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spk12: We are counting on hope for this next first quarter 2022 Unlinked Conference call. At this time, we are assembling today's audience and plan to be underway shortly. We appreciate your patience and please remain on the line. Thank you. Good day and welcome to the NetEase first quarter 2022 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.
spk03: 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 20F and the announcements and the 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 and a reconciliation of GAAP to non-GAAP financial results, please see the 2022 First Quarter 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 the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase Senior Management is Mr. William Ding, Chief Executive Officer, Mrs. Charles Yang, Chief Financial Officer, and other members of Senior Management. I will now turn the call over to Charles, who will read the prepared remarks on behalf of William.
spk05: 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. We kicked off 2022 with a solid quarter, advancing each of our business lines with total revenues coming in at RMB 23.6 billion, up nearly 15% year-over-year, and our net operating profit increased 29% year-over-year to RMB 5.5 billion. Online games revenues were RMB 17.3 billion, growing by 15% year-over-year. Our flagship titles continue to impress with their remarkable longevity and strength. In the first quarter, revenue from Fantasy Westward Journey Online and New Westward Journey Online 2 continued to grow steadily, demonstrating NetEase's core competence in operating franchise IPs over an impressive duration and longevity of about 20 years. With immersive festive activities and engaging new expansion packs during the Chinese New Year period, we are thrilled that these epic games remain as attractive and appealing to the players as ever. We are actively growing many other long-lasting franchises in addition to these legacy titles, keeping our content fresh with years of perseverance and dedicated craftsmanship. Take LifeAfter as an example. Our open world Doomsday survival game, first introduced in 2018, continues to lead its category with its distinctive survival gameplay. Since its operation of more than three years ago, we've been frequently rolling out big updates for LifeAfter on an almost quarterly basis. refreshing players' appetites with numerous content updates. In the first quarter, the Spring Festival version of LiveAfter brought the game to the forefront once again on China's iOS top-grossing chart. In terms of newly launched titles, nearly one year since its launch, Naraka BladePoint maintains strong engagement levels with fast-paced content updates. including new gameplay, heroes, and weapons. Adding to our regular update schedule, we are prepping for a significant update, including the first new map, to bring new excitement to the whole player community in the second half of this year. Featuring unchained melee combat, Naraka Blade Point was a huge breakthrough for us in esports, and has become one of the most popular games on live streaming platforms in China. To round out the game's ecosystem, we established a multi-tiered tournament system consisting of scrimmages, regional tournaments, and the World Championship, catering to different player groups, including the general public, as well as professional teams across different regions. In January, we concluded the first World Championship tournament, the game's highest level of competition, which attracted considerable attention from esports fans worldwide and brought global players an exciting visual feast. We are also seeing growing momentum with Infinite Lagrange. Similar to our original SLG game, Invincible, this next-generation SLG title has begun to show healthy, sustainable growth trend in the first quarter. As the game advances, we are steadily gaining more confidence in our ability to extend the success of SLG games to an even broader demographic. In April, we launched Dead by Daylight Mobile in Asia, co-developed with Behaviour and published by us. Dead by Daylight Mobile is the mobile version of the famous asymmetrical battle arena game, bringing players unrivaled asymmetrical competitive experiences on mobile platforms. Soon after its debut, Dead by Daylight Mobile tops the iOS download chart in both Japan and Thailand with very strong user engagement. In the second half of the year, we plan to bring to the world more exciting titles, which we hope to thrill our growing global community. In particular, we are extremely excited to have Diablo Immortal slated for release on the 2nd of June in most global markets. And last Friday, at our annual Game Day event, we announced that the China launch of Diablo Immortal is now confirmed for June the 23rd. As one of the gamer community's most anticipated titles this year, Diablo Immortal marks one of the most ambitious game release in the Diablo franchise's 25-year history and will bring fans and new players an uncompromised AAA gaming experience. Pre-registration has been exceptional with more than 35 million people preparing for the battles