Allegion Q4 2023 Earnings Call Transcript

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Provided by Quartr
February 29, 2024

There are 7 speakers on the call.

Operator

Good day, and welcome to the NetEase 2023 4th Quarter and Full Year Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandy Piacente, President of Piacente Financial Communications. Please go ahead.

Speaker 1

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

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 this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20 F and in announcements and 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 also 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 Q4 and full year earnings news release issued earlier today.

Speaker 1

Please note that certain financial information regarding Cloud Music we will be discussing on this call has been prepared in accordance with IFRS. For additional information, including a definition of non IFRS measures and a reconciliation of IFRS to non IFRS financial results, please refer to Cloud Music's annual results announcement for 2023. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase's senior management are Mr.

Speaker 1

William Ding, Chief Executive Officer and Mr. Bill Peng, Vice President of Corporate Development. I will now turn the call over to Bill, who will read the prepared remarks on William's behalf.

Speaker 2

Thank you, Brandy, and thank you, everyone, for participating in today's call. Before we begin, I would like to remind everyone that all percentages we're talking about here today are in RMB. 2023 marked another year of innovation for NetEase. We drove momentum across our businesses, expanding our top and bottom lines year over year for both 2023 and the 4th quarter. Continuous cross category innovation at NetEase games is actively expanding and diversifying our ever growing game portfolio.

Speaker 2

On top of our enhanced strength in MMO and Chinese culture derived titles, in 2023, we have landmark success and breakthroughs in diversified honors. This powerful combination is driving our game business with healthy Q4 performance from both our new and time honored titles. Looking first at some of our MRO performance for the period. We remain highly committed to supporting and growing the robust appeal of our esteemed legacy franchises such as FENNIS Westward Journey and Westward Journey Online with fresh content and exciting in game events like our annual celebration for Fantasy Westward Journey. In the 4th quarter, we held a series of carnival themed events that we invigorated players, reaffirming the importance of Fantasy Westward Journey's IP and its stature as one of the most influential MMORPGs in China.

Speaker 2

The longevity of these flagship titles also underscore our commitment and ability to elevate traditional game standard through ongoing in game innovation. Adding to our conventional MMO titles, our new MMOs are pushing the boundary of what MMOs can be. The revolutionary advancements we have introduced with games like Justice are evolving the genre as a whole and continue to gain player momentum. In the Q4, the Justice, Nichu Han franchise reached a new milestone of 100,000,000 active user, encompassing a broad and diverse user base. In our experience, these are telltale signs of games' potential for robust operating longevity.

Speaker 2

The innovative renovation system, which both introduced new pursuits and reduced entry barriers, continues to captivate and inspire current user and new users alike. These are bolstered by rich challenges and achievements where everyone can develop individual interest and be rewarded equally, whether playing in PVP instances, combat focused PVP sessions or casual gameplay modes. The steps we're taking to strengthen our brand and engage players are also bearing fruits. By integrating players' other interest with our games and giving them more in game autonomy and choices, we create deeper connections between our games and player communities. For example, in the Q4, players got to weigh in on the selection of collaboration partners for Justice franchise.

Speaker 2

In response to players' popular choices, we established a collaboration with the Chinese fan sensation, Phoenix Legend, providing players a voice in shaping their gaming experience has proved highly investment with our community. The event was a huge success led by players' word-of-mouth marketing with friend recommendations driving the bulk of new commerce to the game. In addition to our MMOs, we made headway across a diverse side of genres in 2023, broadening our reach across more casual game players and entering new genres such as sports and simulation games. These are not only extend and enrich our broader NetEase community, but also highlight our ability to bring highly successful games to players in more diverse game categories. Touching on a few of successes in genres that are new to us, Dunk City Dynasty, has emerged as a groundbreaking basketball game.

Speaker 2

Here, we have successfully attracted a large user base to a genre that was previously considered relatively small in China. To build on the game's initial success, we are providing more for our players, adding further diversifying gameplay and exciting player to the chip rosters. We have been expanding the player lineup since the Q4, introducing MVP stars like James Harden, Russell Westbrook, Joel Emmett, Jamal Murray and Aaron Gordon, as well as CBA Legends, including Yi Jianlin and Guiller. Beyond the game itself, we are committed to spread basketball game culture. To foster broader basketball game community growth, we are launching a foundation valued at more than RMB10 1,000,000 this year to support the sports development, including sponsoring university basketball games and facilitating events promotions.

