global expansion and we will continue to invest in game content that will resonate with global players.
In terms of R&D, we are looking for talent and teams to complement our R&D skills on a global scale in July we announced our minority investment in behavior Interactive and online games pioneer in Canada, and the leader of the asymmetrical Battle arena genre.
In addition, we also launched a new video game studio in Montreal, Quebec in Canada, with an aim to hire local and international resources to broaden our R&D capabilities in North America.
Our extensive pipeline also holds a number of exciting new titles for the upcoming quarters.
These include fantasy westward journey, three D sharing and Swat Dragon upon the cloud Pokey mom passed and Bloom and blade.
Moving onto our e-commerce business.
During the second quarter, we made additional progress to improve our operating efficiency.
We further optimized our internal structure enhanced our warehouse and logistics operations and upgraded our supply chain management.
For Carla our self Butte bonded warehousing nimble began trial operation in June .
This warehouse is capable of handling millions of orders every year, which we believe will help us to improve operating efficiencies even further.
During the quarter, we also signed strategic partnerships agreement with additional international brands, such as L'oreal, and Maybelline and enabling our customers to more conveniently access these world renowned beauty brands.
For Yangon, we continue to promote supply chain upgrades by helping manufacturers improve their design reduce production costs and enhance efficiencies.
We are further deepening our collaborations with top performing partners, which will allow us to renegotiate PPACA commercial terms implement better controls over quality and optimize product creativity.
On the product side, we are even more selective with new product offerings, enabling us to focus on and dedicate our resources to top products with the highest repurchase rates and customer satisfaction rating.
By offering customers greater value for their money with better product quality and pricing.
We hope to further improve customer satisfaction.
Turning on to our online music business, we continue to innovate and create a highly differentiated product with an unparalleled social experience on our Navvis cloud music acts.
At the end of July we added a new highly popular community module known as the cloud village.
This is the music community that fosters discussion creation and sharing and personalize expression around music.
It is presented in the format of water for containing music video blog music Microblog and many other exciting features that allow music lovers to follow and express themselves interactively.
This brand's new module changes the way that users experience music from just listening to also watching and interacting.
At this moment, we have over 800 million users on our music Act, which is 50% up year over year subscriber numbers are also growing very strongly at 135% year over year increase.
For online education, Yodle continues to deliver solid growth and we see significant opportunities in the online learning industry.
Over the course of the last 13 years Eurodollar has built a robust suite of technology, driven learning products and services.
With this leading AI technology strong content and predictive development capabilities.
Total has steadily build a large engaged and diverse user base with over 100 million average total may use in the second quarter of 2019.
We do not take the responsibility of education lightly and we encourage innovation within each content studio at Yodle.
Our costs as a regularly evaluated and their success is measured by user satisfaction ratings, which we believe is pivotal to the long term sustainable growth of any online learning company.
Youre down most recently hosted its annual product launch conference in Beijing at the event, we announced five different products for children, including yield our children English mobile App Youre down mathematics online cost and yield our Chinese reading online costs, all designed to improve children's learning habits.
As well as Youre domiciled pooling and Qatar two online courses teaching coding two children between the age of three to 18.
Additionally, we also announced our second generation yield our dictionary Pang supported by more advanced optical character recognition.
Hi, technology, allowing more accurate and effective scanning translation.
In an evolving internet market content is king and that is best known for our content creation capabilities.
This remains true across our different business segments.
We continue to emphasize product enhancements.
Craftsmanship and innovation and better user experiences to thrill, our ever growing user community of different segments.
Through our industry knowledge deep IP diversification strategy within our core competencies and our international growth initiatives.
We believe we can continue to bring relevant exciting new products and services to Natus players fan and users around the world.
As we continue to grow and evolve we're always very appreciative of the long term support from our shareholders with that in mind, our board of directors have approved a dividend payout ratio of 30% this quarter.
We are delighted to be returning value to our investors as our business continues to both healthy and growing profits.
This concludes William's comments.
I will now provide a very brief overview of our second quarter 2019 financial results.
Given the limited time on the call I will be presenting some abbreviated financial highlights.
We encourage you to read through our press release issued earlier today for further details.
