NetEase Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 24, 2023

There are 9 speakers on the call.

Operator

Good day, and welcome to the NetEase 2023 Second Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Margaret Chi, Senior IR Director of NetEase. Please go ahead, ma'am.

Speaker 1

Thank you, operator. Please note the discussion today will contain forward looking statements relating to the future performance of And are intended to qualify for the Safe Harbor for Reliability as Established by the U. S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors.

Speaker 1

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 In this discussion, a general discussion of the risk factors that could affect NetEase's business and financial results is included Certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20 F and the announcement and the filings on the website of the Hong Kong 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 discuss certain non GAAP financial measures for comparison purposes only. For a definition of non GAAP financial measures and a reconciliation of GAAP to non GAAP financial results, please see the 2023 2nd quarter earnings news release issued earlier today. Please note that certain financial information regarding Cloud Music we'll be discussing on this call has been prepared in accordance with IFRS.

Speaker 1

For additional information, please refer to Cloud Music's interim report for the first half of twenty twenty three. 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 NetEase corporate website atir.netease.com. Joining us today on the call from NetEase Media Management is Mr. William Ding, Chief Executive Officer and Mr.

Speaker 1

Charles Yan, Chief Financial Officer, we will now turn the call over to Charles, who will read prepared remarks on behalf of William.

Speaker 2

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 Our total net revenues came in at RMB24 1,000,000,000, An increase of nearly 4% year over year and our net income attributable to shareholders increased by 56% year over year to RMB8.2 billion. Our long standing franchises are Still resonating well with our users. In the Q2, revenues from our fantasy westward journey saga Continues to grow year over year, further impressing the industry with this IP's longevity and sustainable popularity. Westwood Journey franchise recently celebrated its 21st anniversary since its commercial launch.

Speaker 2

Games from our flagship series crafted on solid foundations and continue iterations every few months Maintain their top tier positions and alluring charm in today's market even after nearly 2 decades of operation. In addition to these legacy titles, we are proactively cultivating an expanding array of long lasting franchises. We believe our recent portfolio additions such as Aggie Party and Narrator Blade Point are showing similar popularity With potential longevity, continuing its successful streak after more than a year of operation, Aggie Party achieved another record high for active users this summer, surpassing the peak It reached during the Chinese New Year period this year. In the Q2, it was the most downloaded game in China, which speaks to the game's strong reputation and user engagement. Additionally, we have our sights set on long term success, and we are deeply committed to fostering a thriving UGC ecosystem.

Speaker 2

In June, we successfully hosted our very first creators conference and introduced a series of new incentives, providing even better support and rewards for creators. Furthermore, we've diligently upgraded our game editor By introducing a series of advanced components and interactive functions such as MPC and plot editor, These additions not only offer increased flexibility, but also push the boundaries of creative possibilities To build on the domestic popularity of Aggie Party, our plan to launch it in the global market is well underway. We went through our first round of testing outside of China in April, which has given us valuable insights. Our development team is working hard to optimize the game experience based on this feedback. We plan to test Aggie Party in a few more regions, including the Europe, North America and Japan markets Before we officially introduce Aggie Party to worldwide audiences, for Narrator Blade Point, We proudly announced that we added another 10,000,000 new users in the past year, reaching a new milestone of 20,000,000 users In total, after 2 years of operation, to celebrate the game's 2 year anniversary, We increased the memory of captivating new content, featuring fresh weapons, heroes and engaging gameplay features.

Speaker 2

Most notably, during its 2 year celebration, Nara Blade Point made some exciting moves, Transitioning into a free to play model and debuting on the PlayStation 5 to expand its accessibility to a wider audience, resulting in a remarkable surge in active users and being voted as PlayStation's best new game in July. Furthermore, the development of Narrator Bladepoint's mobile version is making steady progress. We have a firm focus on preserving the game's hardcore essence on mobile devices to further its reach To a broader audience in China and potentially globally. The huge success we have seen with our June new releases, Justice Mobile Game and Racing Master has been very exciting for us and demonstrate our ability to once again Set the bar for the MMO industry and expand genres to brand new categories through 1st class content innovation. Justice Mobile Game is arguably the first game in the world to bring fresh real game experiences to users By leveraging machine learning technologies, the game has dominated both the iOS download and grossing charts Upon its release in China, within a month, Justice mobile game attracted over 40,000,000 players, which is unheard of for any MMO game.