to come worldwide including 15 million in China and counting. Diablo Immortal supports both cross-play and cross-progression, allowing global players to join the fight with each other, regardless of platform, while being able to seamlessly transition between mobile and PC gameplay. We consider the debut of Diablo Immortal a huge opportunity to show the world particularly Western gamer community, about NetEase's strong R&D capability. We take a very global view of our online game business, and Diablo Immortal truly embodies the sort of worldwide appeal that we hope to possess. Next in the pipeline, we will be introducing Naraka BladePoint on console. The development is well on track, and we are definitely excited about its prospects. and to welcome console players to our global Naraka BladePoint community. Equally exciting is our planned global market launch of Harry Potter Magic Awakened, which captivated the Chinese market since last September. While we are putting great effort into the global version, we are also simultaneously working intensively to update the game in China, regularly rolling out new cards costumes, and gameplay to add even more fun. Our rich pipeline goes far beyond these titles, and we continue to initiate new projects on schedule. As usual, we held our 2022 annual game product launch event last Friday on May 20th, revealing the latest information about other exciting titles in the pipeline, including the mobile versions of Justice, and Naraka Playpoint, Aggie Party, A Casual Game, Raw of War, Vive le Football, and Mission Zero. We encourage you to read through our press release about this event or watch last Friday's event replay to get more comprehensive information. In 2022, we have made more solid progress in globalization We have always been relentless in our drive to invest in and empower our people, and we are incredibly excited to have more global talents joining us. After years of strategic planning, we now have a number of first-party overseas studios across Japan and North America, each of them being led by top industry veterans. who are using their creativity to forge their best titles on NetEase platform. For example, our three Japanese studios aim to build great console games for both the Japanese and the global audience. Earlier this month, we also launched our first U.S. studio, Jack Club Games, led by industry veteran Jack Emmert. who has decades of experience in MMO game development. Our idea is to persistently unleash talent potential by enabling them to focus on core mechanics and storylines with creative autonomy while offering them solid technical support in areas such as coding and art design. Going forward, we hope the world will see more of Natty's relevance on AAA releases in the global market, either through self-development, investment, or publishing. Now turning to our education business, NetEase Yodao achieved a solid and sustainable performance in the first quarter after disposing of its academic after-school tutoring businesses. With total net revenues of RMB 1.2 billion and gross margin of 53.1%, Smart learning devices remain the key driver of Yodao's future growth. In the first quarter, Yodao continued to extend its technology offering by launching improved content, features, and new products. Net revenues from Yodao's smart devices segment reached RMB 253 million, representing an increase of 25% year-over-year. Through partnership with education presses in 11 additional regions, we have added original sounds to the Youdao listening pod based on various versions of the English learning textbooks. In early April, we introduced a new product named Youdao Smart Light, Youdao Zhimen Taiden, which integrates AI learning features into a desk lamp. Powered by our robust AI algorithms, It allows users to schedule a plan before they study, look up meanings and translations of words and sentences in Chinese and English during their study time, and inspect and review their homework after they finish studying. By clicking the screen to conduct research, the device helps students develop more independent learning habits and significantly improves their learning efficiency while protecting their eyes Looking towards growth opportunities in the STEAM education sector, we have worked hard to optimize the functions and user experience for different courses. As a result, for example, growth billions from Youdao chess class increased over 170% quarter over quarter. In addition to content upgrades, we have also built a learning community on the Youdao Board Game Academy app On this platform, students of Go, chess, and Chinese chess courses can interact and compete with AI or their peers of similar levels in a fun and engaging way. To complete the cycle of learning, testing, and grading, Yeodao has applied to become an official online testing and certification site for various board game associations in China to make the skill certification process easier for our students. Looking ahead to the remainder of 2022, Yodao will remain focused on upgrading its diversified portfolio of products and services, and we have confidence in its future development, powered by its sophisticated