NetEase Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 16, 2023

There are 5 speakers on the call.

Operator

Good day, and welcome to the NetEase 2023 Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Margaret Shi, 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 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.

Speaker 1

Some of these risks are beyond 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 the 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 of the filings on the website of the Hong Kong Stock Exchange. The company does not undertake any obligation to update our forward looking Information is exempt as required by law. During today's call, management will discuss certain non GAAP financial measures for comparison purposes only. For definition of non GAAP financial measures and a reconciliation of GAAP to non GAAP financial results, please see the 2023 3rd quarter earnings release news release issued earlier today.

Speaker 1

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 Senior Management are Mr. William Ding, Chief Executive Officer and Mr. Charles Yang, Chief Financial Officer.

Speaker 1

I will now turn the call over to Charles, who will read the 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 Based on RMB, the 3rd quarter was another period marked by outstanding results. Our beloved legacy titles and new hit games are strengthening our reach throughout the gaming world. Our total net revenues were RMB27.3 billion for the 3rd quarter, up nearly 12% year over year and our net income attributable to shareholders rose to RMB7.8 billion, increasing by 17% year over year. Our time honored Lexi franchises have maintained robust popularity.

Speaker 2

Notably, we brought players updates for the fantasy Westwood Journey saga in the 3rd quarter With a brand new storyline and captivating activities, which once again breathed new life into the saga And show year over year revenue growth for more than 20 year old epic title. In addition to our well established games, we are actively expanding our portfolio by consistently launching And cultivating long lasting franchises across more genres. We have strengthened our leadership in MMOs By pushing the boundaries of industry standards, we have also expanded our presence in broader game categories And demographics with innovative content, gameplay and monetization models. We can see this in the enduring popularity of the games that we have introduced in recent years, such as Aggie Party, NARAKA: Blade Point. Furthermore, our recently launched titles, including Justice Mobile Game, Racing Master and Song City Dynasty Has quickly climbed to the top of the iOS grossing charts after its release.

Speaker 2

Looking at our newest hit titles, Justice mobile game launched just in June impressively surpassed 50,000,000 registered users in October, Establishing itself as one of the largest MMOs in NetEase company history in terms of user base size. Notably, a significant portion of its player community comprises Generation Z players Who were previously unfamiliar with the MMO genre, becoming the gateway of MMO games For the younger generation in China, as a trendsetter in the MMO industry, MedEase has once again Brought key innovations to the genre with the launch of Justice mobile game and reshaped the MMO landscape. It offers players a vast array of high quality content for free, revamping the conventional paying model for MMOs. The shift to a more balanced spending approach gives players more freedom to enjoy the game's rich features and gameplay, With optional purchases focused on avatars cosmetics and accessories, This model was very well received by the game's player base, solidifying its stability. In late October, We introduced Justice Mobile Games' 1st seasonal update, which significantly enhanced player engagement With captivating storylines, new gameplay and additional professional role options, It swiftly propelled Justice Mobile game to the number 2 position on China's iOS grossing chart shortly after its release.

Speaker 2

The innovative seasonal mechanism we've introduced to the MMO genre gives all players a fresh start With a focus on fair and balanced gameplay, it also reduces the gap between experienced and new players, ensuring that everyone can enjoy and engage in this game. In addition to the success of this new blockbuster MMO title, We also achieved success across other game genres in the Q3. Our new racing simulation game, Racing Master, Consistently ranked amongst the top 3 most downloaded and highest grossing games on the iOS chart in China Following each new game update, proving its broad appeal to racing enthusiasts. Notably, As China's very first AAA standard racing simulator mobile game, Racing Master has introduced an authentic racing experience Into China's mainstream gaming sphere, with the plan for Racing Masters global market expansion, We will soon commence overseas testing to bring this exciting racing simulation experience to players worldwide. We also achieved a significant milestone with our foray into sports games, a historically less popular category in China.

Speaker 2

We've broken new ground with DONG City Dynasty, a street basketball game that provides various modes To deliver a casual basketball gameplay experience, DONG City Dynasty quickly rose to the number 2 position On the iOS Growth in China, just a few weeks after its release. Following our latest seasonal updates With the introduction of new basketball superstars to the Team Rooster like James Harden, The game rose to the number one position on the iOS grossing chart in China. The innovative gameplay and balanced gaming experience We've infused in Dang City Dynasty are important differentiators for our game By integrating players authorized by the MVPA with Street Basketball, we provide players With higher gameplay freedom along with expanded cosmetic options, the game also includes a fair card for Fair play, meaning increased player spending doesn't dictate who wins. This facilitates more inclusive gameplay And even more potential for the game's long term success. Player enthusiasm for Racing Master and DONG City Dynasty Underscores the significant demand in China for top tier games in the casual game genre.

