NetEase Inc

NASDAQ:NTES

Earnings Call Transcript 2021-Q4

[Operator]

Good day, and welcome to the NetEase 2021 Fourth 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 Margaret Shi, IR Director of NetEase. Please go ahead, ma’am.

[Margaret Shi, Director-Investor Relations]

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 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. 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 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 the announcement and filings on the website of 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 as a reconciliation of GAAP to non-GAAP financial results, please see the 2021 fourth quarter and the full year earnings news release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase senior management is Mr. William Ding, Chief Executive Officer; and Mr. Charles Yang, Chief Financial Officer. I will now turn the call over to Charles, who will read the prepared remarks on behalf of William.

[Charles Yang, Chief Financial Officer]

Thank you, Margaret, and thank you, everyone, for participating in today’s call. Before we begin, I would like to remind everyone that all percentages are based on RMB. 2021 was an eventful year for NetEase for online games, we introduced a number of prolific games, breaking new record and various categories for Youdao. We quickly and successfully restructured our business in lines of the new regulations in the online education industry and Youdao is now ready for its next phase of from. And for our Cloud Music business, we are extremely pleased to have completed a initial public offering on Hong Kong Stock Exchange in December, we look forward to growing this business further with augmented content and features to create and bring more quality music to our users. For online games, we finished the year with a strong project revenues came in at RMB17.4 billion representing 30% year-over-year growth. Our flagship titles continue to demonstrate strong year-over-year growth after two decades of operations. We continue to supply our loyal and sustainable base of users is continual content updates revenues from our Fantasy Westward Journey and Westward Journey Online saga continue to grow remarkably at double digit rates year-over-year. Further strengthening their positions as China’s biggest and MMO titles. In terms of our new game launched during the year Naraka: Bladepoint was a clear standout with international success. The game quickly broke the sales record for buy-to-play games made by Chinese developers and gained the claim as a top seller on Steam’s Best of 2021 games list. Some of the Naraka: Bladepoint excitement in the fourth quarter followed our roll out of content update. For example, in our crossover with Bruce Lee, we brought a series of themed items based on the legendary martial arts figure in to the Naraka world, letting players unleash the fury of the dragon against their opponents and invigorating the global player community. Keeping our games fresh with frequent updates, Naraka: Bladepoint user base continuously hit new record. The strong engagement then retention we are seeing today brings us great confidence that Naraka: Bladepoint will continue to attract users from all over the world. We are now working diligently to bring players council version and mobile version of the game, which we look forward to bringing to our players in the very near future. The highly anticipated release of Harry Potter : Magic Awakened also took that market by storm as one of the most successful games in China last year in chunking millions of players and dominating both top download and grossing charge in China, following its launch in September. Harry Potter : Magic Awakened uses the best-in-class development capabilities of NetEase games to bring players a captivating gameplay experience with compelling features and in depth collectable cloud system and beautifully crafted art style after a strong debut in September, we continued to extend the games popularity by frequently, rolling out captivating updates that bring users fresh gameplay, cosmetic items and card every month rising to the top three position multiple times on China’s iOS top grossing game chart during the fourth quarter. We share an equal excitement for the overseas versions of Harry Potter : Magic Awakened and our localization for other geography are progressing smoothly. Two weeks ago, we kicked off the closed data testing for overseas players leveraging the talent of two gaming and online entertainment powerhouses we will work very closely with Warner Bros. Games to co-publish this amazing game globally, including in the U.S., Europe and Japan later this year. We believe worldwide audiences will be delighted to embark on immersive adventures, taking a fantastical journey into the wizarding world of magic and infinite possibilities. In addition to these two blockbuster games, we are proud to have also launched a number of other titles in various brands new genres, growing our rich with new players and opening up new possibilities. We launched Ace Racer in July, our very first self-developed racing