R&D capabilities and persistent drive to empower education with our technology. With NetEase Cloud Music, we maintain steady momentum in the first quarter. MAU for our online services were 182 million, largely stable both year over year and quarter over quarter. We also continue to improve our monetization capabilities, growing our net revenues by 39% year over year to RMB 2.1 billion, driven by healthy membership growth and robust social and payment services. Our membership paying ratio reached 20% compared with 13% in the same period last year. We made enhancements to our content and introduced more product feature innovations to improve the user experience, which helped us drive paying user growth. Additionally, growth margins more than doubled quarter over quarter in the first quarter, reaching over 12% as we continue to optimize our content cost structure. On the new features front, we introduced our innovative Harry Potter Magic Radio, a joint collaboration with NetEase Games team, which allows users and gamers to enjoy Harry Potter themed podcast content within the game. While we continue to add unique products and capabilities that help redefine our community's music experience, we are also improving our brand awareness and influence with content-oriented and event-driven campaigns. We offer a full spectrum of varied content as the demands of our useful user base are increasingly diverse and personalized. By the end of March 2022, Our content library consists of more than 90 million music tracks, including music from established labels, as well as independent artists. We are attracting independent music talent at a notable rate, and by the end of the first quarter, we have more than 450,000 registered independent artists on our platform. To help independent artists create and promote their music, as well as realize commercial value, we continue to nurture music talent with invaluable tools such as support programs, traffic referrals, fan interactions, and multiple monetization methods. Moving on to Yanshan, April marked its sixth year anniversary. Over the course of the last six years, we have built Yanshan into an exciting private label consumer lifestyle brand. We have an established and strong supply chain system and can accurately profile user preferences with our leading algorithms. Through diversified channels, Yanshan has launched a number of popular products such as cat foods, bathroom fragrance, and ergonomic chairs. As we move ahead, Yansheng will continue to focus on pets, home cleaning, bedding, and other categories that we excel in while we continue to launch original design products and bring consumers products that facilitate more chilled and pleasant lifestyle. Above all else, NetEase is always a content company with deep-rooted internet DNA. Our ability to innovate, create, and leverage our proprietary technology forms a cohesive layer across our different business lines, whether it be games, education, or music. Within each of these areas of robust content, we are step first in our mission. Dedicated to improve our content competitiveness, we will continue to invest and innovate to provide users with excellent products and services full of fun, technology, and surprises. At the forefront of each of our business lines is our commitment to social responsibility and charitable endeavors. With the recent pandemic cases in China, each of our businesses have utilized their resources to help the community we are serving. In March, NetEase Group, distributed one million copies of anti-pandemic gift packages to cater to people's entertainment, work, and consumption needs. More recently, leveraging the advantage of our supply chain, Yanshan mobilized 50 tons of fresh vegetables from our fresh food suppliers for people in COVID-affected Shanghai areas. Additionally, leveraging the power of music As an inspiring and uniting force, we distributed another 5 million cloud music Vimeo memberships for free to the people in Shanghai and Jilin province with a goal of using music to comfort and inspire those impacted by the pandemic. This concludes William's comments. I will now provide a brief review of our 2022 first 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 first quarter were RMB $23.6 billion or US $3.7 billion, representing a 15% increase year-over-year. Net revenues from online game services were RMB $17.3 billion, up 15% year-over-year. The additional growth was primarily due to the increased revenue contribution from the launch of new games such as Naraka Bladepoint and Harry Potter Magic Awakens. Net revenues from our mobile games accounted for approximately 67% of total games revenue. Youdao's net revenues were RMB 1.2 billion, compared with 1.3 billion last year, same quarter. Youdao discontinued its after-school tutoring services for academic subjects under China's compulsory education system K9 since the fourth quarter of last year, per regulatory requirement. If we exclude this continued business, Q1's Apple-to-Apple revenue stayed relatively stable compared with last year. On the other hand, the smart devices business maintained steady growth trajectory with net revenues up 25% year over year. Net revenues from cloud music were RMB 2.1 billion, up 39% year over year. The increase was primarily due to increased revenues from membership subscription and social entertainment services. Net revenues for innovative businesses and others were RMB $3 billion, up nearly 12% year-over-year due to business development and seasonality impact of various lines. Our total gross profit margin was 54.5% in the first quarter, up slightly compared with 53.9% in the first quarter of last year. GP margin for our online game services remained stable at 65.1%. 