Speaker 2

Along with our rich R and D capabilities, we are leveraging the inroads we've already made across a broad spectrum In the market with new hit game players love. Games we've introduced in recent years continue to resonate with players, Demonstrating enduring popularity and long term operating potential, Aggie Party, for example, Continues to achieve remarkable milestones. In August, Agiparty set new records By amassing over 100,000,000 UGC Maps and attracting 100,000,000 MAUs, We have been committed to fostering and nurturing our UGC ecosystem, which is a cornerstone of Agiparty's success. We enhanced our self developed editor in the Q3 by introducing more advanced and interactive functions. We also added collaborative map crafting functionality that lets users create with friends online on the shared canvas.

Speaker 2

To help foster even more creativity, we've introduced tutoring systems And a range of incentives to reward and motivate creators through various activities. Building on the game's notoriety in domestic markets, we are actively pursuing global expansion plan for Aggie Party. In the Q3, we launched Aggie Party in Southeast Asia, where it consistently secured dominating positions on Google Play download chart for multiple weeks, particularly in Indonesia and Thailand. These early overseas releases Also gave us valuable feedback and insights that guide our assets as we optimize the game for a global audience. We are also proud to announce that Naraka BladePoint recently reached a remarkable milestone of 40,000,000 users.

Speaker 2

Following the transition to a free to play mode in July, we also introduced new heroes to the game in the 3rd quarter, Igniting greater player enthusiasm and attracting a massive influx of additional users to the game. To bolster our robust portfolio of games, we have a number of new games under development. As we get closer to some of these introductions, we are particularly excited about Where Winds Meet, Our new AAA martial arts themed action adventure game, Whirlwindsmeade infuses an immersive open world experience This interactive sandbox style adventure features an extensive map, a diverse array of weaponry And captivating martial arts techniques. Players have the flexibility to explore this interactive world, landscape in single player mode, enjoying a highly personalized combat experience. In multiplayer mode, players can work closely with friends to complete tasks, engage in exciting and heartwarming social interactions.

Speaker 2

We will soon launch the 2nd round of testing, where players will be able to see more of the game with a longer play time. Early feedback fuels our excitement as we get closer to officially launching this brand new open world experience To our players in 2024, as developer of China's first ACG hit title, Onmyoji, NetEase has made ongoing investments in the animation genre, accumulating valuable industry expertise, Coming ACG title under development set in the metropolitan themed open world genre, Project MUGEN Has garnered significant attention from players both domestically and internationally. We are committed To infusing new vitality into the ACG arena, drawing upon our renowned innovation capabilities And experience in the realms of animated games. Beyond these titles, we also have a number of other games in the making, Including Mission 0, 1's Human, Shiejiao and Narrator Blade Point mobile game. On the global stage, our game development is progressing smoothly in Japan, North America and Europe.

Speaker 2

This month, we are excited to welcome Fantastic Pixel Castle as our newest additions to the NetEase family. Fantastic Pixel Castle is led by Greg Street, who is well known for his contribution to massively successful games around the world, including World of Warcraft and League of Legends. Greg and his experienced funding teams are currently developing a top tier MMO game code named Ghost To provide players with a fresh and immersive fantasy MMO experience, We are thrilled to collaborate with so many talented industry producers, leveraging their creativity in synergy With our deep research and operational capabilities, together, we aim to deliver even more captivating games to players worldwide. Now let's move on to Youdao. In the 3rd quarter, Youdao achieved record high revenue of RMB1.5 billion, growing 10% year over year, driven by the growth in learning services and online marketing.

Speaker 2

Additionally, as part of our continued efforts To improve profitability, our operating loss for Youdao narrowed by a significant 74% year over year to RMB58 1,000,000. The solid growth in our learning services was due to our consistent ability to launch unique and high quality courses. Notably, in the Q3, our coding courses Introduce a specialized program aimed at preparing students for the CSP Informatics Competition, One of the most popular competitive programming event in China. Our program features all encompassing services That includes learning, context practice and an evaluation system. The evaluation system is supported by our in house developed Scoring model allowing students to estimate their scores and assess their probability of progressing into the next round of the contest.

