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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.
Margaret Shi
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 Security 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 companies' control and could cause actual results to differ, particularly 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 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 announcement of the filings on the website of the Hong Kong Stock Exchange. The company does not undertake any obligation to update all the information except as required by law. During today's call, management will 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 2023 third quarter earnings release 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 are Mr. William Ding, Chief Executive Officer, and Mr. Charles Yan, Chief Financial Officer. I will now turn the call over to Charles, who will read the prepared remarks on behalf of William.
William Ding
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. The third 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 RMB 27.3 billion for the third quarter, up nearly 12% year-over-year, and our net income attributable to shareholders rose to RMB 7.8 billion, increasing by 17% year-over-year. Our time-honored Lexi franchises have maintained robust popularity. Notably, we brought players updates for the Fantasy Westward Journey saga in the third quarter with a brand new storyline and captivating activities, which once again breathed new life into the saga and drove year-over-year revenue growth for the 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 Stunk City Dynasty, have quickly climbed to the top of the iOS growth in charts after its release. Looking at our newest hit titles, Justice Mobile Game, launched just in June, impressively surpassed 50 million registered users in October, establishing itself as one of the largest MMOs in NetEase company history in terms of user-based 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, NetEase 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' first 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 two position on China's iOS grossing chart shortly after its release. 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 third quarter. Our new racing simulation game, Racing Master, consistently ranked amongst the top three 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-simulated mobile game, Racing Master has introduced an authentic racing experience into China's mainstream gaming sphere, with the plan for Racing Master's 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. We've broken new ground with Dunk City Dynasty, a street basketball game that provides various modes to deliver a casual basketball gameplay experience. Dunk City Dynasty quickly rose to the number two position on the iOS growth chart 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 Bank City Dynasty are important differentiators for our game. By integrating players authorized by the MBPA 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 Dunk City Dynasty underscores the significant demand in China for top-tier games in the casual game genre. Along with our rich R&D capabilities, we are leveraging the inroads we've already made across a broad section of genre verticals to fill these gaps in a market with new hit games that players love. Games we've introduced in recent years continue to resonate with players, demonstrating enduring popularity and long-term operating potential. Agipati, for example, continues to achieve remarkable milestones. In August, Agipati set new records by amassing over 100 million UGC maps and attracting 100 million MAUs. We have been committed to fostering and nurturing our UGC ecosystem, which is the cornerstone of Agipati's success. We enhanced our self-developed editor in the third quarter by introducing more advanced and interactive functions. We also added collaborative map crafting functionality that lets users create with friends online on a shared canvas. 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 third quarter, we launched Aggie Party in Southeast Asia, where it consistently secured dominating positions on Google Play download charts for multiple weeks, particularly in Indonesia and Thailand. These early overseas releases also gave us valuable feedback and insights that guide our efforts as we optimize the game for a global audience. We are also proud to announce that America's PlayPoint recently reached a remarkable milestone of 40 million users. Following the transition to a free-to-play mode in July, we also introduced new heroes to the game in the third 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, Whale Wings Meet infuses an immersive open world experience with an exciting historical backdrop that's relatively untouched in Chinese gaming. 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 both individually and in groups, with two gameplay options. Players can freely roam in the ancient Chinese landscape in single-player mode, enjoying a highly personalized combat experience. In multiplayer mode, players can work closely with friends to complete tasks, engaging in exciting and heartwarming social interactions. We will soon launch the second 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 the developer of China's first ACG hit title, NetEase has made ongoing investments in the animation genre, accumulating valuable industry expertise, and we hope to impress the ACG community once again. The promotional video release of our upcoming ACG title under development, set in the metropolitan-themed open-world genre, Project Moogan, 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 Zero, Once Human, She Diao, and Naraka Blade Point mobile game. On the global stage, our game development is progressing smoothly in Japan, North America, and Europe. This month, we are excited to welcome Fantastic Pixel Castle as our newest addition 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 founding teams are currently developing a top-tier MMO game codenamed 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 third quarter, Youdao achieved record high revenue of RMB 1.5 billion. growing 10% year-over-year, driven by the growth in learning services and online marketing. Additionally, as part of our continued efforts to improve profitability, our operating loss for Youdao narrowed by a significant 74% year-over-year to RMB 58 million. The solid growth in our learning services was due to our consistent ability to launch unique and high-quality courses. Notably, in the third quarter, our coding courses introduced a specialized program aimed at preparing students for the CSP Informatics Competition, one of the most popular competitive programming events in China. Our program features all-encompassing services that include learning, contest 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. Yeodao's online marketing services have consistently grown at an impressive rate of approximately 100% for the second consecutive quarter. 