PWW

Portfolio AI Insights

pww.comNetEase, Inc., Q2 2024 Earnings Call, Aug 22, 2024 - SEHK:9999

SEHK:9999

Unknown Executive [Executives] 💬

**- NetEase is a mature company with a diverse and healthy portfolio of games, including Naraka: Bladepoint, Identity V, Eggy Party, and Fantasy Westward Journey.

  • Adjustments to Fantasy Westward Journey aim to refresh gameplay and maintain player engagement, despite causing short-term turbulence.

  • Identity V's success is attributed to continuous efforts in development and operations over six years, reflecting NetEase's capability to sustain game longevity.

  • Justice Mobile's new season reengaged many players, and the focus is on maintaining player activeness and ecosystem diversity.

  • High DAU is a result of high-quality game design rather than a specific target. NetEase explores various genres to create engaging games.

  • Global market success, such as Once Human, indicates NetEase's capability to design games appealing to both Chinese and global players.

  • Where Winds Meet will be an open-world game with substantial content, planned for a multi-year run, with differences between PC and mobile versions.

  • Eggy Party has a large user base, and NetEase is exploring ways to balance user numbers and revenue.

  • Upcoming games include Marvel Rivals, Marvel Snap, and FragPunk, with high production quality and competitive elements.

  • AI technology is widely used in game development, freeing developers from labor-intensive tasks to focus on creative aspects.

  • World of Warcraft's return has exceeded expectations, with a 4:6 split between new and returning players, positively impacting PC revenue.

  • NetEase is building strong relationships with Blizzard for the return of other games and potential future collaborations.**

Bill Pang [Vice President of Corporate Development] 💬

- Q2 Financial Performance: NetEase reported a total revenue of RMB 25.5 billion, a 6% increase year-over-year. Revenue from games and related VAS grew by 7% to RMB 20.1 billion, driven by mobile games like Identity V and Justice Mobile. Youdao's revenue increased by 10% to RMB 1.3 billion, and NetEase Cloud Music's revenue grew by 5% to RMB 2 billion.

  • Game Highlights:

    • Once Human: Achieved over 230,000 concurrent users on Steam and ranked among the top 5 most played games in July. After an August update, it ranked #1 on Steam's top seller chart in 12 countries and regions, with over 10 million worldwide downloads.
    • Naraka: Bladepoint Mobile: Climbed to #3 on the iOS grossing chart and maintained the #1 position on the iOS 3D chart for over a week. The mobile version boosted overall franchise excitement.
    • Fantasy Westward Journey: Launched a new expansion pack, driving record-high quarterly revenue.
    • Westward Journey Online Mobile: Reintroduced classic gameplay, attracting both long-term fans and new players.
    • Infinite Borders: Introduced seasonal themes, hitting a 3-year high in DAU.
    • Identity V: Achieved record-high DAUs and revenue, ranking #4 on China's iOS top grossing chart in July and #2 in Japan in August.
    • Eggy Party: Hosted a second anniversary event and expanded its UGC ecosystem with partnerships and coding courses.
    • Justice Mobile: Achieved significant success with new content, reaching the #3 position on the iOS top grossing chart in June.

  • Upcoming Games:

    • Where Winds Meet: Completed a new round of testing and plans to launch on PC and mobile this year.
    • Marvel Rivals: Announced its console plan and showcased at Gamescom, with a release date of December 6.
    • FragPunk: Featured at Xbox Game Showcase 2024, with a closed beta test in North America and a planned release in 2025.
    • World of Warcraft: Received overwhelming player response, with a split of 4:6 between new and returning players. The game will increase PC revenue.
    • Hearthstone: Set to return on September 25, with all 2023 cards available for free and China-only events.

  • Other Business Segments:

    • Youdao: Achieved historic high operational cash flow and narrowed operating loss, driven by digital content services and AI-driven subscription services, which saw 200% year-over-year growth.
    • NetEase Cloud Music: Enhanced its music ecosystem with new partnerships and features, leading to increased user engagement and membership subscriptions.
    • Yanxuan: Launched new products and led sales across various online categories, particularly in pet food and house cleaning products.

  • Financial Metrics:

    • Gross profit margin increased to 62.9% from 59.9% year-over-year.

    • Operating expenses were RMB 9 billion, or 35.5% of net revenue.

    • Non-GAAP net income was RMB 7.8 billion, with a net cash total of RMB 116.1 billion as of June 30, 2024.

    • The company approved dividends of USD 0.087 per share and has repurchased approximately 12 million ADSs under its USD 5 billion share repurchase program.

Feedback