Speaker 2

Youdao's online marketing services have consistently grown at an impressive rate of approximately 100% This underscores our expertise in proprietary algorithms And the effectiveness of our customized solutions that are precisely crafted for diverse industry sectors. Revenues from our smart devices declined in the 3rd quarter as we strategically optimized our channel mix By reducing sales through less cost effective channels, although this may have a temporary impact on Youdao's revenue, We believe it will lay a solid foundation for sustained long term growth and enhance Youdao's profitability potential over the long run. Our focus on technological innovation remains our driving force. In addition to Youdao's tech boosted performance, We upgraded AI Box on Youdao translation products in the Q3, which enables more accurate And natural translation across various types of documents. With the support of our machine generated functions, 3rd quarter revenue from subscription fees for translation increased by over 160% year over year.

Speaker 2

Furthermore, following the August introduction of our digital human language coach, HiEcho, Through Youdao Dictionary PEN X6 Pro, we expanded our reach to a broader user base through an independent app in October, Attracting over 100,000 user registrations within just a month. We will continue to iterate high echo with a new update coming soon. Looking forward, we will look to drive more technological innovation I'll introduce more products that genuinely meet our users' needs by harnessing our expertise in machine learning technology. Next, turning on to MedEase Cloud Music. In the Q3 of 2023, Cloud Music continues to navigate Quality development across our core music centric ecosystem, while further extending the robust monetization momentum In the call, online music sphere and improving overall profitability.

Speaker 2

Total online music MAUs Remained largely steady, staying above $200,000,000 in the 3rd quarter. Total revenues for the quarter were RMB 2,000,000,000 on par with late last quarter. Growth in our music centric memberships accelerated, demonstrating our ability to introduce premium offerings, including expensive content and innovative features. Additionally, Our social entertainment services started to stabilize on a monthly basis during the latter part of the 3rd quarter following our strategic positioning refinements in live streaming, which resulted in short term setbacks. With solid monetization momentum in the core online music businesses and continued cost structure optimization, Cloud Music maintains steady margin improvement for the period.

Speaker 2

We are constantly expanding our music library To provide a comprehensive selection of music for our diverse audience base, during the Q3, We broadened our extensive music collection by adding songs from popular Chinese pop artists like Karen Mok, In addition, we were delighted to release albums by pop stars including JAM, As part of our ongoing commitment to enriching our music centered ecosystem, We remain dedicated to empowering and assisting independent artists. As of the end of September, We proudly serve a thriving community of over 660,000 registered independent artists, Showing strong growth of 16% compared with the same period last year. We've also broadened our support For emerging music talent, our new programs are tailored to regional routes and distinctive styles in different areas, including programs like Localized Sound and Project Stone Season 5 to unmerse and promote At the same time, we hosted off line music festivals Such as 65 Park Camp Music Festival, providing more exposure for our independent musicians. In addition to broadening our content selections, we continued our product innovation initiatives, aiming to elevate users' music listening experience and foster our music centric community. We recently officially launched the Private DJ feature incorporating music recommendations With an intelligent and personalized music introduction and explanatory experience, this feature Allows users to record old fashioned radio DJ while enjoying a more personalized music accompaniment as part of their listening experience.

Speaker 2

Building on our iconic comments section, our comments were Has emerged as a vibrant gathering place for users to express and find connections with one another. Moving on to Yanxuan. In the Q3, our private label consumer brand launched more popular products Through diversified channels, we saw robust sales growth in selected categories like pet supplies and home cleaning products. Best sellers like ergonomic chairs, bathroom fragrances and cat food Consistently outperformed competitors across various platforms. Our strategic efforts, Including efficient warehouse and distribution management and personalized packaging have also proven successful.

Speaker 2

Thanks to the innovative marketing campaign, our Down Jacket series, which is highly acclaimed for its exceptional quality at affordable price, Gained immense popularity during this year's W11 online shopping event, driving the collection to hit top position on multiple best selling charts on several e commerce platforms. In summary, innovation is at the core of all of our business, Driving our growth and our competitive edge. We believe that great content, products and services stem from new and creative ideas. This principle lies at the heart of NetEase, Whether it's games, cloud music, Youdao or Yanxuan, we consistently strive to reach new heights. In doing so, we help drive the industries we serve forward while delivering value to our growing global community, This concludes William's comments.