Speaker 2

Notably, it has joined in massive groups of Generation Z players Who were previously unfamiliar with the MMO genre, revitalizing the spotlight on MMOs within the Chinese game industry. As a forerunner in the MMO world, we continuously explore new horizons of innovation That brings all new creative gameplay into the genre. Justice mobile game offers a more balanced game experience, which resonates well with younger generation, prompting players to willingly spend on cosmetic items they love within the game. Also, by leveraging our advantaging machine learning technologies, Justice Mobile Games development team We'll be significantly more efficient in producing new and frequent expansion packs that keep our game players super engaged. Turning on to Racing Master.

Speaker 2

Since the game's June debut in China, it has swiftly risen to the top position On the iOS download chart and claimed the number 3 spot on the top grossing chart, this milestone launch Mark's addition of our 2nd racing car game to our portfolio, expanding our presence in this very popular genre. With Racing Master, we pioneered China's 1st proprietary AAA standard racing simulator mobile game, Introducing an authentic racing experience into the mainstream of China's gaming sphere. Developing a simulation racing game is no small feat. It requires a deep pool of technical expertise, Such as understanding dynamic crash physics, aerodynamics and real world tracks. These take years to build from the ground up.

Speaker 2

This kind of undertaking requires a lot of dedication and passion For games as well as a strong commitment to bring this to life, we have ambitious plans for Racing Master in the global market. We are about to commence overseas testing with a name to bring Racing Masters' authentic racing simulation experience To global mobile players around the world, Badlanders, Our next generation looter shooting mobile game has received positive reviews from players and achieved the number 2 position On the iOS download chart following its launch on June 8, we are dedicated to refining the game To fully unleash its long term potential, at the end of June, we also rolled out Harry Potter's Magic Awakened To the global market, including Japan, North America and Europe, where it's tough to download charts in more than 50 regions. The game was well received by Harry Potter fans across the world and has been acclaimed for its world class design Our most recent addition is DONG City: Dynasty, which we launched just yesterday. The game tops the iOS download chart authorized by the NBA Players Association, Dunk City Dynasty marks our debut into the self developed basketball game domain. Dunk City Dynasty lets basketball fans build their dream team with all star NBA legend And dominates the court with real time command using strategic prowess and leadership skills.

Speaker 2

Transitioning to our pipeline. Alongside the exciting titles mentioned earlier, such as Nara the Blade Point mobile game, Aggie Party and Racing Masters for the International Markets, Where Wings Meet, our open world adventure RPG, It's counting down to its eagerly awaited 2024 launch. At Gamescom 2023 held this week, Whale Wings Meet unveiled a wealth of thrilling revelations, which is now capturing significant attention from players worldwide. Set at the onset of the Song Dynasty, a time of warfare and turmoil, Whirlwindmeet Allows players to embark on a journey as a mysterious swordman and immerse themselves in the heart pounding allure Our dedication towards R and D underpins our ability to continue to scale Through consistent proprietary game launches, nevertheless, we remain committed to bringing top quality worldwide games to Chinese market. Since we introduced Minecraft to China in 2017, we have seen an incredible surge in its popularity within Chinese gamers community, where fans have embraced the opportunity to craft and explore their unique world as well as those of others limited only by imagination.

Speaker 2

Recently, we are very pleased To have renewed the term of Minecraft license and are dedicated to continuously serving Chinese players in the long term. In the Q2, we are pleased to announce the establishment of a new game studio named PINGCO in Tokyo, which is being led by Ryotaro Ichimura, a 20 year game industry veteran and long time producer of the Dragon Quest franchise. Incu plans to leverage its diverse knowledge as an entertainment production company to deliver top notch entertainment experiences to users worldwide. While it will mainly focus on developing titles for game consoles, Ping Ku will also venture into various forms of entertainment. Equally exciting, we've welcomed T minus 0 Entertainment to the NetEase family.

Speaker 2

The studio is located in Austin, Texas, Headed by Rich Vogel, an experienced game developer who has led development on groundbreaking multiplayer And service based games such as Meridian 59, Ultima Online, Star Wars Galaxies And Star Wars: The Old Republic. T Minus 0 Entertainment is developing an online multiplayer focused Now let's move on to Youdao. The company's net revenues resumed its robust growth trajectory following the pandemic's impact earlier this year, Registering a 26% year over year increase to reach RMB 1,200,000,000 led by strong performance in our learning services And online marketing services. Our differentiated theme courses continues to drive year over year increase In our learning services revenue, for our goal and coding courses, their renewal rates have reached close to 70%, demonstrating our user satisfaction with our cost content. Online marketing services for Youdao achieved record revenues In the Q2, nearly doubling comparing to the same period of last year.