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 third quarter as we strategically optimized our channel mix by reducing sales through less cost-effective channels. Although this may have a temporary impact on Yodao's revenue, We believe it will lay a solid foundation for sustained long-term growth and enhance Yodao's profitability potential over the long run. Our focus on technological innovation remains our driving force. In addition to Yodao's tech-boosted performance, we upgraded AI Box on Yodao translation products in the third quarter which enables more accurate and natural translation across various types of documents. With the support of our machine-generated functions, third-quarter revenue from subscription fees for translation increased by over 160% year-over-year. Furthermore, following the August introduction of our digital human language coach, High Echo, through Yodao 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 and introduce more products that genuinely meet our users' needs by harnessing our expertise in machine learning technology. Next, turning on to NetEase Cloud Music. In the third quarter of 2023, Cloud Music continues to navigate quality development across our core music-centric ecosystem while further extending the robust monetization momentum in the core online music sphere and improving overall profitability. Total online music MAUs remained largely steady, staying above 200 million in the third quarter. Total revenues for the quarter were RMB 2 billion, on par with 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 third 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 maintained steady margin improvement for the period. we are constantly expanding our music library to provide a comprehensive selection of music for our diverse audience base. During the third quarter, we broadened our extensive music collection by adding songs from popular Chinese pop artists like Karen Mock, Zheng Jun, and Zhang Jie. In addition, we were delighted to release albums by pop stars including Jam, Key and Gee, and Shen Yichen. 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 served 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 roots and distinctive styles in different areas, including programs like Localized Sound and Project Stone Season 5 to honor and promote more diverse artists. At the same time, We hosted offline 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. Building on our iconic comments section, Our common square has emerged as a vibrant gathering place for users to express and find connections with one another. Moving on to Yanshan. In the third quarter, 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. that 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. 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 positions on multiple best-selling charts on several e-commerce platforms. In summary, innovation is at the core of all of our businesses, 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 Yanshan, 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, our partners, our team members, and our stakeholders. This concludes William's comments. 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 third quarter were RMB 27.3 billion, or US dollars 3.7 billion, representing an increase of approximately 12% year over year. Total net revenues from our games and value added services were RMB 21.8 billion, up 16% year over year. 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 operation. Yeodao's net revenues were RMB 1.5 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 billion, 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 third quarter at RMB 2 billion. Our total gross profit margin continues to grow, exceeding 62% in the third quarter, compared with 56% in the third quarter of 2022. Looking at our third quarter 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 third 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 third quarter of last year. The increase was primarily the result of margin improvement in Yanshan and some of our innovative businesses. Total operating expenses for the third quarter were RMB 9.4 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 were 13% in the third quarter, compared with 15.4% for the same period of last year. This reflects our ongoing efforts to consistently enhancing marketing efficiency. Our R&D expenses as a percentage of total net revenues also remain stable quarter over quarter at 16%. As always, we are committed to ongoing investments in content creation and product development. We are also seeing leverage in our R&D investments longer term. Our GNN 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 RMB 1.5 billion for the third quarter of 2023, versus RMB 2.8 billion in previous quarter. The decrease was mainly due to the exchange rate of the U.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 third quarter. As a reminder, the effective tax rate is presented on an accrual basis. and the tax credits defer for each of our entities at different time periods, depending on applicable policies and our operations. Our non-GAAP net income from continuing operations attributable to our shareholders for the third quarter totaled RMB $8.6 billion, or US dollar $1.2 billion. Non-GAAP basic earnings from continuing operation per ADS for the quarter was US dollar 1.84 or US dollar 0.37 per share. Additionally, our cash position remains robust with net cash of approximately RMB 104.4 billion as of September end compared with 95.6 billion RMB 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 US$0.099 per share or US$0.0495 per ADS. Lastly, under our current US$5 billion share repurchase program starting in mid-January this year, we had repurchased approximately 7 million ADS as of September 30, 2023, for a total cost of approximately US dollar $588 million. Thank you for your attention. We would like now to open the call to your questions.