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 self-developed and licensed games. GP margin for Youdao was 53.1%, compared with 57.3% in the same period of the last year. The decline was mainly due to the lower revenue proportion from Youdao's learning services, which carry a relatively higher margin. GP margin for cloud music excelled in this quarter, climbing to 12.2% versus 4.1% in the preceding quarter and a negative margin of 3.1% in the same period last year. The significant margin improvement primarily resulted from strong top-line growth, as well as improved content cost control. Additionally, this marks our fourth consecutive quarter of positive growth GP margin for cloud music. Growth profit margin for innovative businesses and others was 23.3%, flattish compared with 24.1% in the first quarter of last year. Total operating expenses for the first quarter were RMB 7.3 billion or 31% of our total net revenues. If we look at our costs in more details, our selling marketing expenses as a percentage of net revenues were 12% compared with 13% last year. The change was mainly due to less marketing spending related to Youdao. If we exclude Youdao, our selling and marketing expenses as a percentage of net revenue were 11% compared with 10% last year, mainly due to increased spending on certain games promotions in the first quarter. Our R&D expenses were RMB 3.4 billion, or 14% as a percentage of net revenues. We remain committed to investing in content creation and product development, which is core to our revenue growth. Other income was RMB 28 million for the first quarter. The quarter-over-quarter and year-over-year decrease resulted from the fact that we had certain publicly traded securities in our current investments, and the prices of such securities declined meaningfully in the first quarter. We are required on the U.S. GAAP to reflect for these fair value changes. The effective tax rate was 22% for the first quarter. As a reminder, the effective tax rate is presented on an accrual basis, and the tax rates differ from each of our entities, depending on the applicable policies and our operational results. Our non-GAAP net income attributable to our shareholders for the first quarter of 2022 totaled RMB $5.1 billion or U.S. dollars, 807 million. Non-GAAP basic earnings per ADS was 1.23 U.S. dollars, or 0.25 per share. Our cash position remained strong. As of the quarter end, our total cash, cash equivalents, current and non-current time deposits, and short-term investments balance totaled RMB 107 billion, compared with $103 billion as of the end of last year. In accordance with our latest revised dividend policy, our Board of Directors have approved a dividend of US$0.0644 per share or US$0.322 per ADS. Lastly, under our share repurchase program, approximately 20.1 million ADS had been repurchased as of the first quarter end for a total cost of approximately US dollar 1.9 billion. Thank you for your attention. We would like now to open the call to your questions. Operator, please go ahead to the Q&A.
spk12: OK, thank you. If you would like to ask a question, signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. For the benefit of all participants on today's call, if you wish to ask your questions to management in Mandarin, please immediately repeat your questions in English. We will pause for just a moment to allow everyone an opportunity to signal for questions.
spk11: We will take our first questions from the line of Alicia Yap from Citigroup.
spk02: Your line is open. Please go ahead. Hello. Hi. Yeah. Thank you. Can you hear me? Okay.
spk06: Hi, Alicia.
spk02: Yes, Alicia. Yeah. Hi, thank you. 我自己翻譯一下。 My question is on your overseas studio. So given your recent establishment of the overseas studio in the US and Japan, could you share some color with us regarding your hiring plan, your games development plan, and also how you're viewing the overseas talent industry and future gains growth and growth outlook. Thank you.
spk09: We pay great attention to the overseas market and overseas development. The overseas market is now 80% in China, and more than 10% in China. We hope to expand the scope of the W40 to W50. We pay great attention to the market of the United States and the United States. Secondly, we are also very active in fighting with various overseas teams, including investment companies, including the development of the company, including the development of various means to participate in the development process of this content. Okay, thank you. So the overseas market and the overseas market development is of utter importance to us.