Speaker 2

This achievement can be attributed To the utilization of our proprietary algorithm, which has substantially elevated advertising precision and efficiency. Notably, it operates at a nearly 90% accuracy rate in intelligently targeting tagging KOLs And reduce the time required to produce advertising materials by 80%, all the while enhancing user satisfaction. For smart learning devices, we continue to invest in innovative technology and rolled out new products. We were excited to launch Youdao Dictionary 10 X6 Pro model in August, our first dictionary 10 Powered by our proprietary Zue Large Language Model, which is the 1st large language model designed specifically for the education sector in China. X6 Pro offers highly personalized tutoring functions a digital human language coach named echo.

Speaker 2

Echo engages users in interactive English oral practice, which teaches students how to initiate a conversation, express themselves naturally in a native manner and provides grammar analysis based on students' submitted texts through scanning. Looking ahead, our focus on technological innovation remains our driving force, while we compel long term success Turning to NetEase Cloud Music. In the Q2, Cloud Music continues to enrich its music centric ecosystem and optimize the user experience, Resulting in a thriving music community. Total online music MAUs steadily climbed to 207,000,000 For the first half of twenty twenty three, marking a 14% year over year increase Despite the industry wide slowdown, total revenues were RMB 1,900,000,000, remaining stable compared to last quarter. This can be attributed to a combination of strong growth in online music services driven by Revenues from subscription based memberships and declining social entertainment services as we shift towards more sustainable development.

Speaker 2

Regarding margins, we are making remarkable progress. Our gross margin continues to improve in the 2nd quarter, Reaching 27% versus 13% for the same period of last year, Cloud Music also achieved Positive operating profit for the first time under IFRS in the first half of twenty twenty three. We continuously enrich our music library to offer a comprehensive music selection for our diverse audience base. In addition to the partnerships we established earlier this year with Beam Music and COMEX Wave Films, We were happy to announce our collaboration with the country's top pop singer, Chris Lee, Leading brand, Yutingmi and renowned Mandarin label, RISE Entertainment, which represents a number of highly acclaimed international pop star, including Jackson Wang. Furthermore, we have also extended our collaboration with popular Korean labels, including Dreamers, SLL And JTBC, our collaboration assets with copyright holders, have also proven to be successful in terms of digital Album sales.

Speaker 2

Notably, the digital album, I Feel by the leading Korean girl group, Giddyo, achieved over RMB 10,000,000 in gross sales and 430,000 copies sold after its release in May. We continue to empower and support independent artists. By the end of June, we were serving a growing community of more than 640,000 registered independent artists. In addition to our support programs for nurturing music talent, We actively harness cutting edge technology to provide tools that aid in music creation. During the Q2, we introduced Cloud Music X Studio, a voice synthesis software Developed in collaboration with Xiaobin, a technology innovator in lifelike interactions.

Speaker 2

This innovative tool offers 12 natural singing voices covering a variety of singing styles and provides musicians with resources in music creation. Moving forward, We will continue to foster our music centric ecosystem, further grow our community and drive healthy long term monetization And margin expansion for NetEase Cloud Music. Now moving on to Yanxuan. In the second quarter, Our private label brand continues to thrive by strengthening its portfolio with a focus on premium quality. This coincided with a steady increase in Yanxuan's revenues and significantly enhanced its profitability.

Speaker 2

In particular, the June 18 promotion yielded exceptional results. Our products achieved strong rankings on best Selling charts in diverse categories, including pet food, household cleaning products and office furniture Across leading e commerce platforms. In Q2, we also introduced a campaign that highlights the production journey Some of our popular products using short films, we showcase how much detailed attention goes into the making of some of these products, which was heavily validated by our user community. Looking ahead, we will persist in our dedication In summary, innovations through content production continues to be the cornerstone of NetEase and will be what propels our future growth. Superior content, products and services come from fresh ideas.