Operator
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up your handset to ask your question. 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 one at a time. If you wish to have a follow-up question, please rejoin the queue. Our first question comes from Richie Sun with HSBC. Please go ahead.
spk11
Good evening. Thank you for accepting my question. Congratulations to the company for its strong performance in the new game. I would like to ask the management team's opinion on the competition pattern of the party games. Do you think the winners can still be two players? We see that the solo party has a strong user group and the ability of the user to generate content UGC. Considering the competition brought by other competitors, which measures will Wang Yi take to maintain the leading position? 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 it have two players? And we noticed that AG Party has strong user base and UGC content already. Given that there are more potential competition from other platforms, what would NetEase further do to sustain the leadership? Thank you.
Wang Yi
Yeah, just do a translation for William.
Margaret Shi
So we think it's absolutely normal to have a competition. So from NetEase's 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.
Thomas Chong
Next question, please.
Operator
Our next question comes from Sue Quinn-Jane with CICC. Please go ahead.
Sue Quinn - Jane
My question is about the flagship games. Can management share more details with us on how do the flagship games, such as Fantastic Westworld Journey Series, maintain their strong authority, and what is the glass ceiling trend of these games? Thank you.
Wang Yi
I would like to return to the topic of the game. First, you need to be innovative. Second, you need to provide high-quality games Thank you.
Margaret Shi
So I 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 a long-term goal is the key. Thank you. Next question, please.
Operator
Our next question comes from Felix Liu with UBS. Please go ahead.
Felix Liu
谢谢管理层接受我的提问 也恭喜我们三季度非常好的业绩 我想问一下我们公司这个Pipeline的情况 首先恭喜我们近期获得了射雕的版号 在我们已经有版号的几款新游戏里 射雕燕云十六生和零号任务 Let me translate myself. Thank you, Benjamin, for taking my question and congratulations on the strong third quarter results. My question is on the pipeline. Among the three games that already have Banhao, including She Diao, Where Wind Meets, and Project Zero, how's the R&D progress for these games and when do you think these games can come to market? And for the other games that are still waiting for Banhao, such as Naraka Mobile and Project Mugen. Does management have any color on their R&D progress? Thank you.
Wang Yi
We will provide services to users only when the quality is guaranteed. So we are still seriously preparing for the last online game. We will be available before the second quarter of next year. We will be available before the second quarter of next year. Thank you.
Margaret Shi
So for each of our games, it's always after very careful adjustments, moderation, before we are ready to release them to the market. So games such as She Diao, Ling Hao Ren Wu, we are still in the final stage of preparation, and hopefully we'll get them released to the market no later than the second quarter of next year. Thank you. Next question, please.
Operator
Our next question comes from Thomas Chong with Jefferies.
Thomas Chong
Please go ahead.
spk10
Good evening. Thank you, Manager Chong, for introducing my question. My question is about our overseas business. Thanks management for taking my questions. My question is about our overseas strategies. Given that we have demonstrated various good sets of results in the domestic market, the Belarus solid pipeline, how should we think about our overseas expansion in the coming years, as well as our investment strategies. Thank you.
Margaret Shi
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, share the same passion for games as we do, and continue to invest in good teams to produce and create great content for users all around the globe. Thank you.
Thomas Chong
Next question, please.
Operator
Our next question comes from Lincoln Kong with Goldman Sachs. Please go ahead.
spk13
Thank you for your question. Congratulations on the company's strong profit performance in the third quarter. My question is, this year, whether it is a single-seater or a reverse-seater, we have seen a lot of different user skills and living standards compared to traditional long-term games. So in the future, the development of online games, especially next year's Shadow of the Galaxy and Shadow of the Galaxy, do you think there will be more new games and similar experiences? Can we look forward to the next success of Shadow of the Galaxy? So, thank you, Mitchell, for taking my question. So, we have seen this year a very successful title from AccuPotty and Justice Mobile, which is a bit different from traditional legacy game, have a very big user base and a DAU. So, when we think about the future upcoming launching games, especially for next year, where WinMins and Shodell, should we expect some of the similar type of features and anything we can sort of recover from the past success? When should we expect the next success of Justice Mobile?
Wang Yi
WMU's game products are definitely a very important direction for us in the future. We will continue to summarize We will continue to launch more new products in this direction. At the same time, I would like to emphasize that we will also create more high-quality hammer game products to meet the needs of players with the same interests. For example, the basketball and racing cars we launched this year are all very good, which means that we have the ability to make breakthroughs in different hammer games. NetEase has the ability to make very large DAO products, Thank you. Let me do a translation.