game. Ace Racer’s realistic art style and real life racing tracks create an exciting and differentiated racing experience. Players can travel to Hangzhou, Chongqing and other places to enjoy the unique and beautiful scenery. The strong view of Ace Racer marks another lead in our genre expansion, giving us more confidence in our ability to create more successful titles outside of our comfort zone. Infinite Lagrange our space-themed SLG game launched in the third quarter is a great example showcasing how we expand SLG genres with its strong debut in China as one of our next generation SLG titles, Infinite Lagrange features an iconic space simulation experience captivating, hardcore sci-fi players with its intense and exciting travel through time and space. After six months of operation Infinite Lagrange continues to show a healthy upward trend with gradually ramping revenue. With our strong R&D capabilities and relentless pursuit of innovation we are constantly looking to break into new territories, capturing new users that reach beyond our traditional genres. Moving into 2022, we have an abundance of new pipeline projects planned for Naraka: Bladepoint and Harry Potter : Magic Awakened as well as a number of other strong titles ready for launch in China and globally. Diablo Immortal has been long anticipated by players community worldwide. In our pursuit of top quality, the game has taken us great efforts to create and refine. We strive to bring our players the most authentic Diablo experience restore the popular combat style and immersive exploration features and create a new story and blame play for the mobile platform. Luckily for players, the weight is almost over. We have concluded the latest round of testing in January with highly positive feedback from players in both China and overseas market. We are on track for its global launch this year. And in China alone, we have already over 10 million players preregistered for this exciting title. Additionally Ghost World Chronicle our self developed Chinese style sci-fi RPG is also in the making. We creatively integrated sci-fi style with elements from modern cities and traditional Chinese culture, creating a engaging Chinese style sci-fi world with a distinct artistic style. We are working diligently on development. I’m hoping to bring a fresh and differentiated RPG experience to players. In the overseas market, we will be launching that by Dead by Daylight Mobile in Asia, which is the mobile version of the famous asymmetrical battle arena PC game. We have worked jointly with behavior interactive to build this mobile version and we are confident that players will find unrivaled asymmetrical competitive experiences. Following the games release in the coming month. As we create a larger presence on the international stage with our top quality games, we are also attracting global top talents into NetEase. In January, we announced that we have teamed up with master producer Toshihiro Nagoshi former producer of Yakuza, one of the most famous and best selling game franchises in Japan together we are building Nagoshi Studio in Tokyo for the development of high quality games for global art audiences. We share a commitment to unleash the potential of creative in an open and inclusive environment. The new studio will have full authority to manage and create the kinds of games that they are passionate about, and we will be there to provide support throughout. Over the past few years, we have also attracted top producers, including Tetsuya Akasaka and Goichi Suda with this top talents joining us, we will gain new inspiration and global vision to reach passionate gamers around the globe with high quality and engaging content. Now turning to Youdao, we have completed a smooth business transition in compliance with requirements from regulators and achieved steady growth throughout 2021. Total net revenues for Youdao were RMB1.3 billion in the fourth quarter representing 21% year-over-year growth. In addition, we achieved positive non-GAAP net income for the first time, since our IPO, and continuing operating cash flow inflow of RMB142 million. In the fourth quarter, we continues to upgrade our steam cost offerings, gross billings from Youdao Go, Youdao wage fee increased by around 130% year-over-year. Recently we launched Youdao [indiscernible] the Youdao Game Academy Act, which enables Go and chance learning through AI or person to person matches. Complimentary to our online offerings we opened our first offline theme center in Beijing last November, offering courses such as Youdao Go, Youdao Icon programming and Youdao Drosophila Science to help improve children’s skills in logical thinking and explore the scientific world. We expect to expand the learning center with more diversified content in the coming periods. Growth momentum, from our leading smart devices also remain strong with new and improved content and features. Net revenues from the segment grew 34% year-over-year to RMB317.7 million in the fourth quarter through a partnership with the commercial press Zhonghua the oldest and most influential publishing agency in China, exclusive