Speaker 2

I will now provide a brief review of our 2023 Third 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 further details. Total net revenues for the Q3 were RMB 27,300,000,000 or 3,700,000,000, representing an increase of approximately 12% year over year. Total net revenues from our games and value added services RMB21.8 billion, up 16% year over year.

Speaker 2

The growth was primarily Due to increased revenue contribution from newly launched games such as Justice Mobile Game, Racing Master and Aggie Party. Net revenues from our mobile game accounted for nearly 78% of our total net revenues From Online Games Operations, Youdao's net revenues were RMB1.5 billion, A year over year increase of nearly 10%, primarily due to increased revenue contribution from learning services And online marketing services. Net revenues from Cloud Music were RMB 2,000,000,000, A 16% decline compared to the same period last year. As we explained earlier, this result reflects declining revenue of Social Entertainment Services as we adjust our focus to improve profitability in a sustainable manner. Net revenues for Innovative Businesses and Others were relatively flat in the 3rd quarter at RMB 2,000,000,000.

Speaker 2

Our total gross profit margin continues to grow, exceeding 62% in the 3rd quarter Compared with 56% in the Q3 of 2022. Looking at our Q3 margin in more details, Gross profit margin was 69% for our games and related value added services compared with 65% In the same period of last year, the increases were primarily attributable to changes in the revenue mix Of the NetEase self developed and co developed and licensed games, GP margin for Youdao was 55.9% compared with 54.2% in the same period of last year. The increase mainly resulted from increased revenue contribution From its Learning Services and Online Marketing Services segment, gross profit margin for Cloud Music improved in the 3rd quarter, Reaching 27.2% versus 14.2% in the same period a year ago, The margin improvement primarily resulted from increased revenues, scale from membership subscription And continued improvement to our cost management measures. For Innovative Businesses and Others, Gross profit margin was 27.3% compared with 25.5% in the Q3 of last year. The increase was primarily the result of margin improvement in Yanshan and some of our innovative businesses.

Speaker 2

Total operating expenses for the Q3 were RMB9.4 billion or 35% of our total net revenues. Taking a closer look at our expense composition, our selling and marketing expenses as a percentage of total net revenues We're 13% in the 3rd quarter compared with 15.4% for the same period of last year. This reflects our ongoing efforts to consistently enhancing marketing efficiency. Our R and D expenses as a percentage of total net revenues also remained stable quarter over quarter at 16%. As always, we are committed to ongoing investments in content creation and product development.

Speaker 2

We are also seeing leverage in our R and D investments longer term. Our G and A expenses As a percentage of total net revenues was 5.5%. The slight increase from the previous quarter was primarily due to certain one off items. Our other income was RMB1.5 billion for the Q3 of 2023 versus RMB2.8 billion in previous quarter. The decrease was mainly due to the Exchange rate of the U.

Speaker 2

S. Dollar against the RMB fluctuating over the period. As per applicable accounting standards, We are required to reflect these fair value changes. The effective tax rate was 14.2% for the 3rd quarter. As a reminder, the effective tax rate is presented on an accrual basis and the tax credits differ for each of our entities at different time periods depending on applicable policies and our operations.

Speaker 2

Our non GAAP net income from continuing operations attributable to our shareholders for the 3rd quarter totaled RMB8.6 billion or US1.2 billion dollars Non GAAP basic earnings From continuing operations per ADS for the quarter was US1.84 dollars or US0 point at 3.7 per share. Additionally, our cash position remains robust with net cash of approximately RMB 104,400,000,000 as of September end Compared with RMB95.6 billion as of the end of last year. In accordance with our dividend policy, we are pleased to report that our Board of Directors Has approved a dividend of US0.099 dollars per share or US0.495 dollars per ADS. Lastly, under our current US5 $1,000,000,000 share repurchase program starting in mid January this year, We have repurchased approximately 7,000,000 ADS as of September 30, 2023, for a total cost of approximately US588 million dollars Thank you for your attention. We would like now to open the call to your questions.

Speaker 1

Thank

Operator

For the benefit of all participants on today's call, If you wish to ask your question to management in Chinese, please immediately repeat your question in English. Please limit your questions to 1 at a time. Our first question comes from Richie Sun with HSBC. Please go ahead.