For the second quarter. Our total net revenue were renminbi 18.8 billion or us dollars $2.7 billion, representing approximately 15% increase year over year net revenues from online game services, where renminbi $11.4 billion down 4% quarter over quarter.
But up 14% year over year.
The sequential decrease was due to the second quarter typically being a slower quarter season seasonally the year over year increase was primarily driven by increased revenue contribution from flagship titles, such as FWJ and new games, such as Justice and life after.
Mobile games accounted for approximately 72% of net revenue from our online games in the second quarter.
Net revenue from E. Commerce, we're renminbi 5.2 billion and net revenues from advertising services were renminbi 582 million.
Net revenues from our innovative businesses and others will remain to be $1.5 billion up 18% quarter over quarter and 23% year over year, both due to increased contribution from cloud music Cc live streaming and Youre doll.
Our overall gross margin was 43.3% in the second quarter compared with 44.1 in the preceding quarter and 44.5 for the prior years period.
Gross margin for our online game services for the second quarter was 63.1%.
By and large our gross margin for gains is generally stable fluctuating quarter to quarter within a narrow band with based on the revenue mix of mobile PC self developed and licensed games.
For E Commerce, our gross margin was 10.9% in the second quarter.
We achieved a positive gross margin for our innovative businesses another's business of 1.4% in the second quarter versus losses of 13.1% and 7.3% in the prior quarter and second quarter of last year, respectively.
The significant improvement came from increased revenue contribution from some of our businesses business lines. Within this segment as mentioned a moment ago as well as better cost controls.
For the second quarter total operating expenses were renminbi $4.6 billion.
Our selling and marketing expenses as a percentage of net revenue were 9.4% in the second quarter largely stable from the previous quarter.
We continue to see operating leverage as we benefit from economies of scale and improve operational efficiency.
E Commerce related shipping and handling expenses included in selling and marketing expenses as a percentage of E. Commerce revenue was 7.4% in the second quarter significantly improved from 8.4% in the previous quarter.
R&D expenses were maintained at around $2 billion level, reflecting our commitment to investing in content creation and product development, which is was defined as a technology company.
Operating income for the second quarter of 2019 increased by 2% quarter over quarter, and 50% year over year to renminbi $3.5 billion.
The effective tax rate for the second quarter was 18%.
The lower effective tax rate in the second quarter was mainly due to reduced losses from certain subsidiaries as well as certain tax credits being recognized.
For certain subsidiaries of the company during the quarter.
non-GAAP net income attributable to our shareholders for the second quarter totaled renminbi 4 billion or us dollars $531 million, representing an increase of 21% quarter over quarter and 34% year over year.
Our non-GAAP diluted earnings per acre, yes, we're renminbi 28.06, our U.S. dollars 4.09 for the second quarter of 2019.
Our cash position remains strong as of June 32019, our total cash and cash equivalents current and Noncurrent time deposits and short term investments balance totaled renminbi 55.6 billion compared with 50.1 billion as of year end last year.
For the second quarter. We are pleased to report that our board has approved a dividend of US dollars 1.04 per adss, representing a 30% dividend payout ratio.
As we mentioned earlier in Williams remarks, we are thankful for the long term support from our shareholders and we are always looking for ways to return value to our shareholders.
As a result, this quarter's higher dividend payout ratio reflects this commitment as we continue to both healthy and growing profits.
Thank you for everyone's attention, we would like now to open the call to your questions. Operator, Please go to Q anyway.
In Q, if you had to ask a question. Please say no by pressing star one owner telephone keypad. If they are using a speakerphone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
Please take note that only one question could be asked venue Q and if you have second question. Please re queue again by pressing star one.
For the benefit of all participants on today's call. If you wish to ask your question to the company management in Chinese place immediately repeat your question in English.
We'll pause for just a moment to allow everyone an opportunity to signal for questions.
We would take our first question from human chance from Citi.
Hi, Good morning management.
Hi, Good morning management. Thank you for taking my question has a question regarding the overseas expansion strategy file games. So as we noted we recently launched new game studio among trail and acquire a stake in behavior into active adult games are doing well in Japan, and some overseas my cat so going forward in the future could management share in more on the strategies in particular, what are the key focus markets by geography to target game genres, and expect it will take to achieve.
