PWW

Portfolio AI Insights

pww.comNetEase, Inc., Q1 2024 Earnings Call, May 23, 2024 - SEHK:9999

SEHK:9999

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

During the NetEase 2024 First Quarter Earnings Conference Call, Bill Pang, Vice President of Corporate Development, provided a detailed overview of the company’s performance and upcoming plans. Here is a summary of his remarks:

Key Business Highlights

  1. Financial Performance:

    • Net revenue for Q1 2024 was RMB 26.9 billion, up 7.2% YoY.
    • Games and related business revenue was RMB 21.5 billion, up 7% YoY, driven by new launches like Justice Mobile and sustained growth from Eggy Party.
    • Mobile games accounted for 79% of total online game operations revenue.

  2. Game Portfolio:

    • MMORPGs:
      • Fantasy Westward Journey Mobile celebrated its anniversary and achieved record-high quarterly revenue.
      • Westward Journey Online introduced a new Sim update featuring traditional Tongliang Dragon Dance.
      • Justice Mobile became a nationwide sensation and implemented advanced technology for immersive gameplay.
    • Other Genres:
      • Infinite Borders, an SLG, achieved a 3-year revenue high.
      • Identity V celebrated its 6th anniversary with record-breaking revenue and DAU.
      • NARAKA: BLADEPOINT saw a record number of concurrent players after transitioning to a free-to-play model.
      • Eggy Party reached over 40 million DAUs and continued to expand its thematic diversity.
      • Racing Master dominated the racing community with engaging content and new challenges.
      • Dunk City Dynasty dominated the basketball mobile market with innovative design and content.

  3. New Releases and Upcoming Titles:

    • Shijie Zhi Wai:
      • A female-oriented love simulation game that reached #3 on China iOS grossing chart.
    • Where Wings Meet:
      • An open-world action-adventure RPG game set to launch in July 2024.
    • Once Human:
      • A multiplayer open-world survival game scheduled for Q3 2024.
    • Ashfall and Marvel Rivals:
      • MMORPG and superhero team-based PVP shooting games to be introduced soon.

  4. Partnerships:

    • Renewal agreement with Blizzard Entertainment to bring titles to China.
    • Strategic partnership with Microsoft Gaming.
    • Plans to publish Raid: Shadow Legends and Marvel Snap in China.

Other Business Segments

  1. Youdao:

    • Healthy growth with a focus on digital content services, online marketing services, and AI-driven subscription services.
    • Record-breaking net revenue growth in online marketing services.
    • Rapid sales growth in AI-driven subscription services.

  2. Cloud Music:

    • Subscription-based membership revenue accelerated with a 2-year high in quarterly net ads.
    • Expanded music library through agreements with popular Chinese stores and South Korean labels.
    • Successful in-house produced music featured in high-profile TV performances.

  3. Yanxuan:

    • Continued introduction of popular products, achieving strong sales growth in various categories.
    • Economic chair launched with extensive popularity among younger generations.

Environmental, Social, and Governance (ESG)

  1. ESG Commitment:
    • Released the 2023 ESG report showcasing progress in key areas.
    • Greenhouse gas emissions from operations decreased by 11% compared to 2022.
    • Committed to promoting diversity, equity, and inclusion.
    • Recognized by Forbes as one of the world’s best employers and by Time Magazine as one of the world’s best companies.

Financial Results

  1. Gross Profit Margin:

    • Increased to 63.4% in Q1 2024 from 59.5% in the same period in 2023.
    • Games and related business margin increased to 69.5%.
    • Cloud Music margin reached 38%.
    • Innovative business and others margin was 33.4%.

  2. Operating Expenses:

    • Total operating expenses were RMB 9.4 billion or 35% of net revenue.
    • Selling and marketing expenses as a percentage of total revenue were 15%.
    • R&D expenses remained stable at 15.5% of total net revenue.

  3. Net Income and Cash Position:

    • Non-GAAP net income attributable to shareholders was RMB 8.5 billion, up 12.5% YoY.
    • Net cash position was approximately RMB 113.4 billion as of March 31, 2024.
    • Dividend of $0.99 per share or $0.495 per ADS approved.
    • Repurchased approximately 8.9 million ADSs for a total cost of approximately $811 million under the current share repurchase program.

Game Pipeline and Development

  1. NARAKA: BLADEPOINT Mobile:

    • Testing completed in April, reflecting high player anticipation and enthusiasm.
    • Expected launch during the summer vacation time.

  2. Condor Heroes:

    • Stage 1 offshore results did not meet expectations.
    • Active modifications focusing on fun, social factors, and style.
    • Updated version expected to be launched during the summer vacation time.

  3. Where Wings Meet:

    • PC version set to launch in July, with everything ready.
    • Mobile version development complete, undergoing testing and optimization.
    • Potential for overseas market, with marketing planned.

  4. Future Game Pipeline:

    • Details to be disclosed via news releases and events when appropriate.

  5. Overseas Studios:

    • Many products are in active development, but no specific release dates yet.
    • China domestic studios are also working on titles for the global market.

  6. Operating Expenses:

    • No significant increase expected in sales and marketing expenses.
    • Customer acquisition cost is decreasing.

  7. Gamer Spending:

    • No meaningful downgrade in gamer spending, as games provide emotional value.

  8. Capital Returns:

    • Repurchase and dividend activities will continue at their own pace.

Closing Remarks

  • Brandi Piacente thanked everyone for attending the call and invited them to contact Piacente Financial Communications or the company for further questions.

Feedback