Speaker 2

We expect these initiatives to extend the reach of our game and the sport itself across the broader audience. Racing master, Jianzhong Jisu, is another new hit for us, offering top tier content for all the racing fans. During the Q4, we enriched the player experience with an expanded selection of international professional racetracks and aspirational supercars, catering to our robust demand from our player community. Following its official launch in China in June, Racing Master is now available in Hong Kong, Macau and most recently Taiwan, where it topped local Ios download and grossing charts in the 1st week of its launch. As we expand our reach across a growing range of genres, we are also capturing the attention of more female players with innovative games like Shih Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia Jia.

Speaker 2

With this ACG style romance game, we have once again defied conventions, introducing an infinite school backdrop and bringing players more storytelling and gameplay innovation. We released the Shijiazhuai in January this year, and the players continue to embrace it, having topped China's iOS download gaming charts during its 1st week on the market. For our blockbuster equity party, we continue to cultivate our UGC ecosystem. Shooting our players enduring enthusiasm, in December, we introduced a new feature, Aggie Code, unleashing even more creation potential by offering an engaging and easy coding tool for our players. Coding lines can be now translated into user friendly toy blocks to control events, actions and conditions more readily, allowing creators to further unleash their creativity.

Speaker 2

This new innovation pushes higher game coding limits, greatly increasing creation flexibility for the game's more than 26,000,000 creators. To further expand our rich catalog of diverse games, we have a number of new titles under development. Today, I would like to mention a couple of our new coming games that will be rolling out this year. First is Shodiao Condo Hero. Based on one of China's most popular martial arts novels, Shodiao is an open world RPG that will be launching across PC, mobile and cloud gaming platforms.

Speaker 2

We have established a highly immersive martial art world for the game, featuring open explorations and rich storytelling. All players will embark on their journey within a single server that can accommodate over 10,000,000 players simultaneous online interaction. Multiple rounds of CAST has shown an excellent performance so far, and we are on course for Xodiao's soft launch on March 28 this year. Next comes Where Wings Meet, Yanyun Shilosheng, which is designed to bring players an open world gaming experience comparable to console gameplay. The game features realistic martial arts combat experience and an inclusive art style with a unique historical backdrop.

Speaker 2

We successfully concluded testing on the PC side in December, and we are currently gearing up for the game's launch later this year. Additionally, we are thrilled to announce that we have received license approval for Naraka Blake Point, Yongjie Wuxian on mobile earlier this week. We are excited to extend the immersive comeback experience enjoyed by players on PC and console platforms to mobile world. On the global stage, we continue to add studios around the world that demonstrate our ability to draw on local talent and extend our international appeal. We are thrilled to announce the latest addition to our game studio portfolio, World Untold in Bancur, Canada and our newest U.

Speaker 2

S. Edition, Fooly Farm, headquartered in Los Angeles. World Untold is led by industry veteran, Mac Walters, who has over 2 decades of experience in game and writing, well known for his contribution in the acclaimed Mass Effect series. We welcome Mac and his team, who will be dedicated in creating new IP with their debut product already underway. The Remote First Studio, Booty Farm, is led by David Van der Haar and his team of industry veterans.

Speaker 2

David is an award winning and experienced game developer, best known for leadership of the Call of Duty franchise. They are currently working on an ambitious new AAA game set in the original universe with an emphasis on collaborative game time. We're looking forward to his contribution in creating more highly anticipated titles for our portfolio. As we have always said, people are most valuable and talent development is one of our top priorities. The tailored course we offer our employees across various career development stage and professions ensure that NetEase culture fosters sustainable talent incubation.

Speaker 2

I'm pleased to announce that in the Q1 of 2024, we were the sole Chinese Internet company to be awarded the ATD Excellence in Practice Award. This prestigious award and acknowledgment from the global talent development industry is an honor that further strengthens our commitment to cultivating the new wave of Internet talent. Alongside with our business momentum, we have assumed increasing social responsibility. This comes with a result to protect minors in our Internet endeavors. In addition to our existing anti addiction system, we have started integrating several functions, including a minor mode across our China based China based game line up to protect miners, and we'll continue to steer the gaming ecosystem towards a healthier trajectory with our innovative products and technology.

Speaker 2

Now let's move to Youdao. In the 4th quarter, Youdao continued to propel technological innovation and product development, further improving profitability and cash flow. In our learning services, we have consistently raised the quality of our unique courses. Digital content services kept a healthy growth momentum in the 4th quarter. In addition, the retention rates were approximately 70% in the 4th quarter for both advanced level programming courses and Go courses.