Speaker 2

This concept forms the heart of our company where we will always strive for excellence, manifest through hard work and persistence To inspire the industries we serve, from games to music to education to retail, we work to reimagine what is possible, Creating value for our global community, our employees and our stakeholders. This concludes William's comments. I will now provide a brief review of our 2023 Second Quarter Financial Results. Given the limited time on today's call, I will be presenting some abbreviated financial highlights. We encourage you to read through our press release Issued earlier today for more details.

Speaker 2

Total net revenue for the Q2 were RMB24 1,000,000,000 US3.3 billion dollars representing a nearly 4% increase year over year. Total net revenues from our games And related value added services were RMB18.8 billion, up nearly 4% year over year. The growth was primarily driven by increased revenue contribution from mobile games, including our strong legacy titles Such as Fantasy Westwood Journey series and our newer games such as Aggie Party. Net revenues from our mobile games Accounted for approximately 74% of our total net revenues from online games operation. Youdao's net revenue were RMB1.2 billion, a year over year increase of 26%, Primarily due to increased revenue contribution from learning services and online marketing services.

Speaker 2

Net revenues from Cloud Music were RMB1.9 9,000,000,000, a 11% decline compared to the same period last year. As explained last quarter, These results reflected declining revenue of social entertainment services as we adjusted our focus to improve profitability In a sustainable manner, we introduced multiple measures to enhance the listening experience of more dedicated music fans, Lower the revenue sharing ratio to broadcasters and agencies as well as reinforced risk controls And additional live streaming function optimization. Net revenues for innovative businesses and others were RMB 2,100,000,000, Up 10% year over year with a balanced approach to top line growth and margin expansion. Our total gross profit margin continues to grow, reaching close to 60% in the 2nd quarter Compared with 56% in the Q2 of last year. Looking at our 2nd quarter margin in more details.

Speaker 2

Gross profit margin was 67.4 percent for our games and related value added services sector Compared with 64.9% in the same period of last year. The growth was primarily driven by the termination of certain license games With comparatively lower gross margin, our gross profit margin for Youdao was 47% Compared with 42.8% in the same period of last year, the increase mainly resulted from increased revenue contribution From its learning services and online marketing services, which carry higher margins. GP margin for Cloud Music Continues to improve in the 2nd quarter, climbing to 27% versus 13% in the same period 1 year ago. The quarter over quarter year over year increase in Cloud Music's gross profit primarily resulted from the growth of membership services And continuous cost optimization initiatives. For our innovative businesses and others, Gross profit margin was 29.5 percent compared with 25.8% in the Q2 of 2022.

Speaker 2

The increase was primarily the result of margin improvement in Yanshan. Total operating expenses for the 2nd quarter RMB 8,300,000,000 or 35 percent of our total net revenues. Taking a closer look at our expense component, Our selling and marketing expenses as a percentage of total net revenues were 13.6% in the 2nd quarter and remained relatively stable year over year. Our R and D expenses as a percentage of total net revenue Also remained stable year over year at 16.3% in the 2nd quarter. As an innovative content and technology driven company, Our commitment to investing in content creation and product development is ongoing.

Speaker 2

We are also seeing leverage Our other income was RMB2.8 billion for the 2nd quarter. The increase was mainly due to the mark to market value appreciation of certain publicly traded securities in our investment portfolio during the quarter As well as higher unrealized net FX exchange gains. As per applicable accounting standards, We are required to reflect these fair value changes. Effective tax rate was 8% for the Q2 of 2023. The lower effective tax rate for the 2nd quarter was mainly due to tax benefits recognized in this quarter.

Speaker 2

As a reminder, the effective tax rate is presented on an accrual basis and the tax credits differ for each of our entities Our non GAAP net income attributable to our shareholders for the Q2 totaled RMB9 1,000,000,000 or US1.2 billion dollars Non GAAP basic earnings per ADS for the quarter was US1.93 dollars or With net cash of approximately RMB99.6 billion as of June 30, Compared with RMB 95,600,000,000 as of the end of last year. In accordance with our dividend policy, We are pleased to report that our Board of Directors have approved a dividend of US0.105 dollars per share or $0.525 per ADS. Lastly, on our current 5,000,000,000 share repurchase program starting in mid January this year, approximately 6,100,000 ADS Have been repurchased as of June 30 for a total cost of approximately US536 1,000,000 Thank you for your attention. We would like now to open the call to your questions. Operator, let's move on to the Q and A.