spk03: So right now, about 80% of our R&D resources is in China, and something between 10% to 20% is overseas market. And going forward, we think that we will probably see a 40% to 60% split, having 40% of the R&D resources in overseas markets. We are working very diligently and actively with overseas development teams to co-develop some games content Internally, we have a plan and we have a clear goal of how we want to achieve the revenue split between overseas markets and the China markets. Hopefully, both the China markets and overseas markets will account for a meaningful portion of our revenue. Thank you.
spk11: Thank you.
spk12: Okay, we will take our next question from the line of Yang Bai from CICC. Your line is open. Please go ahead. Thank you.
spk11: Thank you, Mr. Bin.
spk04: My question is, in addition to Japan,
spk11: Are you on speakerphone? Because your line is breaking.
spk10: Hello, can you hear me now? 我听到了白杨的问题。
spk03: So his first question is about the impact of overseas games market, how that would affect our profitability for games business. And his second question was in terms of in addition to Japanese market, what other regions we're thinking of publishing ourselves?
spk05: For convenience, I will answer these questions directly in English. When we think of our overseas games' increased contribution, obviously we are in a ramp-up phase, but as we grow more diversified titles across different geographies, Like I mentioned in previous quarters, the margin profile shouldn't be very different between domestic game and the overseas game in a steady state, but rather it is more correlated to the growth building. So we are very confident in the next three to five years' time as we continue to expand the scale and presence in the overseas market when we have multiple hit titles that's universally appealing to the users, those games are going to demonstrate very, very strong and similar margin profiles as what we have been experiencing with some of our very long-lasting legacy titles here in China. Now, your second question regarding our publishing capability, as you may have noticed that NetEase remains very determined in major markets such as Japan, and for some titles, even in the Western market, we strive to learn and control our own publishing capability. That is something we have to gradually build up and learn as we become a truly global game company. You may have noticed that we've successfully self-published games like Knives Out, Identity V in Japan. We are going to publish Harry Potter Magic Awakens in Japan. We are globally publishing Lord of the Rings. I think going forward with more content partners, with more IP partners, and with more self-developed or co-developed titles, our global publishing capability particularly in major markets, will be further strengthened.
spk06: Operator, next question, please.
spk12: Okay, we will take our next question from the line of Jia Rongshi from Nomura. Your line is open.
spk07: Thank you, Mr. Guan, for accepting my question. Thanks for taking my question. I would like to ask about the D&N income of the first quarter game. Deferred Revenue. Your game different revenue rose by 1% sequentially in one queue. even though you did not launch any new titles in first quarter. Could you give us some colors? What were the factors that have contributed to this recovery in your deferred game revenue? I just wonder if this recovery had anything to do with the lockdown.
spk05: Thank you, Jialuo. I'll answer this financial question directly in English. By the way, we rephrase deferred revenue into contract liabilities just to be more precise and accurate under the accounting literature. So yes, as you may have noticed, our contract liabilities increase slightly for games if you exclude your DAO from that. It's largely attributable to our strong Q1 growth, Q1 performance of PC games. As you may know, Chinese New Year period is typically a seasonality peak for PC games. And Fantasy Westward Journey, by the way, after almost two decades of operation, have recorded a new record high quarterly gross billion and quarterly revenue in the first quarter. World of Warcraft also performed fairly strong in the first quarter, contributing to our strong game contract liabilities that's been recorded in the first quarter that's the main reason okay now operator next question please okay thank you we will take our next question from the live from Fed Felix Liu from UPS
spk12: Thank you. And with the success of this game, how do we expect to cooperate with Blizzard in the long term? My second question is about the selection. Recently, we have also noticed that the epidemic has had an industrial impact on e-commerce logistics. So I want to see if the management can share the latest impact on the selection. We estimate that Thank you, management, for taking my questions. Let me translate myself. My first question is on Diablo Immortal. First, congratulations on the launch. Could you share any expectations on revenue or user metrics for this game? And which overseas markets will NetEase be responsible for distribution? And any thoughts or color on the long-term collaboration with Microsoft and Activision Blizzard post the game launch. My second question is on Yanshan, more specifically about the COVID-19 impact to the Yanshan business in the second quarter and potential turning point.