Speaker 2

In 2023, 3.40 students from our programming courses received awards in the CSP programming competition held in China. Notably, 106 students won 1st prize, comprising over 20% of all the award recipients. We believe that our students' success highlights the high standard and effectiveness of our courses. Additionally, the utilization of our cutting edge AI technology and the enhancement of our data infrastructure drove Youdao's online marketing services revenue to reach a record breaking RMB474.1 million in the 4th quarter. These AI driven advancements have empowered us to enhance our real time API technology capabilities, diversify our time base and broaden the scope of our applications.

Speaker 2

Our smart devices saw an expected year on year decline in the net revenue in the 4th quarter. This was due to organizational initiative for our strategic channel structures, as mentioned last quarter. Step we have taken are directed at reducing low ROI sales channels, which in turn affected China inventory in the short term, but are expected to serve our long term ROI driven objectives. In Chargely, we have observed signals indicating a recovery, including a return to healthy development in the Q4 compared to the previous quarter. The sales channels optimizations has been completed.

Speaker 2

Our commitment to technological innovation remains central to Youdao's business. We have consistently advanced our proprietary LLM in the year and accelerated the development of large language model applications since the Q4. Expanding our capabilities in virtual human tutoring, we upgraded the digital human language coach Hi Echo in the 4th quarter, further enhancing its conversational capabilities. To augment students' learning experiences, we introduced the AI tutor into our recently launched Youdao smart learning path, Xplenty. The AI tutor adeptly respond to students' inquiry on path, simulating the interaction of the human tutor.

Speaker 2

Furthermore, we are observing the tangible impact of AI technology in truly improving performance. Our existing LLM features, particularly AI Box, continue to receive user acclaim, contributing to more than 100% year on year growth in the translation subscription fees for 3 consecutive quarters. Turning to NetEase Cloud Music. In the Q4 of 2023, Cloud Music continued to navigate quality development across our music centric ecosystem, while further extending robust monetization momentum in the core online music business and improving overall profitability. The revenue from subscription based membership in the 4th quarter continued a solid upward trend.

Speaker 2

This growth was primarily driven by an increase in the number of subscribers, along with the moderate improvements in ARPU, as a result of our diligence in strengthening our music centric monetization capabilities. With the introduction of new premium offering, including expensive content and innovative features, as well as broadening membership privileges and joint programs with external partners, we notably grew our subscriber base in the 4th quarter. Moreover, we considerably improved our profitability for Cloud Music throughout 2023, achieving full year positive adjusted net profit under IFRS for the first time. We remain committed to fostering strong partnerships with music copyright holders and are actively working towards deepening these collaborations to expand our catalog of music label content, promote advantageous music genres and increase album sales in cooperation with the top office. In particular, music genres such as hip hop and Chinese folks has been a surge in the popularity of our platform and we continue to cultivate content in these advantageous genres.

Speaker 2

2023 also marked our debut of physical album market with our 1st co published physical album, Huaqanyu's new album, Xu Wang Hope, followed by the successful sales of Zhang Jie's physical album, in the Q4. We continue to enhance our support system for independent artists by actively investing to initiatives that bolster musicians, improving music creation tools and expand online and offline music exposure. We aim to help independent artists increase their influence and commercial income, ultimately strengthening the original music ecosystem on our platform. As of December 2023, our platform had over 684,000 registered independent artists who contributed around 3,100,000 music tracks to our library. Drawing on our expertise in music, a wide and varied user base and in-depth user insights, our in house studios continue to enrich our content matrix, offering high quality and unique music content.

Speaker 2

Our studios are gaining increasing ground in advantageous music genres. For instance, we produced a number of popular tracks in the Q4, including Sunshine Boy and Sunshine Girls 2023, Yanguangnanhai, Yanguang Yuhai, Arlinga Shan and Sheng Shan, further solidifying our competitiveness in the hip hop genre. Turning to our private label consumer brand. In 2023, Yanxuan continued to strengthen its brand presence with highly popular products in focus categories. With increasing consumer recognition of domestic made products in China, Yanxuan has established a solid brand awareness across pet supplies and household claiming, as well as office supplies and food among others.

Speaker 2

Sales growth remained steady in 2023, with double digits increase in specific e commerce channels year over year. Simultaneously, we are continuously optimizing Yanxuan's supply chain to improve cost efficiency by integrating automated system. In 2024, we will continue to provide Yanxuan customer with consistent high quality original products. Across our business lines, the cornerstone of our competitive edge is our innovation. With our robust R and D capability, we have consistently produced unique products that drive our company and industries we serve forward.