content, including those from Xinhua Dictionary were added to our Dictionary Pen. Additionally, in our new upgraded pro version of the Dictionary Pen, personalized writing assessment and improvement suggestion are available for students at various stages of learning based on vocabulary, grammar and composition. These features are again powered by our strong AI technology, such as optical character recognition and natural language processing capability. As for education digitization solutions, we have secured strategic partnerships with a number of local municipals, including [indiscernible] and recently Suzhou to provide schools and teachers with our Youdao smart learning terminal and solutions, empowering them to effectively track students learning progress and optimize teaching guidelines. Turning to our Cloud Music business. Throughout the year, we continue to make progress on our financial, operational and corporate goals. The various product and content enhancement we made strengthened our overall position and a healthier industry environment. MAU of online music services is stable in 2021. In the fourth quarter, net revenues increased 24% year-over-year to RMB1.9 billion with continued increase in membership paying ratio. We have managed to improve profitability along with enhancements to our content library, attribute both to copyright cost optimization. In the fourth quarter, we enhanced our margins both year-over-year and quarter-over-quarter and achieved positive growth margin for the full year of 2021. To faster our growth growing music community, we continued our product innovation initiatives in the fourth quarter. Some of our upgrades included more individual personalization capabilities on homepage users can now better showcase their personalities and music preferences. We also added a new music co notation function in November, providing music enthusiastic with professional and accurate scores and services across our music offering. In addition, we launched our brand new beat trading platform in mid-December accommodating transactions between beat makers and musicians, as well as music fan. The beat platform has the potential to not only allow beat makers to realize commercial value, but also liberate individual musicians, creative content, enriching our content ecosystem and bonding our users together even more. On the content side, we secured more high quality music from large IP owners and continues to nurture independent artist. By the end of the fourth quarter, we were servicing more than 400,000 independent musicians. Meanwhile, we have been making progress on our initiatives to produce music in-house, which further diversifies and differentiate our content offering. Going forward, we hope to bring more quality content to our platform, to complement our music library while working together with other industry players to benefit all music lovers. ON to Yanxuan, as one of the most loved lifestyle brands catering to the new middle class in China, NetEase Yanxuan is redefining the lifestyles of China’s younger generation intensifying our focus on certain categories. We continues to launch a variety of key popular product across core categories, including foods, electrical appliances, household cleaning, pets, and beauty and skincare. Our useful design led approach has enables the products on our platform to gain increasing appeal with younger consumers. As we grow each of our businesses, we are also very conscious of these effects on society and our emphasis on ESG initiatives has greatly increased over the past years. We are honored to have our efforts acknowledged by MSCI who upgraded our ESG rating to an aid. In addition, we scored 39 points on the Dow Jones Sustainability Indices DJSI more than doubling our score in the prior year on Sustainalytics’ ESG risk assessment scale, NetEase is received a score of 14.9 points indicating a low level of ESG risk. We are recognized by Sustainalytics’ as a ESG industry top rated company, and also a ESG regional top rated company. Along with our leading privacy and data security policies, the human capital development practices, we’ve made concerted efforts to reduce our carbon emissions, improve our corporate governance and make increased contributions to charitable causes. The global pandemic and environmental catastrophe has prompt many to find ways to do more for the society and we are no exception. Adding to our recent disaster relief donations following the flood in Zhengzhou and Henan, we also donated an additional RMB10 million to help local residency Henan in the wake of COVID-19. With our solid financial reserves and continued strong performance, improving shareholder return is always on our agenda. During 2021, we repurchased around $2 billion worth of shares and paid $551 million in dividends. All in all, we are pleased with our growth in 2021, we gain steady ground across each of our verticals positioning NetEase for continued growth in 2022. Our focus on content creation and elevating users experience with NetEase products and services remains at our call. Moving ahead, we will continue to innovate diversify and