Speaker 2

I will translate these questions myself. Thank you, management, for taking my questions. I have a question about the competitive landscape for party games. Does management think it is a winner takes all market or can you have 2 players? And we noticed that AK Parti has Strong user base and UGC content already.

Speaker 2

Given that there are more potential competition from other platforms, what would NetEase further do to sustain the leadership? Thank you.

Speaker 1

Yes, just a translation for William. So we think it's absolutely normal to have a competition. So from NetEase perspective, we'll continue to drive innovation and provide good services to our users and that's how we lead the market. So we have full confidence in keep pleasing our users in the party game genre. Thank you.

Speaker 1

Next question please.

Operator

Our next question comes from Sook Kwan Jain with CICC. Please go ahead. My question is about the flagship games. Could management share more details with us as how do the flagship games such as

Speaker 1

So the most as I say want to say the most important thing for a game is innovation and continue to provide high quality Content for our users and it's important for us to focus on the long term longevity of our games and never make any short term decisions. So based on our 20 years operation experience, we think that long term goal is the key. Thank you. Next question please.

Operator

Our next question comes from Felix Lu with UBS. Please go ahead.

Speaker 3

Let me translate myself. Thank you, management, for taking my question and congratulations on the strong third quarter results. My question is on the pipeline. In Among the 3 games that already have done, including Shudiao, Where Wind Meet and Project 0, How's the R and D progress for these games? And when do you think these games can come to market?

Speaker 3

And for the other games that are still waiting for banh such as Naraka Mobile and Project Mogen. Does management have any color on their R and D progress? Thank you.

Speaker 1

Yes, so for each of our games, it's always after very careful adjustments, moderation before we are ready to release them to the market. And so games such as We are still we're in the final stage of preparation and hopefully we'll get them released to market no later than Q2 of next year. Thank you. Next question, please.

Operator

Our next question comes from Thomas Chong with Jefferies. Please go ahead.

Speaker 2

Thanks management for taking my questions. My question is about our overseas strategies. Given that we have demonstrated very good sets of results in the domestic market, the very solid How should we think about our overseas expansion in the coming years as well as our investment strategies? Thank you.

Speaker 1

So on the global market, we will continue our strategy of high quality focused direction. We'll continue to look for partners who share the same Mentality shares the same passion for games as we do and continue to invest in good teams and to produce and create great content for users all around the globe. Thank you. Next question please.

Operator

Our next question comes from Linqing Kong with Goldman Sachs. Please go ahead.

Speaker 2

So thank you, Mitchell, for taking my questions. So We have seen this year our successful title from Eggie Party and Justice Mobile, which is a bit different from traditional Legacy game have a very big user base and DAU. So when we think about the future upcoming launching games, Especially for next year, where Weemings and Sheodiao, should we expect some of the Similar type of features and anything we can sort of copy from the past success, when should we expect the next success of

Speaker 1

Thank you. Let me do translation. So the large DAU games is definitely a very important direction for us. We'll continue to find the key takeaways from the games that have succeeded in order for us to produce more games of this type. But at the same time, it's also very important to create high quality games of a particular niche category to meet the different requirements and preference of different type of users.

Speaker 1

For example, this year, we launched a basketball game, racing car games. So these are good examples of Top performing games of each of their respective categories. So within that ease, we have Lot games who teams who specialize in large DAU games and our teams that focus on particular niche, so that we have various different teams with NetEase and we encourage them to show to apply their unique edges and unique and experienced. Thank you. Next question, please.

Operator

Our next question comes from Richie Sun with HSBC. Please go ahead.

Speaker 2

So the Dong City Dynasty has been quite successful despite launching without Android App Store. Although it could have higher channel costs, Android can also bring in more users potentially, which can sustain the game longevity. So how does management assess the ROI of not using Android Store? And what type of titles will absorb a single launch strategy in the future? Thank you.

Speaker 1

Thank you. So for games that we're targeting towards a massive User based, like, party games, games are targeted for all ages. So for these type of games, The platform distribution platforms are more effective in reaching out more users. But for games such as either the basketball game, It requires a specific group, a specific community of game players. And so we can find these players through various different platforms and channels.

