August 18 news, NetEase (NASDAQ: NTES), today announced second quarter ended June 30, 2016 unaudited financial results. Data show that the second quarter of 2016, NetEase net 8.953 billion yuan (1.347 billion US dollars), up 96.0%, growth of 13.1%; net profit of 2.721 billion yuan (409 million US dollars), up 91.0% MoM an increase of 10.6%. NetEase quarter net income and net consecutive record high.
After the earnings announcement, Netease CEO Ding Lei Cai Ann live and Chief Financial Officer, he attended the subsequent earnings conference call held to discuss results and highlights and to answer analysts' questions.
The following is a question and answer session analysts main content:
TH Capital analyst: My question is about China's recent live fire up the business, now looks live news in various fields, electricity providers, entertainment, music, etc. are very fire, I know Netease news client there are some live activities, there are some games broadcast class of business, then the NetEase live in areas no plans intend to seize this market?
Ding: do live industry people know, NetEase is a pioneer in this field, we started four years ago to do a live broadcast services. There are two Netease Live platform, the first one is with the game, broadcast platform gaming-related, called CC live inside the industry knows, broadcast live primarily focused aspects of CC competitive games and related content, which is on the "Dream Journey to the West "," Hearthstone legend "live far ahead in the industry, and has made nearly four years.
The second broadcast platform called & ldquo; & rdquo ;, Netease wave in the market, we launched the platform two years ago and a half, the other competitors know that & ldquo; Netease Popo & rdquo; exists, its location is mainly live show is singing, talent shows, etc., the domain name is Bobo.com. Mobile end we are also the first to do, whether or Netease Netease CC wave, we are very early on force in the mobile terminal, and income has been reflected in earnings inside.
We started early this year Netease news client news broadcast in the dissemination of information to mobile phone users through live the way, most notably this year Beijing rainstorm live, as well as urban management and law enforcement officials in Henan live, the court Nanjing chase & ldquo; old Lai & rdquo; live like.
So, we now have actually considered to have three live platform: game gaming live show and broadcast live news, we have accumulated a lot of experience in the broadcast field, but three live platform is profitable, although earnings not separately listed, but the company attaches great importance to this aspect.
We are also exploring the future of innovation in the game live and live show, and will consider the contents of VR (virtual reality) live, which is why we will consider in the early NextVR US companies to invest and cooperate reasons. We can imagine that the next generation of broadcast live not only flat, it should be immersive, VR live multi-dimensional.
In addition, we are also very optimistic about the important areas of education, we can consider if education is to use VR to do, then what will be our open class Netease and Netease cloud classroom in the country has made remarkable achievements, we also in developing the next generation of VR Internet classroom, so that we can bring the glasses to get immersive classroom experience at home.
Bank of America - Merrill Lynch analyst: Can you tell us about the page in VR (virtual reality) and AR (Augmented Reality) technology development potential? Do you think VR and AR just enhancements to existing gaming market experience of it? Or that these techniques can attract a new game user groups thus opening a new market?
Second, the company's second-quarter mobile gaming revenue contribution to the overall game is how much?
Ding: NetEase attaches great importance to the development of AR and VR technology, we invested US NextVR in the last quarter, which is designed to do a live broadcast of the company. In VR aspect, Netease is very hard, now we have been trying to try how VR is applied to the best state in a different game. We also note that the game Pokemon Go popular in Western markets, are concerned about the development of such innovation model is not sustainable.
Overall, in the field of VR and AR, NetEase will not lag behind, as in the past five years, NetEase mobile gaming has been in the market ahead, because from 2009 onwards we do adequate preparation and exploration and innovation in the next time, have the results today. In the field of AR and VR, Netease from earlier than anyone else, investment funds are also more than any other company.
We are also Google VR platform Daydream currently the only Chinese partner, and we have the world's best hardware company VR, VR platform companies, including VR content companies have very close and even cooperation strategy.
Nomura Securities analyst: From the gamer's perspective, when they can play on NetEase's first VR or AR game?