The opus isgro, either organic growth or M&A and also some of the updates on the latest partnership in this industry, but he's overseas student would be helpful. Thank you.
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Hi, Thank you kill me I will provide a brief translation of Williams comments for everyone's benefit so.
As you can see that we [noise].
Being very active and open minded for deeper collaboration with global premium game Studios.
The speakers for ourselves and that is we have been cultivating in game content development R&D, we almost two decades of expertise and experiences. So we are very very open minded and we'll continue to explore deeper collaboration with Pierre <unk> Best in class Studios globally in terms of the overseas expansion strategy William has summarized or from a few different aspects first is about our games launch Matisse games into global stage. Currently we have achieved certain milestones in Japan and we are.
Hopeful and we are working hard to make also our popular content popular games into.
Popular hit into mainstream western market in North America and Europe .
In terms of collaboration lease global Chirs.
We've always been focusing on joint R&D development as a priority because that is our know how and that is where we see a lot of.
A supplementary.
Capabilities that we can provide to each other the goal is to jointly develop by leveraging each other's.
Competitive strengths to devalue the premium content for global gamers.
As to the genres.
There is no fixed rigid framework, we're very open minded as to be more explorative in nature, because as everyone can witness in the most recent years gaming genre has been evolving very fast and we are very glad that Marriott is always a pioneer in the fourth round of keeping innovation in terms of gameplay and genre.
Thank you very much damage helps thank you.
[noise].
It would take from our next question from Alex Barrn from Morgan Stanley .
Your line is open. Please go ahead.
Hi, guys. Good morning. Thank you for taking my question I have a question regarding me the music business.
It's very glad to see the new module called villages launch recently.
Can you tell so talk about in a second half how your monetization strategy will change and I also have seen some news regarding the timetable of profitability.
Can you also share with US how are you going to control the costs and achieve the profitability.
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Okay, Alex fell out of favour West benefits, let me, let me quickly translate Williams remarks.
So we are glad to see that Youve noticing our most recent version update of cloud music. There is a prominent music community feature QAD cloud village. So everyone. A true music lover is now official villager of our App as we've mentioned previously a a key focus of cloud music is to dedicate our.
Platform and our use our outreach to promote independent musicians and independent music here in China.
And we see this community features I think this is more productive in us achieving this mission in terms of your crashing our monetization by and large I think it can be categorized into one being the user subscription, which we now seeing a very robust growth in both the overall users as well as subscriber.
Gross more than 135% year over year second is act from advertising, which again comp growth handing hand, as we growing our user base and.
Popularity amongst the users the third is broadcasting which is not only in the format of.
Of of video.
Live streaming, but also audio broadcasting fourth now with the establishment of a community feature we will also be more innovative and they are exploring.
Deeper monetization opportunities around these community interactive features in terms of you are catching on profitability. We we've never officially commented on any timetable, but rest assured we feel very very confident about the growth upside of China's online music industry as a whole and nobody is asking you can now witness for the past few records. We are very disciplined in controlling cost at a reasonable level as well as be focusing on the return on the various investment whether it's selling marketing or R&D into our different business segments. So profitability is ultimately our our.
Our target.
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[noise], we would take our next question from Ed Woo from C.I.E.
Your line is open. Please go ahead.
Hi, Good morning, Thanks for taking my question I actually have to be true here. That's why it's regarding the I'll call music was a you just mentioned about the.
Ah yes, it's in the cloud a cloud village a module actually I try that and that module and it's very innovative an interesting I'm just wondering can management share with us some but the operating metrics I regarding the I use the engagement recently for that called in sick I just want to get a sense of how that's yeah. That's not a function has improved that I used to engage them and say the daily active user or the they do time spent as much as some some things and really because of that.
And secondly, I bought them Mabile IP I'm, just wondering how should we anticipate the use of mobile IP will there be some new Rand I said, some brand new games, all journalists and launching under these I piece or just you updates with these new features embedded in our existing games.
Thanks.