Speaker 1

So in order for us to bring them on To NetEase platform and to operate this game for a long period of time in order for us to get to know these users a little bit better and then to continue to perform different iterations to give better and better service and experience to our users. We also want to add that for The Android platform users can also download our game through our own website and tap tap and various other channels. Thank you. Next question please.

Operator

Our next question comes from Alex Poon with Morgan Stanley. Please go ahead.

Speaker 4

Congratulations on very strong quarter. My question is related to AIGC. And can AIGC And for our future game updates, expansion packs being much more frequent than the current 3 to 6 months, Coming on a monthly basis or even weekly basis and such that the longevity and gaming user stickiness

Speaker 1

Yes. So just so yes, we agree that AI is extremely helpful in increasing enhancing the R and D efficiency, particularly areas of game design, storyline design, mission design and on ATSI, etcetera. So almost every year we can every month we can see another upgrade in terms of R and D efficiency. But while the productivity is increasing, but the pace of us pushing out expansion packs is not completely dependent on that. We need our users to enjoy our content fully.

Speaker 1

So the pace and frequency of Fazibo Inau expansion pass It's still very much dependent on the preference of our gamers. So we want to run each of our game for a long period of time. So with the increased efficiency, we can provide higher quality content within the same amount of time frame. Thank you. Next question please.

Speaker 4

My second question is about Naraka Data Point Mobile and Project Movin. Are they likely will be released

Speaker 1

Okay. So for Mallika, Blade Point mobile game, as you know, the game has been under preparation for for a while now, and I think we are fully prepared. The only thing we are waiting for is the license approval. So once we receive license approvals, the product should be ready to go. In terms of project Midian is one of the games that's highly anticipated by both us and the gaming community.

Speaker 1

So we want to keep surprise our players with great content. So we're going to continue to invest in more resources We'll be developing that game in order to create the next generation quality content. So for now, we do not have a timetable to share. Thank you. The last question, please.

Operator

Our last question comes from Alicia Yang with Citigroup. Please go ahead. Hello. My question is related on Justice Mobile. So in addition to the new user for those existing NetEase gamers, where do these gamers come from, Which NetEase game that they were playing before and which non NetEase game that these players used to play before Justice?

Operator

Is the Ping Weishou and also the ARPU for Justice is much higher than the others NetEase games. Thank you.

Speaker 1

So for Justice Mobile, based on our stats about roughly a third of our users I've never played NetEase games before, and this game has mostly come from other large DAU products around the market, which means that this is actually a very friendly and In fact, I mean, this year, some of the other games that we launched, such as The basketball game and the racing master, they also enjoyed many a large proportion of gamers who've never played NetEase games before. So in terms of the paying ratio, monetization of Justice Mobile, So for Justins Mobile, we've actually we opted a more lighter monetization model. And because of that, we the ARPU is relatively lower with much higher pain ratio. So We purposely chose this monetization model so that we can create a more healthy and balanced in game environment, giving our game players less pressure in terms of paying to give them a long term enjoyable environment in which you can enjoy their games. Thank you.

Speaker 1

Yes. So that's I think that's all the questions we have for today.

Operator

Operator, that concludes the question and answer session. I would like to turn the conference Back over to management for any additional or closing comments. Thank you

Speaker 1

once again for joining us today. If you have any further questions, Please feel free to contact us directly of your Center Financial Communications. Have a great day. Thank you.

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Key Takeaways

  • NetEase reported Q3 total net revenues of RMB 27.3 billion (up 12% YoY) and net income of RMB 7.8 billion (up 17% YoY), reflecting strong margin expansion and a robust cash position.
  • Justice Mobile Game surpassed 50 million registered users by October and introduced a balanced, free-to-play monetization model focused on optional cosmetic purchases, revitalizing the MMO genre and attracting Gen Z players.
  • New releases Racing Master and Dong City Dynasty both climbed into the top 3 iOS grossing charts, marking NetEase’s successful expansion into racing simulation and casual sports genres.
  • Youdao achieved a Q3 revenue record of RMB 1.5 billion (up 10% YoY) and narrowed its operating loss by 74%, though smart devices revenue declined due to strategic channel mix optimization.
  • Pipeline and global expansion remain key, with multiple AAA titles like Where Winds Meet and Project MUGEN in development, and partnerships such as Fantastic Pixel Castle gearing up new global MMO offerings.
AI Generated. May Contain Errors.
Earnings Conference Call
NetEase Q3 2023
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