Operator

Thank Please limit your questions to 1 at a time. If you wish to have follow-up questions, please rejoin the queue. Your first question comes from Alex Poon with Morgan Stanley. Please go ahead.

Speaker 3

Congratulations management and Development team, we have got a lot of the Title 1 after another launching this year. Can management elaborate how the Justice Mobile leverage AI to boost revenue and user engagement? And how the Justice Mobile became the first one of this kind in China to adopt AI. And can management also share some of the difficulties And expectations of this gain into the future. Thank you very much.

Speaker 1

Thank you. I'll just do a quick translation. The AI CapEx we applied The AI has an effect on us in 2 ways. Firstly, is on the it has been greatly enhanced our R and D efficiency. And secondly, it enhance our user experience.

Speaker 1

From the R and D efficiency perspective, we've adopted AI technology in programming, In graphic designing, I think most importantly, we changed the way we think about designing games from just Games plus AI to AI plus games, which means that when we at the very beginning of designing the game, we start thinking AI. We build a whole The world view based on AI world, which gives our users a very immersive, Strong open world experience. So from what we've seen, our users have been highly attracted to this game. And we still very strong stickiness and engagement of youth to the game. And it has I think that the enjoyment that youth From the game, game has caused voluntary spread or promotion of our game within the gaming community and we'll be able to attract many gamers who were traditionally non MMO game players.

Speaker 1

Other thing I would wanted to add on here is that applying AI technology into our game development is not something that can be achieved overnight. We start thinking about AI as far as back in 2016, 2017 when we still out the go. And that's when we realized AI We'll have a profound impact on gaming. So that's one. So I think what the results in today It's a cumulation of all the investments and dedication we have put into AI research and AI development in games.

Speaker 1

Thank

Speaker 4

you. Next question please.

Operator

Your next question comes from Yang Bai with CICC. Please go ahead.

Speaker 5

Okay. I will translate by myself. After the success of Aggie Party, raising Master Justice Mobile, we noticed that the company has recently Launched the Dancity Dynasty, which ranked number 8 on China's iOS top grossing chart soon after its launch. Could management share more color on the operation strategy of this game? And how should we think of the opportunity of esports game?

Speaker 5

Besides, we can also see that the company released the PV of Urban Open World Game Project Mugen,

Speaker 1

Yes, to ask the first question on Don't Forget It Dynasty. So this game is actually our first attempt in sports Game run rate, particularly in basketball. After researching this market, we think there's potential innovation we can do in this particular run rate. So we actually when we started to put together the team of developers and game designer, we asked all the team members We chose all the team members who are hardcore basketball players personally. So all of them have a passion about basketball and they want to create the best basketball game In the market.

Speaker 1

So it has actually taken us a few years of development and dedication optimization. So we wanted we feel like we only launched the game when we feel like we've mastered a great graphics, art and a maneuver And the style in our game. So going forward, we hope to continue to expand the user base for this game and hopefully become the dominant player in this category. Thank you. So the second question is on cold internet.

Speaker 1

So this is actually our attempt on innovating The anime style game genre, so of ACG games, This is our attempt to bring the open world experience AI technology into the ACG runway. This is our attempt to further solidify our development facilities in AI and also give our ACG game lovers a true experience of open world And hopefully, we'll be able to introduce the game to our gamers in the not too far future.

Speaker 4

Thank you. Thank you. Next please.

Operator

Your next Question comes from Richie Sun with HSBC. Please go ahead.

Speaker 2

Good evening, management. Thank you for taking my question. What's the rationale behind the change of Naraka Playpoint to a free to play game? And how's the reception in terms of in game item sales and user base? And how would this change the game performance trajectory going forward?

Speaker 2

Thank you.

Speaker 1

Okay. So after we turn this game to free, we were able to bring in more users. So after this transition, we actually saw a great improvement in terms of both active users and also our revenue. And so we think that was the right decision to make. Thank

Speaker 4

you. Thank you. Next question please.

Operator

Your next question comes from Felix Liu with UBS. Please go ahead.

Speaker 6

Let me translate myself. On the domestic pipeline, congratulations on the Banhau win on Bear Wind Meet, and we look forward to more color on the game in Gamescom. Can management share more color on the status R and D status of the game? What are the potential launch time that we're looking at? And what is the game's differentiated marketing positioning compared with Justice Mobile, given both seems to be open world

Speaker 4

So

Speaker 1

where William Smith is actually a very important game for us. We actually have a very different world view to adjusted. So when we develop when we're developing well wind, We're actually learning from different things with over the world experience. And hopefully, we'll be able to launch it by the second half next year.