Margaret Shi
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 types of users. 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 NetEase we have teams who specialize in large DAU games and our teams that focus on a particular niche. So we have various different teams within NetEase and we encourage them to apply their unique edges and unique experience. Thank you. Next question please.
Operator
Our next question comes from Richie Sun with HSBC. Please go ahead.
spk11
谢谢管理层在接受我的提问。 全明星街球派对在iOS的销售榜表现出色, 而没有在安卓的应用商店上线。 虽然说安卓的平台可能有更高的渠道成本, 但潜在的也可以吸引更多用户延长游戏的生命周期。 So the Dunk 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 similar launch strategy in the future? Thank you.
Wang Yi
We think that such a single-user, home-friendly product, a general product, is still more suitable for So in the future, we will continue to maintain a cooperative relationship with players under appropriate conditions. For example, players like basketball need to be accurately matched to the player group with basketball hobbies. And we can also go through different other channels to find such a player group. So in this case, we are inclined to protect such users and create a long-term operation
Margaret Shi
Thank you. So for games with targeting towards a very massive user base, like party games, games targeted for all ages, for these type of games, the platforms, distribution platforms, are more effective in reaching out more users. But for games such as the basketball game, it requires a specific a specific community of game players. So we can find these players through various different platforms and channels. So in order for us to bring them onto 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, they can also download our game through our own website and TapTap and various other channels. Thank you.
Thomas Chong
Next question, please.
Operator
Our next question comes from Alex Poon with Morgan Stanley. Please go ahead.
Alex Poon
Hi, thank you for accepting my question.
spk12
My question is about AIGC. Can AIGC improve the efficiency of our new games? In the past, some big games needed three to six months to be updated. Will AIGC be faster in the future? Congratulations on a very strong quarter. My question is related to AIGC. Can AIGC for our future game updates, expansion packs, be much more frequent than the current three to six months, becoming on a monthly basis or even weekly basis? and such that the longevity and gaming users' stickiness monetization can get better.
Alex Poon
Thank you very much.
Wang Yi
First of all, I would like to emphasize that AIGC has been of great help in our research. We are planning to use AIGC for this kind of monetization. I believe that AIG will be able to do this faster. But although our production capacity has improved, we still have to look at the speed of development and the number of players. Yes, we agree that AI is extremely helpful in increasing and enhancing the R&D efficiency
Margaret Shi
particularly areas of game design, storyline design, mission design, and arts, etc. So almost every month we can see another upgrade in terms of R&D efficiency. But while the productivity is increasing, the pace of us pushing out expansion packs is not completely dependent on that. We need our users to enjoy our content fully. So the pace and frequency of the rolling out expansion packs is still very much dependent on the preference of our gamers. So we want to run each of our games for a long period of time. So with the increasing efficiency, we can provide higher quality content within the same amount of time frame. Thank you. Next question, please.
Alex Poon
Thank you. Thank you. I have a follow-up question.
spk12
I want to ask, will Dahua Wuxian and Yongjie Wujian's mobile phone be available in 2024? Thank you. My second question is about Naroka Daypoint Mobile and Project Move-In. Are they likely to be released in 2024?
Alex Poon
Thank you very much. Thank you.
Wang Yi
um Okay, so for Naraka PlayPoint mobile game,
Margaret Shi
As you know, the game has been under preparation for a while now, and I think we are fully prepared. The only thing we're waiting for is the license approval. So once we receive license approval, the product should be ready to go. In terms of projects, Mugen is one of the games that's highly anticipated by both us and the gaming community. So we want to keep surprise our players with great content. So we're going to continue to invest in more resources in 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 Yeh with Citigroup. Please go ahead.
Alicia Yeh
Hello. Thank you. 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 games that they were playing before and which non-NetEase games that these players used to play before Justice? Is the paying ratio and also the R pool for Justice is much higher than the other NetEase games. Thank you.
Wang Yi
OK.
Margaret Shi
So for Justice Mobile, based on our stats, about roughly a third of our users have 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 among many other users. In fact, this year, some of the other games that we launched such as the basketball game and the racing master, they also enjoyed a large proportion of gamers who've never played NetEase games before. So in terms of the paying ratio of monetization of Justice Mobile, for Justice Mobile, we opted for a more lighter monetization model. And because of that, our pool is relatively lower. with a much higher paying 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 they can enjoy their games. Thank you. Yeah, so 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 closing comments.
Margaret Shi
Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly of your Center for Natural Communications. Have a great day. Thank you.
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