2019-08-08 15:26Financial Data and Key Metrics Changes - The company reported a 15% increase in total net revenue year-over-year, totaling CNY 18.8 billion (approximately USD 2.7 billion) for Q2 2019 [22] - Net income grew by 46% year-over-year, with non-GAAP net income attributable to shareholders reaching CNY 4 billion (USD 531 million), representing a 34% increase year-over-year [26] - The overall gross margin was 43.3%, slightly down from 44.1% in the previous quarter and 44.5% year-over-year [24] Business Line Data and Key Metrics Changes - Net revenues from online game services were CNY 11.4 billion, down 4% quarter-over-quarter but up 14% year-over-year, with mobile games accounting for approximately 72% of this revenue [22] - E-commerce net revenue was CNY 5.2 billion, while advertising services generated CNY 582 million [23] - Innovative businesses and others saw net revenues of CNY 1.5 billion, up 18% quarter-over-quarter and 23% year-over-year, driven by Cloud Music, CC live streaming, and Youdao [23] Market Data and Key Metrics Changes - The overseas games revenue accounted for more than 10% of total games net revenue, with successful titles in Japan contributing to this growth [14] - The company launched several new titles in Japan, which topped the iOS downloads chart shortly after their launches [14] Company Strategy and Development Direction - The company aims to deepen collaboration with global premium game studios and expand its reach in North America and Europe [29] - There is a focus on joint R&D development to leverage competitive strengths and develop premium content for global gamers [29] - The company is also investing in a new video games studio in Montreal to enhance R&D capabilities in North America [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of China's online music industry and emphasized disciplined cost control [35] - The company is optimistic about the future of its innovative businesses, expecting continued growth and improved margins [44] - The management highlighted the importance of returning value to shareholders, with a dividend payout ratio of 30% approved for the quarter [27] Other Important Information - The company has launched a new community module called Cloud Village on its NetEase Cloud Music app, which has seen a 135% year-over-year increase in subscribers [18] - The company is actively working on expanding the Onmyoji IP with four new games in development [11] Q&A Session Summary Question: Overseas expansion strategy for games - Management highlighted the importance of collaboration with global studios and the goal of making popular games hits in Western markets [28][29] Question: Monetization strategy for Cloud Music - Management discussed user subscriptions, advertising, broadcasting, and community features as key monetization strategies [34] Question: Operating metrics for Cloud Music - Management noted strong growth in daily active users and monthly active users since the launch of the new module [37] Question: Use of Marvel IP - Management confirmed multiple games across different genres are in development with Marvel, leveraging its global popularity [39] Question: Cost control and gross profit margin - Management expressed confidence in maintaining positive gross profit margins for innovative businesses and e-commerce [44] Question: Dividend payout rationale - Management explained the shift to a 20% to 30% dividend payout range allows flexibility based on financial performance [56]