expand our reach to generate further value for our users and investor communities as a whole. This concludes Williams comment. I will now provide a very brief review of our 2021 fourth quarter and full year 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. Total net revenues for the year were RMB87.6 billion or $13.7 billion representing a 19% yield increase year-over-year. We closed the year with fourth quarter revenue of RMB24.4 billion or $3.8 billion representing 23% increase year-over-year. For 2021, our net revenues from online game services were RMB62.8 billion up 15% from 2020 revenues accelerated even faster in Q4 to RMB17.4 billion up 30% year-over-year. The additional growth was primarily due to increased revenue contribution from the launch of new games, such as Naraka: Bladepoint and Harry Potter: Magic Awakened. Net revenues from our mobile games accounted for approximately 68.3% for the full year for the fourth quarter and 70.4% for the full year. Youdao’s net revenues for 2021 reached RMB5.4 billion up 69% year-over-year. On a quarterly basis, net revenue increased by 21% to RMB1.3 billion in Q4. Both increases were driven by fast growth of both Youdao learning services, as well as increased sales of smart devices. Net revenues from NetEase Cloud Music were RMB7 billion for the full year up for the 3% year-over-year. Q4 net revenue of Cloud Music increased 24% year-over-year to RMB1.9 billion. Both increases were primarily due to increased revenues from social entertainment services, particularly audio based, live streaming and paid user expansions. Total revenues for innovative businesses and others were RMB12.4 billion for the – year up 13% year-over-year. For the fourth quarter, total revenues were flat year-over-year at RMB3.8 billion. Our total gross profit was 53% in the fourth quarter compared with 50.2% in Q4 of last year. Looking at our fourth quarter margin in more details, gross profit margin for our online game services remain stable at 64.1%. As a reminder, this number is generally stable with some narrow fluctuations based on the revenue mix of mobile and PC titles, as well as revenue mix of self-developed and license games. Gross margin for Youdao in the fourth quarter was 50.7% compared with 47.5% in the same period of prior year. The growth was primarily attributable to our improved learning services gross margin, due to improved economies of scale and continuous optimization of our faculty compensation structure. The substantial sales growth of smart learning hardwares, such as Youdao Dictionary Pen 3.0 also contributed to these gains. As this line carries a higher gross margin than other product lines. GP margin for NetEase Cloud Music was positive at 4.1% versus a negative margin of 7.1% in the year ago period. This is our third consecutive quarter of positive gross margin. The significant increase was primarily due to the strong top line growth as well as improved cost control measures. Gross profit margin for innovative businesses and others was 26.8% compared with 28.2% in Q4 of 2020. The decrease was mainly due to the decreased GP margin from advertising services. For the full year, total operating expenses were RMB30.6 billion or 35% of our total net revenues. For the fourth quarter total operating expenses were RMB8.3 billion or 34% of net revenues. Looking at the fourth quarter selling marketing expenses as a percentage of net revenues were 13.5% compared with 14.1% in the prior quarter to quarter-over-quarter decrease was mainly due to decrease marketing spending related to Youdao. R&D expenses were RMB3.8 billion, largely stable from the previous quarter, we remain committed to investing content creation and product development, which is core to our revenue growth into the sustainable future. The effective tax rate was 19.6% for the full year and 14.2% for the fourth quarter. As a reminder, the effective tax rate is presented on an accrual basis and the tax credit defer from each of our entities at different time periods, depending on applicable policy and our operation results. Our non-GAAP net income attributable to our shareholders for the fourth quarter of 2021, totaled RMB6.6 billion or $1.04 billion. Non-GAAP basic earnings per ADS for the quarter was $1.858 or $0.32 per share. Our cash position remains strong, as of the year end our total cash and cash equivalent current and non-current time deposit and short term investment balanced totaled RMB103.4 billion compared with RMB100.1 billion as of December 31, 2020. In accordance with our dividend policy, we are pleased to report that our Board of director has approved a dividend of $0.081 per share, or $0.405 per ADS. Lastly, under our share repurchase program, approximately $18.5 million ADS had been repurchased as of December 31, 2021 for a total cost of approximately $1.8 billion. Meanwhile, on the NetEase, Youdao Go share purchase program, approximately 0.6 million ADS has been purchased for a total cost of $8.2 million as of the year end. Thank you for your attention. We would like now to open the call to your questions. Operator, please go to Q&A Question-and-Answer session.