Speaker 2

In 2024, we remain committed to these principles and we will bring more high quality product to the market. By crafting outstanding products, we can simultaneously create value for both our user community and our stakeholder. This concludes William's comments. I will now provide a brief review of our 2023 annual results with focus on the 4th quarter. Given the limited time on today's call, I'll be presenting some abbreviated financial highlights.

Speaker 2

We encourage you to read through our press release issued earlier today for further details. Our total net revenue for 2023 were RMB103.5 billion or $14,600,000,000 representing a 7% increase year over year. For the Q4, total revenue were RMB27.1 billion or US3.8 billion dollars up 7% year over year. For 2023, our net revenue from games and related BES were RMB81.6 billion, up 9% from 2022. Revenue accelerated even faster in Q4 to RMB20.9 billion, up 10% year over year.

Speaker 2

The additional growth was primarily due to increased revenue contribution from launch of new games such as Justin Mobile and sustainable developed titles like Aggie Party. Revenues from mobile games continue to make up the lion's share of our game business, accounting to 77% of our total net revenue from online game operations in the Q4 and 75% for the year. Youdao's net revenue for 2023 reached RMB5.4 billion and were up 2% year over year in the 4th quarter in the 4th quarter reaching RMB1.5 billion, primarily due to increased revenue contribution from Yudao's online marketing services. NetEasecom Music net revenue were RMB7.9 billion for the full year and RMB2 1,000,000,000 in the 4th quarter, a 13% and 16% decline, respectively, compared to the same period last year. As we have previously discussed, the decline reflects lower revenue from social entertainment services as we adjust our focus to improve profitability in a sustainable manner.

Speaker 2

Net revenue for Innovative Business and Others were RMB8.6 billion for the year, up 9% year over year. In Q4, total revenue were RMB2.8 billion, up 12.9% year over year, mainly due to increased revenue contribution from Yanxuan and some of our innovative business. The total gross profit margin was 62% in the 4th quarter compared with 52.2% for the same period in 2022. Looking at our Q4 margin in more detail. Gross profit margin was 69.5% for our games and related EAS, compared with 59.1% in the same period last year.

Speaker 2

The increase will primarily attribute to a higher proportion of net revenues contributed by net self developed games. Our gross profit margin for Youdao was 49.9% compared with 53.3% in the same period of last year. The decrease was mainly due to reduced revenue contribution from smart devices, which was partially offset by increased revenue contribution from online marketing services, which carry relatively lower margins. Gross profit for Cloud Music improved in the 4th quarter, reaching 30.3% versus 17.8% in the same period a year ago. The margin improvement primarily resulted from increased revenue scale from membership subscriptions and continued improvement to our cost management measures.

Speaker 2

For our Innovative Business and Others, gross profit margin was 34.4% compared with 31.5% in the Q4 of 2022. The increase was primarily the result of margin improvement in Yanxuan and our advertising services. Total operating expenses for the Q4 was RMB10 1,000,000,000 or 37% of total net revenue.

Speaker 3

Taking a

Speaker 2

closer look at our cost composition, our selling and marketing expenses as a percentage of total revenue were 15.6% compared with 13.5% for the same period last year, mainly due to increased spending on gaming promotions this quarter. On a full year basis, selling and marketing expenses accounted for 13.5% of net revenue, which remained relatively stable compared with 2022 when it was 13.9%. Our R and D expenses as a percentage of total net revenue also remained stable year over year at 16.5% in the 4th quarter compared with 16.1% for the same period last year. On a full year basis, R and D expenses accounted for 15.9% of net revenue, which remains relatively stable compared to 2022 when it was 15.6%. We remain committed in investing into content creation and product development.

Speaker 2

We are also seeing leverage in our R and D investments longer term. Our other income was RMB876 1,000,000 for the 4th quarter compared with RMB1.5 1,000,000,000 last quarter. The decrease was mainly due to exchange rate of U. S. Dollars against RMB fluctuating over the period and mark to market value of certain publicly traded securities in our investment portfolio witnessed depreciation during the Q4.

Speaker 2

As per applicable accounting standard, we are required to reflect these fair value changes. The effective tax rate was 13.8% for the full year and the Q4. As a reminder, the effective tax rate is presented on an accrual basis depending on applicable policies and our operations. Our non GAAP net income from continued operations attributable to shareholders for the Q4 totaled RMB7.4 billion or US1 $1,000,000,000 up 53% over year. Non GAAP basic earnings per ADS from continuous operation for the quarter was $1.62 or $0.32 per share.