Speaker 2

2nd quarter.

Speaker 1

Q2 next year. So for NetEase, we believe we have a lot of experience in Open world games. So every game we launch, we try to bring our users a different user experience.

Speaker 4

Thank you.

Operator

The next question comes from of Lincoln Kung with Goldman Sachs. Please go ahead.

Speaker 7

So thank you, management, for taking my question. So my question is about the new game type of game genre offer and A's game. So in the past 12 months, we have seen a very successful launch of 3rd party, racing master and also recently the Dang City Dynasty, those are relatively less exposed game from that you see in the past. So how should we conclude and understand the success learning from these games? And after the breakthrough of all these different types, with companies And the development operational strategy have any new change or priority in the future, especially for those leader party

Speaker 1

So as the Internet company, as a content provider, We keep our innovation spirit at heart and we continue to invest very heavily in R and D. So the success you've seen in the past 12 months are some positive results from the past efforts we're putting in R and D and in developing game. These are successes, but there have been failures too. But we will continue to work hard, never give up, and we want to bring

Operator

Your next question comes from Kenneth Fong with Credit Suisse. Please go ahead.

Speaker 8

Thank you for taking my questions and congrats for the very strong set of results. I have a question about the gross profit margin. What's the game business and overall business gross profit margin outlook for second half and twenty twenty four? As we see strong performance of our self developed titles and continuous channel optimization. Thank you.

Speaker 2

Okay. Thank you, Candace. It's Charles. In the interest of time, let me answer this question directly in English. As you have rightly put, NetEase prioritizes our R and D resources and attention To self develop proprietary games, which would yield, relatively speaking, much higher margin Vis a vis licensed games.

Speaker 2

In the first half of this year, we continue To enhance our game services related GP margins, largely because The termination of certain licensed games, as well as very strong performance Our self developed legacy games such as SWJ, WWJ, as well as new games such as Aggie Party. In the second half, as you can already tell that we launched multiple New exciting very, very strong performing games in June. So the trajectory of

Speaker 4

Thank you, Kenneth. Next question please.

Speaker 2

Thank you.

Operator

Next question comes from Natalie Wu with Haitong International. Please go ahead.

Speaker 4

Thanks for taking my question. My question is related with the game Overseas Expansion Plan. Just want to get an update of both in And the short term and the long term, which market enrages will be the focus for your game expansion? And wondering if you can give us an update of your the overseas Expansion plan and target, both in short term and long term. Charles, you've mentioned that the raw card Transition and ex parties Charles on your prepared remarks.

Speaker 4

So just wondering If Nadia get any inspiration or license or learned from these kind of recent And lastly, just for housekeeping, what's the overseas revenue contribution for GAME in last quarter? Thank you.

Speaker 1

Okay. So in terms of geographical focus For us, it's Europe, both America and Europe, Japan and Korea. So in terms of And the markets are very different in the sense that in the China market, mobile game is a mainstream time and game type and play, Whereas in overseas market, console and TV games are still the mainstream. And thirdly, in terms of Runners, A lot of the games that are popular a lot of the run rate that are popular in China probably do not apply for overseas market. So what are the run rate that will attract overseas audiences?

Speaker 1

It's a topic that we are studying. I would spend a lot of time evaluating and I'm sure that one very soon we'll be able to introduce to the world the right answer. Thank you.

Speaker 2

And Natalie, for your second part of the question, overseas games revenue, well, since the Strong performance of Aggie Party from Q4 and the end of last year. The overseas revenue percentage Has slightly declined to a single digit from previously around 10 ish. So But again, the primary reason of that percentage mixture change is mainly due to the strong performance Certain of our new games launched mostly in domestic market. Now with Justice Mobile And Racing Masters' strong debut launch in June, we would expect my Domestic games, particularly domestic mobile games in the second half to continue to grow outgrow at a faster rate

Operator

Your next question comes from

Speaker 1

No, I think this is what we've got for today. I think that's all the time we've got for today. So we did conclude the question and answer session. So thank you once again for joining us today. If any further questions, please feel free to contact us directly,

Operator

Thank you. The conference has ended. You may now disconnect your line. Thank you.

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