spk11: Thank you. Okay. Thank you, Felix.
spk05: I'll answer your question directly in English. First of all, Diablo Immortal, under the partnership agreement, we are a co-developer. So we got a co-developer's share of Pi from its global revenue. In terms of publishing, NetEase is responsible for the games publishing in mainland China, whereby Blizzard is responsible for its publishing rest of the world. You may have noticed that we also have very close partnership business partnership with Microsoft because we've been the exclusive partner for Minecraft for multiple years with the announced acquisition of Activision Blizzard by Microsoft. We are very very looking forward to a future strengthened partnership between NetEase and then the broad Microsoft franchise because we are a premium content provider. They obviously have very, very excellent first party studios as well as Xbox distribution platform. So there are multiple areas that we can explore potential partnership down the road. To your second question on Yanxuan, we will have Yanxuan's CEO, Shingo, to answer your question.
spk08: Thank you. Hello, I will answer your question directly. In terms of storage and logistics services, Wang Yi Yanxuan has indeed been affected by some areas of the epidemic. Since the end of March, we have clearly felt that the areas affected by the epidemic So it's true in certain regions, we do think that our fulfillment and the logistics system has been impacted somewhat by the pandemic.
spk03: And since the end of March, the fulfillment time has been a lot longer than before. But the good news is that since May, we've seen much more meaningful improvement and progress, and we think that progress is still ongoing. Thank you.
spk06: Operator, next question, please.
spk12: We will take our next question from the line of Lincoln Kong from Goldman Sachs. Your line is open, please go ahead.
spk00: Thank you for taking my question. My question is about this year's overseas game market outlook and our overseas game transformation strategy. We also saw that since April, we have released a few games in Japan, which are actually quite successful. For example, the engagement with Lin Min-sha is actually very strong. But in fact, in the short term, it seems that the flow is relatively small. I want to know if we are more patient in terms of the commercialization of overseas games, or in terms of the life cycle of the game as a whole, is the commercialization of domestic games relatively more even? Is it such a strategy? So for us, for example, in the second half of the year, will the release of Harry Potter overseas and the release of the Japanese market be a similar change in rhythm? Regarding this, how do we look at the demand of overseas, especially the Japanese market this year? We also see a lot of third-party data and some global game players are relatively conservative about this year's game market outlook, including the situation of year-to-date is relatively weak. So we want to hear from Guanchen about the overall situation of the overseas market outlook for this year. So, thanks for taking my question. The question is about the overseas, you know, game market and our monetization strategy for international games. As we noticed, strong engagement of DPD Mobile in Japan, but a relatively small crossing. So, we think that those international games monetization method is evenly distributed within their product lifecycle. If so, how should we think about those future high-profile international titles in the second half, especially high-reporter Japan? And related to that, how do we view the outlook for the Japanese mobile game market this year, especially year-to-date grossing seems to be a little weaker than expected? Thank you. 我回答你的问题,就是海外的遊戲市場跟中國的確
spk09: foreign foreign Okay. Okay.
spk03: Yes, it's true that overseas markets are completely different from the China market. In China, the majority of the games revenue comes from mobile games, whereas for overseas, we have console, we have PC, and we have mobile. So for different types of games, there's a very different monetization pattern, and for different countries, monetization is different as well. But all of that shouldn't be a big challenge for NetEase. We have decades of experience in gaming R&D, so we should quickly find a way to satisfy users and players in different countries on different types of devices. Thank you.
