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pww.comNetEase, Inc., Q4 2023 Earnings Call, Feb 29, 2024 - SEHK:9999

SEHK:9999

Bill Pang [Vice President of Corporate Development] đź’¬

During the NetEase, Inc. Q4 2023 Earnings Call, Bill Pang, Vice President of Corporate Development, provided a comprehensive overview of the company’s performance and upcoming projects. Below is a detailed summary of his statements:

Opening Remarks

  • Reminded everyone that all percentages discussed were in RMB.
  • Highlighted 2023 as a year of innovation across NetEase’s businesses, with both top and bottom line growth.
  • Mentioned continuous cross-category innovation in NetEase games, expanding and diversifying the game portfolio.

MMO Performance

  • Discussed the robust appeal of legacy franchises like Fantasy Westward Journey and Westward Journey Online, supported by fresh content and in-game events.
  • Noted the success of the Justice franchise, which reached 100 million active users, with a broad and diverse user base.
  • Highlighted the innovative renovation seasonal mechanism in Justice, which introduced new pursuits and reduced entry barriers.
  • Emphasized player engagement and community building, such as the collaboration with Chinese fans and players' input on game events.

Diversification in Genres

  • Mentioned successes in new genres like sports and simulation games, including Dunk City Dynasty and Racing Master.
  • Discussed the expansion of Dunk City Dynasty through the addition of MVP stars and CBA legends, as well as efforts to spread basketball game culture.
  • Highlighted Racing Master’s success and its availability in Hong Kong, Macau, and Taiwan, with top rankings on local iOS download charts.

New and Innovative Games

  • Introduced She Diao Condor Hero, an open-world RPG based on a popular martial arts novel, launching on PC, mobile, and cloud gaming platforms.
  • Announced Where Winds Meet, designed to bring an open-world gaming experience with realistic martial arts combat and an inclusive art style.
  • Mentioned the receipt of license approval for Naraka: Bladepoint on mobile, extending the immersive combat experience to mobile players.

Global Expansion

  • Announced the opening of new game studios in Vancouver, Canada, and Los Angeles, USA, demonstrating the company’s ability to draw on local talent and expand internationally.
  • Highlighted the contributions of industry veterans like Mac Walters and David Vonderhaar, who will lead the creation of new IPs and AAA games.

Talent Development

  • Announced that NetEase was the sole Chinese Internet company awarded the ATD Excellence in Practice award, recognizing the company’s commitment to cultivating Internet talent.

Social Responsibility

  • Discussed initiatives to protect minors, including the integration of minor mode across China-based games and the steering of the gaming ecosystem towards a healthier trajectory.

Youdao

  • Highlighted Youdao’s technological innovation and product development, with improvements in profitability and cash flow.
  • Mentioned the growth in the number of students receiving awards in the CSP programming competition and the effectiveness of Youdao’s courses.
  • Discussed the optimization of sales channels for smart devices, leading to a recovery in the fourth quarter.

NetEase Cloud Music

  • Noted the continued upward trend in subscription-based membership revenue, driven by an increase in subscribers and ARPU.
  • Mentioned the improvement in overall profitability, achieving positive adjusted net profit under IFRS for the first time.
  • Highlighted the success of co-published physical albums and the support system for independent artists.

Yanxuan

  • Discussed the strengthening of Yanxuan’s brand presence with popular products in focused categories, including pet supplies and household cleaning.
  • Mentioned the steady sales growth and the continuous optimization of Yanxuan’s supply chain to improve cost-efficiency.

Financial Highlights

  • Provided an overview of NetEase’s financial performance for 2023, with a 7% increase in total net revenue year-over-year.
  • Discussed the revenue contribution from games, Youdao, Cloud Music, and innovative businesses.
  • Highlighted the gross profit margin improvements in various segments, including games, Youdao, Cloud Music, and innovative businesses.
  • Mentioned the total operating expenses and the breakdown of selling and marketing expenses and R&D expenses.
  • Discussed other income and the effective tax rate.
  • Announced the dividend of 0.21597 per share or USD 1.07985 per ADS and the share repurchase program.

Question and Answer Session

  • Provided responses to analyst questions regarding the R&D progress of Naraka: Bladepoint, Eggy Party’s overseas expansion, Project Mugen, overseas business plans, and marketing expenses.

Closing Remarks

  • Concluded the prepared remarks and opened the call to questions.

Lei Ding [Founder, CEO & Director] đź’¬

**- Lei Ding highlighted the success and innovation across NetEase's businesses, emphasizing the company's commitment to expanding and diversifying its game portfolio.

  • He mentioned significant milestones for key games like "Justice" reaching 100 million active users and the successful launch of "Dunk City Dynasty" and "Racing Master."

  • Lei Ding discussed the company's efforts to engage players through in-game events, collaborations, and community-driven initiatives, such as player-voted collaborations and the introduction of new features like "Eggy Code."

  • He announced the upcoming launches of new games, including "She Diao Condor Hero," "Where Winds Meet," and the mobile version of "Naraka: Bladepoint."

  • Lei Ding emphasized the company's focus on social responsibility, including the protection of minors and the integration of a minor mode in games.

  • He highlighted the success of Youdao's technological innovations and educational offerings, noting strong performance in the fourth quarter and the introduction of AI-driven features.

  • Lei Ding discussed the growth and profitability of NetEase Cloud Music, including the first full year of positive adjusted net profit under IFRS and the expansion of music content and independent artist support.

  • He mentioned the company's commitment to innovation and R&D, leading to the development of unique products and the cultivation of talent.

  • Lei Ding provided updates on the company's global expansion, including the establishment of new studios in various countries and the ongoing development of international projects.**

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