[Operator]

Thank you. [Operator Instructions] We’ll take our first question from Jialong Shi with Nomura.

[Jialong Shi, Nomura]

Good evening management. Thanks for taking my questions. Congratulations on the solid quarter. [Foreign Language] My question is about game pipeline. Just wonder if management can provide an update on, on the latest game pipeline for this year and how many of the new games have already received license and will be released this year for one of the new games, the upload model, which has already received the license in China. Can management provide an update on its launch timeline? Thank you.

[William Ding, Chief Executive Officer]

[Foreign Language] Sure. We are aiming to launch Diablo in the first half of this year and obviously for Diablo, we already have the, the license approval. We are going to launch it in, in China as well as globally. Additionally, we’re also going to release an issue introduce the overseas versions of Harry Potter. Thank you.

[Operator]

Thank you. We’ll take our next question from Kenneth Fong with Credit Suisse.

[Kenneth Fong, Credit Suisse]

[Foreign Language] Thank you management for taking my questions and Congrats for another solid set of result Harry Potter uses a surge of Harry Potter: Magic Awakened in China was our view on the longevity of the game and the timeline strategy and region for the overseas launches. Thank you very much.

[William Ding, Chief Executive Officer]

[Foreign Language] As you know, NetEase we have lots of experience in running our games for a long period of time. And some of the examples are at the [indiscernible] and Onmyoji. And for Harry Potter, this is a types of games that’s about consuming content. And so that longevity is very much linked to how much content is available to the game players. So we’ll continue to deliver those exciting content, to keep our users engaged. In terms of overseas version we, we are aiming to you in, in the middle of the year. Thank you.

[Kenneth Fong, Credit Suisse]

Thank you.

[Operator]

Thank You. We’ll take our next question from Alicia Yap with Citi.

[Alicia Yap, Citi]

Hi, thank you. [Foreign Language] So last two questions. One is regarding the metaverse so can management, share with us what you think about metaverse would you consider adding some metaverse elements into existing games or launching another versions of some of the assisting game in the metaverse setting? The second question is related to Cloud Music. Can you comment on the pricing trend for the subscription and also overall subscription growth target and the margin trend for the business? Thank you.

[Charles Yang, Chief Financial Officer]

[Foreign Language] For metaverse, our understanding is that metaverse, is that integration between the virtual and a reality and for NetEase, as we have many, many years of operating MMORPG games and for, MMORPG games, there’s very heavy social elements, and there’s a very sophisticated economic system. And in some, in certain ways you can regard it as a model or prototype for metaverse. And so we’ll continue, in that way. And secondly based on our existing technology, we’ll also, we’ll also be exploring possible new games for metaverse. Thank you. [Foreign Language] Okay. Firstly we, that the Cloud Music will continue to grow through comprehensive content offering. And one of that is to, is for us to continue to produce high quality, an exclusive content, and much of it will be self-produced by ourselves in-house and I believe, and we believe that everything will be able to deliver to the Chinese consumers a lot of the high quality Chinese pop music for them. And this is the, so content strategy is our one of the main focus for our growth and expansion. Thank you.

[Operator]

We’ll take our next question from Natalie Wu with Haitong International.

[Natalie Wu, Haitong International]

[Foreign Language] I will translate myself briefly. So thanks for taking my question and congratulations on a very solid quarter. This like the upcoming 2022 will be through, for year considering all those quality names in your pipeline. So my question is regarding the headcount plan for, for this year, just wondering which business line has the most talent incremental plan and regarding the global expansion what which certain regions are the most are the major target markets that you are going to put the most efforts on. Thank you.

[Charles Yang, Chief Financial Officer]

[Foreign Language] In terms of headcount plan, I think our focus this year will be on global talents as you can, as we’re mentioned in our prepared remarks last year, we managed to attract many of the top talents globally, and it will continue to invest in this area. So very soon probably be see more of the global talent joining NetEase. In terms of the, the hiring plans in China, there should be no change from previous years. Thank you.

[Operator]

We’ll go next to Thomas Chong with Jefferies.

[Thomas Chong, Jefferies]

[Foreign Language] Thanks management for taking my questions. Can we discuss about the upcoming new games to be developed in multiple devices like console, PC and mobile in order to target the global audience in different regions? And my second question is about our core competence in developing a high quality high dose on a consistent basis like Harry Potter and Naraka. Thank you

[William Ding, Chief Executive Officer]

Okay, thank you. So Thomas, the first question in terms of new types of games. So in addition to mobile games, console will also be an important area for us. So, any media you think you can imagine play games on is an area that we want to explore that is where we want to create game content for. In terms of regional focus, both China and overseas and international markets are very important to us, overseas is going to be the next new focus. And in terms, your second question on our core competence, and I think over the last two decades, you can see that NetEase is a company that’s very focused and very dedicated in content creation. And secondly, is that we value our talents. And thirdly is that, we are very much high quality driven. So, we are now, when we think about creating games, we’re not thinking about just in China, but also looking at, we are also taking a global vision. We want to be able to serve the global markets as well. And then all in all, we think that talent is perhaps the most important thing for our sustainable growth. We want to continue to attract and retain talents share our passion in game creation. Thank you.