spk02: Next question, please.
spk12: Okay, we will take our next question from the line of Natalie Wu from Haitong International. Your line is open.
spk02: Please go ahead. Good evening. Thank you, Mr. Ding, Charles, and Marguerite for accepting my question. Congratulations on your long-term performance. My question is related to the pandemic. On the one hand, after the COVID-19 pandemic, many game companies have said that they have seen some games that are weak. I don't know if we have such a situation. On the other hand, in the recent COVID-19 pandemic in China, have you seen any games Thank you, Madison, for taking my question, and congratulations on a very strong quarter. So my question is regarding the pandemic impact on our game business. Just wondering, can you comment on the impact of pandemic opening up in overseas markets on your games business? Because some of your peers noted that the weakness coming due to that fact. Just wondering if you also experienced that kind of situation. And in the meanwhile, in terms of the domestic market, did you see increasing time and value spent on your games during the domestic lockdowns?
spk11: Thank you.
spk05: Hi, Natalie, it's Charles. In the interest of time, let me answer your question directly in English. So the COVID situation has been lasting since, it's been more than two years. Frankly speaking, I think everyone is a victim of this COVID situation. Game industry, or broadly speaking, entertainment industry is probably a little bit more fortunate that we are less severely impacted by the COVID than many of the other businesses. Frankly speaking, we do not observe any weakness from our overseas markets. right now because we are fairly, fairly new and in our early stage of executing our ambitious global strategy as we continue to launch more games, we feel pretty confident about our growth, particularly in the second half of this year when many of our exciting, highly anticipated games will be unveiled to the international game audience. Now, speaking of the domestic market, for the past quarter, Chinese New Year period is, like I said, a strong seasonality for PC games, but we are not seeing really any meaningful so-called enhanced Apple or timing spend on mobile. Mobile stayed relatively, I would say, so you are not really seeing any kind of highs and lows of obvious seasonalities or one-off implications caused by the lockdown. I think our game development philosophy is fairly consistent and straightforward. There's a lot of these macro situations that's beyond anyone's control. what we could do is that try to observe the shifting user experience preferences and try to cater to their shifting preferences by diligently and regularly roll out content updates through innovation, through fresh gameplay, et cetera. I think that is kind of an open secret. We've been... adopting and operating for the last two decades from PC screens to mobile screens through good economies and bad economies. I think that's something. If anything that we have learned from the COVID or from our past two decades of experience is that, you know, remain user-focused and content-focused, then we won't go too wrong off the track. Operator, maybe we have time for one last question.
spk12: Okay, thank you. We will take our next question from the line of Thomas Chong from Jeffy.
spk01: In terms of policy, in the future, what do we think? In other words, will we be able to recover the board number in July? If so, there should not be too many policies. And then I would like to ask the entire industry, how do we see the growth rate of the long-term domestic game industry? Thanks, management, for taking my questions. May I ask a question about the regulatory environment for the online gaming sector after the resumption of the Ban Hao approval? Should we expect any new regulations or anything that may be released in the future? And on that front, how should we think about outlook for the domestic gaming sector in coming years in terms of the growth momentum.
spk11: Thank you.
spk05: Boss, there are two questions. The first one is about policy. Because the board was reopened in April, what do you think about the policy of the gaming industry? Do you have any ideas? The second one is about the future of the gaming industry in China. What do you think about the future of the gaming industry?
spk09: I don't want to do it. It's just that I don't want to do it. I don't want to do it. I don't want to do it. So we're quite optimistic with the growth of the Chinese gaming market. It's a popular form of entertainment among the younger generation.
spk03: So as you've seen, since April, there's been a batch of new license approvals. And I think that going forward, the policy will remain that it supports game content that could be beneficial and educational to the gamers and game players. Thank you. Thank you. Thank you very much. I think that would end our call. Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly or TPG Investor Relations. Have a great day. Thank you.
spk11: That concludes today's conference. Thank you everyone for your participation.
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