Speaker 2

Additionally, our cash position remains strong. As of year end, our net cash position was about RMB110.9 billion compared with RMB95.6 billion at the end of 2022. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of US0.21597 dollars per share or US1.07985 dollars per ADS. Lastly, under our current US5 $1,000,000,000 share repurchase program starting in mid January last year, we have repurchased approximately 7,200,000 ADSs as December 31, 2023, for a total cost of approximately US644 1,000,000 dollars Thank you for your attention. We would now like to open the call to your questions.

Operator

Thank Your first question comes from Felix Lu with UBS.

Speaker 4

Let me translate myself. Thank you, management, for taking my question and congratulations on the Bahau for the mobile version of Naraka: Blade Point. My question is on the game. Can management share a bit more color on the R and D progress of the game? How would the mobile version differ from PC version?

Speaker 4

And what is your expected launch time for this game? Thank you very much. Yes. That's great. Thank you.

Speaker 2

Yes. I will do the translation. Yes. For the mobile version of Naraka, we did a test. Everything is on track.

Speaker 2

We did a test in Chengdu back in December and the result was fairly good. And regarding your question on the experience between mobile and PC, what William said is that during the past two and a half years operating on PC, we have accumulated ton of experiences and we're doing all the needed modifications, everything, optimization for the mobile version. And regarding the going live date, everything is on track And now our best estimate is somewhere Q2.

Operator

Your next question comes from Alex Poon with Morgan Stanley.

Speaker 2

Congratulations management for very strong results and gain pipeline. My question is first question is regarding the overseas expansion of 80 party. We have launched in many countries already last year what's our latest thought for the game in 2024? My second question is related to the progress of Project Mougain. Thank you very much.

Speaker 2

Okay. I will do the translation. First of all, as everybody knows, Aggie Party was a huge success in China, and we have accumulated tons of experience. And regarding overseas market, we're in the exploration period now, and we're doing that step by step, validating a lot of concept and thoughts to try different things out. The tone we want you to get is that, please stay tuned.

Speaker 2

We're going to get there for the overseas market of party. Regarding the status of Project Mogen, it's under normal game development now. And of course, it's also in the process of applying for the publishing numbers as well. The product has a very specific, very clear positioning and development targets. And we hope in the area of ACG Open World game, we can make the game differentiated enough to have this on foot on the market.

Speaker 2

Thank you. Next question.

Operator

Your next question comes from Li Zheng with Bank of America Securities.

Speaker 1

Thanks management for taking my question. My question is regarding overseas business and can you give us some updates on overseas game plan? And any do we have any plan to expand or acquire more overseas studios? Thanks.

Speaker 2

Yes. So now we have studios in U. S, in the United States, Japan, U. K. And other countries.

Speaker 2

This is quite normal. When we are going global, we have set up our studios in around the globe. That's quite normal. And we're going to there's a it's going to be a new norm for us in the future. Thank you.

Speaker 2

Next question.

Operator

Your next question comes from Yang Bai with CICC.

Speaker 3

I will translate by myself. For Aggie Party and the Party Game, how do we think the future of UGC in game content creation? How is the user structure now compared to January 2023? And how to view the current competition in party games? And second line, as so many successful domestic products, can we find some synergy between domestic and overseas business?

Speaker 3

Thank you.

Speaker 2

Okay. Thank you, William. Yes, I will do the translation. Regarding our understanding of the game UGC type of game, first, we would like to say doing UGC game is not the easy job. Looking globally, not many companies successfully did that.

Speaker 2

And for NetEase, we have our strengths, our experience, our unique experience and strengths, but we are all that we're doing is keep exploring. What we can do is keep a humble and creative attitude and keep exploring the new ways of doing creative be creative in the game design. And regarding your next question on the synergy between domestic success and going overseas, Games the fun part of gameplay are the same regardless where the game sits, where the player sits. So what we can do is leverage what we learn on the fun part, how to do a fun game, how to do a gameplay design and apply that to global products. Thank you.

Speaker 2

And next question please.

Operator

Your next question comes from Jia Longxi with Nomura.

Speaker 3

Thanks management for taking my question. I have a question about 8 party. We noted that since the end of last year, many offline promotional activities have been held for your game, X Party. Just wonder what is the trend for your marketing spend this year, whether or not this promotional expense for Eggtati was a driver for an acceleration in your marketing expense last Q4? Thank you.