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Thank you next week I will answer your first question operating metrics and then William will set a comment on the Marvel IP well as you know we've only launched this.
New updated version almost I think it's pumped in mind. So July towards the very end of July . It's about 10 days. So there's really not a lot of operating metrics that I can specifically share, but we've seen very very encouraging signs of of strong growth in both you and I know you since we launched the most updated version.
These data is exactly why we are confident that our innovation in bringing this new interactive community feature will eventually be very well rewarded because it's not only a way of changing peoples are happy to be experiencing music, but but hand in hand as this new feature is now not only encouraging users to listen but also to watch trends in to rack T interacting with other music lovers. It also creates possible opportunities for us to explore monetization potential.
And I'll leave the second question to William when they're buying your my way I keep in touch with them Yeah sure temptation.
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Different schedule in time table to collaboratively developed with model and the partnership but also goes beyond games for all those details are a it will be gradually announced as we further progress along these long term strategic partnership.
Got it thank you looking forward to that.
[noise] [noise].
We will take our next question from Thomas Chong from Jefferies.
You're like high he's wondering.
Hi, good morning.
Medium trials immigrant friends for taking my questions. Congratulations on solid cost control of what this quarter and my question is this mainly focusing on the cost side often for the GP margin the innovation and others I chip. The first positive gross profit in the past 12 months can we basically assume that all the cost control or east, but we are solid and we should expect innovation and others to maintain a GP margins will be positive going forward as well as for e-commerce or do we need to stay.
Stable GP margin for e-commerce in trying to 19.
Buys second part of the question you asked about the Opex can management comments about their headcount that we have in Q2 versus Q1, and how should we think about trying to 19.
In particular for R&D expenses, well you say any reason why we see a sequential decline should we expect that trend to go or to be continue in the following quarters. Thank you.
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Okay. Thank you Thomas I'll take your questions on the cost side, Let me let me first begin by saying that Netease has been listed since 2000 for 19 years and we have a we have gone through various cycles.
Over the last 19 years of journey of being a list. The company. So we've always been very very disciplined in terms of making adaptive measures to in corresponding to different macro environment for 2019, as we commented in the previous quarters.
Earnings call. One key focus is a more disciplined balance between growth and margin. So we are very happy that at least for the last two quarters, we've been delivering what we have promised to the market being very disciplined we're having said that it doesn't mean a skill back.
In terms of headcount by the end of the second part to the overall headcount is by and large.
Stable furnaces Acosta goal, our end of last year, So a lot of market rumors commenting on massive layoffs and all that those are actually just not fact.
So.
Relating to your other questions are indeed, yes, we are a technology company. So R&D is a an engine for our continued sustainable growth for the longer term I do not see any reason why we should scaled back or down R&D cost significantly quarter to quarter, a small fluctuations that the that that that Ken. It's it's it's difficult to explain sometimes it.
Relates to some one off events, sometimes its the provisions and all that but I think a general trend is that we are going to dedicate a a can see the rubble amount of our natural revenue into R&D, but again like I commented earlier on whatever format of investment, whether it's R&D and selling our selling marketing we focus internally on the return on these investments in terms of managing the reason why we have a group of some business segments into end of innovative businesses. Another this is exactly because they are in the relatively early stage. So as they continue to grow the topline their user base and the economies of scale will help us to improve their margin trajectory. It is too early to predict whether or not those relatively young.
Businesses segments. We are then starting from this quarter always have positive GP margin, but I do not see any indication of managing a materially or decline so going forward as long as my music business My Yodle are growing healthily.
I think you know earlier I'm actually also.
I think Alex also asked that question.
[noise] profitability, making positive profit and then returning.
Value to our shareholders. So always remains as a priority to 90.
Thank you Charles and congratulation again.
[noise].
Thank you we will take our next question from the review Goldman Sachs.
Your line is open Pease go ahead.
Thank you Okay ammonia. Thank you for taking my question I have a follow up question on costs are mainly about the sales and marketing line I noticed that well this quarter, it's almost flattish a quote unquote or but a reduction in the pharma young year perspective, So I wonder for the sales and marketing expense. So how should we think for Thislife a rest of the year given that thoughtful on one side, we have a deceleration in ecommerce girls and on the other hand, the new the number of new approvals has been rather limited compared to previous expectation.