[Thomas Chong, Jefferies]

Thank you.

[Operator]

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

[Alex Poon, Morgan Stanley]

[Foreign Language] Thanks for management for taking my question. I have two questions. First question its related to our legacy titles. Recently macro environment has not been very good and consumption advertising has not been doing well. And does this weaker macro environment affect our legacy titles, especially those high paying users. And also there have been some daily limits on the loots box, some games does this change affect our growth of our legacy titles? The second question is related to the status of Lord of Rings and the rob blocks [ph] like platform that we discussed before in December. Is there any chance that these two games will come out in Asia in first half? Thank you very much.

[William Ding, Chief Executive Officer]

[Foreign Language] So Alex for your first question, is that the, from what we are seeing our legacy titles are actually growing very well throughout last year. And I think you, what you mentioned about the price draw, yes actually has very little impact on us, because we’ve been very conservative in terms of how we monetize, and for games like FWJ if you remember, is actually a time based type of game. So a second question, Lord of Rings, we to release that game in, in Hong Kong, Macau and Taiwan. And for your third question we are going to have – we are actually developing some of the UGC oriented game. And then so some of them will be introduced to the players.

[Alex Poon, Morgan Stanley]

Thank you very much.

[Operator]

Moving next to [indiscernible].

[Unidentified Analyst]

[Foreign Language] Thanks management for taking my question, and congrats on your great performance. My question is how should we expect the impact of activation acquired by Microsoft, on their cooperation with NetEase especially for the past range of license games and your cooperation on Diablo and for the more the potential IP license? Thank you.

[William Ding, Chief Executive Officer]

[Foreign Language] Yes. So both Microsoft and Activision Blizzard actually have been very close partnership with NetEase over the past years, and we’ve been able – we’ve been operating Minecraft in conjunction with Microsoft and we’ve delivered very good strong results. And we congratulate Microsoft, our Activision Blizzard for coming together. Microsoft is one of the largest gaming platforms in the world with while Activision Blizzard is one of the best game creators in the world. And then we believe that that their partnership will create great synergy and they will create positive impact on the gaming just three. And in China NetEase, have a close relationship with both of them. And we believe that in the partnership between Microsoft and Activision Blizzard will also yield strong, positive impact for us in China too. And from our perspective would also love to explore more possibilities of working with Microsoft. Thank you.

[Unidentified Analyst]

Thank you.

[Operator]

Thank you. I’ll take our next question from Guanran Wang with CITIC.

[Guanran Wang, CITIC]

Hello. Can you hear? Yes. [Foreign Language] Under the current situation of the, the master gaming industry, we have observed that many gaming companies have also taught their publics or optimized the resource allocation. I would like to ask under the calendar dramatic and oversee market environment, how that is well developed are these structure key game categories, strategy of resource allocation and the feature pipeline feature?

[William Ding, Chief Executive Officer]

[Foreign Language] So you have been a while since we saw new license approval for NetEase, we are already a game content creator, and we’ve been preparing for the overseas market for a long time. For the past couple of years, you’ve seen some highly successful games in Japan, and you’ve seen us being able to attract some of the biggest global talents to NetEase. We are committed in investing in a global markets. Hopefully in the next two to three years, you’ll see some huge blockbuster titles being produced by NetEase in the global – on the global stage, whether it’s self-developed by us or it’s in a partnership with some of our partner friends. Over the last 20 years, we have accumulated tons of experience in game development in terms of marketing operations, in terms of R&D engines and all of those years, that will give us that strong edge in creating globally successful game. Thank you.

[Operator]

That will conclude our question-and-answer at this time. I’d like to join the call back over to management for additional – any additional or closing remarks.

[Margaret Shi, Director-Investor Relations]

Thank you again for joining us today. If you have any further questions, please feel free to contact us directly or TPG investor relations. Thank you. Have a great day.

[William Ding, Chief Executive Officer]

Thank you, everyone

[Operator]

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