Speaker 2

Thank you, William. Yes, I will do the translation. General, you're right. In Q4, if you look at our marketing spending, of course, as you can imagine, there is some factor of competition that we have to deal in the market. But in the meantime, you look at the recent performance, our performance during the Chinese year 2024, Aggie Party achieved $40,000,000 DAU achievement, which shows that the marketing initiative we spent on are quite effective.

Speaker 2

The result is quite good and quite effective. Looking forward, we don't see a big increase on the marketing spending and we are keep exploring the most effective ROI on the marketing spending as well as the more rigid on where to spend. And the marketing spending increase shouldn't be a concern. And William also talks about some greater macro backdrops that, as you can see as the quality of games in general increase year over year, it's more and more challenging for other companies to compete in the market. For NetEase, because we have long term, long time accumulation in game development everything.

Speaker 2

And we also invest bigly into our new project. So to some extent, year of 2024 is actually a year of harvest to us. We are going to unleash the accumulation that we experienced we accumulated over the past 20 years and you will see more and more result of new games comes out. Thank you. And next question please.

Operator

Your next question comes from Lincoln Kong with Goldman Sachs.

Speaker 5

So my first question is about where we meet. So what's our target launch time line for this game? There will be a cross platform global launch for this time. And it seems during the testing, it requires quite high equipment for the on the PC world. So would that affect to the mobile world in terms of the gameplay and the companies?

Speaker 5

How would that fit in both PC and mobile? And the second question is around the overall market. We do see some of the uncertainty around the macro economy and consumption going forward into 2024. So in those longer term legacy games like Westworld Journey and as a Westworld, do we see any of the change in terms of the user spending behavior or paying willingness on those games? What's our outlook for this year's gaming industry?

Speaker 2

Yes. I will do the translation. First of all, regarding your question to Where Wins Meet, Where Winds Meet, as we explained, is a game we spent 3 years developing. It's a very high quality martial art based open world game, RPG game. And regarding the graph, subsidy, the graph regression, that's something you don't need to worry and players don't need to worry either.

Speaker 2

Our engine has the capability to adapt different hardware platform to push the limit of that specific hardware, but also make sure it's runable on different platforms. So that's been taken care of by our in house game engine, everything. And in the meantime, for the game itself, it's indeed a high graphic game on advanced hardware platforms. And also from our experience, we saw people like the Wuxia culture like to play the game and we hope this game could be a vehicle that we could promote the Wuxia culture to the world as well. And to your second question regarding the macro economy uncertainties, how will that impact the game performance?

Speaker 2

From our observation, actually gamers, they spend pretty prudently how much they spend in different games to get the fund they are pursuing. It's not from our experience, not very related to macro economy conditions. It's actually more related to the quality of the deal itself. Now as we said, the gamers not only in China, but globally become more and more picky regarding the quality, which puts all the developers included to spend more and more effort to making high quality content. Yes, that's kind of the game industry macro we're in.

Speaker 2

Thank you. And next question please. I think we have time for one last question.

Operator

Thank you. Your last question comes from Richie Sun with HSBC.

Speaker 6

So I will translate this question myself. So sure, that will be launched in March and where we speak can be launched in first half. So in terms of the user demographics, how big is the overlapping between these games and now existing games? And how would NetEase coordinate the promotion and launch schedule to maximize the hit rate? And when would where would Meet be launched?

Speaker 6

Thank you.

Speaker 2

The translation. Yes. So regarding your question on the 2 different, both martial art based game, there are different these two games have totally different IP attributes. One is very beloved by Ji Yong fans. The other one is more like an Asian reality kind of setup.

Speaker 2

And both games are developed by different teams with different art style, different system setup. We don't see that the game is going to have a dollar for collaboration with other games. And actually, our view is the market is actually looking for high quality Wuxia Open World Games. And by offering 2 high quality Wuxia games in the market with different positioning, we hope we can push the market further. And as on the go live base, everything has been prepared, everything is on track and yes, everything is on track.

Speaker 2

Thank you.

Operator

And that concludes the question and answer session. I would like to turn the conference back over to Brandy Piazzante for any additional or closing comments.

Speaker 1

Thank you once again for joining us today. If you have any further questions, please feel free to contact us and have a great day.

Speaker 2

Thank you.

Operator

That does conclude our conference for today. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Allegion Q4 2023
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