Thank you.
Thanks, Bill ill again take that crashing seats, it's relates mostly to financials.
For selling and marketing.
Majority of the Sally marketing is.
Allocated two games and that you mentioned are relatively speaking there's a few a new games that is being launched in the first half of this year that explains why they're selling and marketing and games is relatively.
Lower amount comparing to.
Periods, where we have major titles that we need to promote.
Now on e-commerce or as I mentioned for now at least two or three quarters. It's always.
A balanced approach between.
Between how fast we want to grow the top line as well as the.
The profit profile of light E Commerce segment, and I think.
Coming into 2019, we are more disciplined in keeping that balance in a sense that.
We will not.
It's just never our philosophy that we are to pursue a faster.
Top line growth at the expense of a bigger loss. So that is not our intention and never in our corporate DNA. So these two factors accounts.
Fall, mostly why industries have for the past two quarters, selling and marketing expense has been maintained at a very cautious and disciplined level well that does not mean that we face resource constrained in the second half if there are new games, that's ready for marketing and promotion, we will do so and if there are opportunities for us to see.
Reacceleration of my e-commerce or other business segments top line gross.
We will not hesitate to spend marketing dollars, but whatever marketing dollars, we spend it will be a very calculated investment focusing on returns and focusing on the results of my marketing dollar expenditure.
Okay. Thank you.
[noise].
Thank you we will take our next question from Ed dilemma.
Bank of America Merrill Lynch.
Hey, good morning, guys.
Good morning. Thank you for taking my questions I have two quick questions. The first one is about the response.
It seems like there was a planned two in Fas.
In a stadium in Shanghai, So wondering how would that affect our capital expenditure going forward.
And then secondly, just.
Any update on now congratulations.
Any think I'll be laid it out to the.
Beyond users time restrictions.
Anything along that line would be helpful.
Yes.
So I wouldn't either one of you in team Whos until 18 or 19 so.
Once he colonial tea Hot side, Sean Hi, poetry could you quantify.
And when you want to take that.
Keybanc hygiene, you to get the shop, and then why you can't Joshi quality the 10 clot.
Okay anything.
Well no boy.
Utica sometime this year.
You won't see it doesn't do it is an interim analysis.
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Linda.
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How much I'm kinda their size fit onto so I can see at a faster.
Our unique Overwatch pinching southern Highlands today on the portal side decides either trend should have been doing.
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He gets yet.
Do you see that your friendship.
So Andy I'll translate the first question.
Yeah.
I think you noted the recent news we made at Chinajoy, Yes, we are going to invest in Shanghai and east boss related and in Shanghai is very supportive of east spots and overall new economy as a whole as you may notice that.
Our team Dragon.
Which most recently won a championship in the Overwatch League is a team that is.
Based in Shanghai, and we've also had a plan.
We'll invest.
It's not not solely just for E Sports stadium, but it's is spots and as well as R&D center that is more tilted towards developing esports relevant game content.
So thats.
Thats, a long longer term strategic plan and in terms of Capex, because it's going to be spanned across next three five years or even longer so from a financial statement from a cash flow perspective. These are these are well within our resource capability and control it is not going to.
Impact our financial results materially at all.
They are going to shut Hamish on winch acquisition diodes in timberland familiar easier to insist upon activation pure the judiciary inching cool CNG shutdown happened bench.
Yes, Theres machine.
And on your second question game regulation.
We don't have any further update.
And how the regulation is a is progressing.
Yes. Thank you.
Thank you we will take our next question from challenge from Nomura.
Your line.
Good morning.
Hi, Good morning management, Thanks for taking my.
Taking my call.
I have two questions first question is about your dividend payout and as Charles mentioned in the prepared remarks.
You revise your dividend payout from.
Fixed 25% to.
The range of 20% to 30% going forward. So I still I just wonder if not a rationale to you know to two to two to make this change is it fair to think going forward you will.
Be able to pay higher than previous quantify per se in dividends. Since your earnings outlook is getting better and my second question is about fantasy westward journey three D. And this game will best on Tuck ins website. This game will start a new donor testing today. So can you give us some color just on its own it's the revenue potential based on the performance during the past rounds of testing and if there are any potential cannibalization risk between the upcoming fan.
Now BJ three D.
And your existing treaty.
FWJ again, and finally, how long do you expect this.
This led us Ron how long these latest Renault testing.
May last and when you expect to monetize this new again.
What's the do you find yourself.
Oh sure sure yellow and TDO inhibitors, when you sound social Moneyguard pacey trends among only go to Charles Yes, I don't like the Atlantic actually download enrollment regard.
Thank you, ladies and kids on Patrica Trisha.
Maybe to that of course, CEO again at a high level I'm not sure that vehicle.
Thick pay out that Keith.
On the in transit harsher sanctions, it but I'm not sure how censored their take or pay out ratio when you try to push it towards when you look at the end.
I think again since I am a long haul you orman.
Tony you too hard to figure out new renters has held for 600 feet long haul Glenn is hung idea that element I'd take a flicker field actually t. should that trend actually.
I will not go into a high sound confident again, you intend to actually help you quote your heartlands surety all current no social mobile analytic look we'll see that bigger bigger bigger pickup will pick up we'll see figure I think I'll go see that bigger payout shelbyville, it should tick up I am not sure colleagues here now.
Hi, Gary go into your surely more fine Sandy did show you all didn't happen until prices seem on a per share now held for sale. When you saw Joseph Allman do you tape and you'll see it had a bigger show that bigger canteens am I kind of know how would think sandeep and Ben Montblanc and assume that you have to figure out are dependent the multinational youre GTN hopefully if we sound sandeep alphaville cannot argue that the young fly off shore oil is here, particularly in you shall I say, you'll hold onto the sandeep ally descended on hydro shipments inventory should not exceed one osher, Dan downhole multinational patron shinohara data sandeep animal plant in China. This year.
I know you mentioned.
On Claimcenter units.
You can see the Nick what is your weight.
Mohan, if everybody seems entitlement and person down the book with Us.
To do so this is in our country use if she has achieved quarter two so let your team it's harder to call.
Pardon me personally.
Touching on the well was sealed sociopath RP basket.
Actually I was having us for the call.
Uhhuh.
Placing the Tempe, so im with dosing with Ah Lisanti Parkway, when I say hope with the sale.
Well was to show real traction.
Yes, so the way we have stated quite tempting to my this is seeing some years Andy.
Okay. So to just translate for everyone's benefits for FWJ three d. as we start it will start closed beta testing our Android today.
And as to the official launch and monetization timeline that will be subject to first of all obviously the.
The approval when we can get that the license secondly, also based on the testing results of this closed beta testing ground on your concerns our internal cannibalization as this FWJ three D and the current FWJ PC version and the FWJ mobile version they are targeting different use appeals. So see we see very very little concern if any at all in terms of user internal cannibalization, we are very very.
Confident and positive about the future outlook of Apios.
J three D. Upon its official launch for your first part of the question on the dividend payout ratio.
Let me, let me comment, saying that that is in fact, one of the very very few technology companies globally.
That has been consistently paying a dividend returning dividend to our shareholders on a quarterly basis.
Every quarter the exact dividend payout ratio is.
Obviously subject to the board approval. So now the board has authorized management instead of that 6.5%.
0.2, a 20% to 30% range.
And that's not mean that we are bound by this range. So every quarter the exact dividend payout ratio will be dependent on the financial and operational.
And performance of the company and ultimately subject to the board's re approval. So it's that it does not indicate that in the future we will always be paying 30%, but but we're still pleased that this quarter. We are paying more because we are confident about our sustainable profitability profile down the road for the future quarters'.
And that it all depends on how the macro economy and our outlook of the company's performance change.
Thank you.
[noise].
[laughter].
[laughter]. That's concludes today's question and answer session. My great. At this time I would tend to conference back to you for any additional or listing remote.
Thank you again for joining us today, if you have any further questions. Please feel free to contact us or TPG Investor relations have a great day.
[laughter].
This concludes today conference. Thank you for your participation.
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