Ding: internal AR and VR games have been, are being tested, but a little VR game will be late, not because we have not developed well, but because we see the VR equipment currently on the market is still quite small Therefore, we hope that the mature markets and then go to announce such products, AR game is basically the same way, but it might be slightly faster.
Nomura Securities analyst: If you have now carried out an internal test, then AR game is out next year you can publish?
Ding Lei: do not wait until next year.
Nomura Securities analyst: Can you tell us about the latest developments Netease operational aspects of cross-border electricity supplier? Netease and electricity suppliers own brand & ldquo; Netease Picks & rdquo; situation? Netease second-quarter cross-border electricity supplier and & ldquo; Netease Picks & rdquo; the turnover and growth rate is the number? Regulators have delayed implementation of the new policy of cross-border electricity supplier a year, then your strategy has not changed? Is intended to postpone the investment policy in an uncertain situation will continue to dedicate go? & Ldquo; Netease Picks & rdquo; the current gross margin is how much business? Future to achieve the highest gross profit margin will be about how much?
Cai Ann live: our electricity supplier to business turnover and growth rate are very satisfied with the present situation basically in line with our expectations. As for regulatory policy uncertainty, we have stressed before, it does not cause too much impact on the NetEase electricity supplier, electricity supplier business is Netease in the future will continue to develop the business. NetEase carefully selected business, gross margin from our current situation to see, this is a worthwhile pursuit and development of the business, but now we have no more information to share.
Citigroup analyst: My question is about "watch pioneer", can you tell us about the latest situation of the game user participation and user stickiness? Blizzard said recently introduced a lot of new content and functionality, will encourage more users to buy something, the players currently in the Chinese market, you observed this effect? The game is expected on your income is how much?
Second, from an accounting point of view, "Watch pioneer" in sales points will be amortized over the years?
Ding: "Watch pioneer" game in China market was a great success, thanks Blizzard has been developed so that players surprise works in the PC market, and thanks to the trust of Blizzard Netease long term.
In the Chinese market, from May 24, "Watch Vanguard" PC game made a record sales performance, customer satisfaction is very high for this product. NetEase and Blizzard's principle of service, attitude of the users are the same, that is to consider how the world through innovation to meet the different users of the Games experience.
You can share an example of Internet cafes in Korea and the Korean market, "Watch Vanguard" has been ranked in the first game, and we hope that one day "Watch pioneer" can also become Chinese PC gaming market leader, able to China provide more and better user experience. In the next piece of information, we will increase the local content of more characteristics of Chinese players through innovation and exploration.
Not only is "watch pioneer", "World of Warcraft" the new piece of information released on September 1, will allow players to add a lot of surprises content.
Macquarie Securities analyst: Can you tell us about Minecraft (Chinese name & ldquo; my world & rdquo;) best-case scenario of the game? You can tell us about the game's release time and profit model?
Ding: this year we reached a strategic cooperation with Microsoft, the Minecraft game to China, from the current situation we do market research point of view, the PC and mobile terminals combined, it is China's first game.
The game overseas business model is to sell clients in China, we and Microsoft reached a consensus that the client will be free to download, we will pass on the game content innovation to find new business models in this regard we are and Microsoft conducted on new business models to improve the technical aspects, and soon we will launch with local characteristics, innovative content Minecraft game, bring a different experience for Chinese players. We believe that NetEase will be fully capable of the last 16 years of accumulated experience to use in game development and operation of this works, provide users with more innovative content.
Credit Suisse analyst: the second quarter despite the lower contribution margin mobile games accounted reduced, but your overall game business profit margin declined slightly or sequential basis, which is why?
Cai Ann live: You're right, our online game business declined slightly, mainly to increase revenue because from "watch pioneer" and "Hearthstone legend" and other agents of the game, and the agent game margins and proprietary game phase relatively low.
JP Morgan analyst: Although the "watch pioneer" very successful launch, but if my calculations are correct, then your PC games whether or ring than an income have declined, can you tell us about the life cycle of Netease PC Games and the next few quarters earnings outlook?
Ding: in the past three months, "Rye pioneer" release was a huge success, as the PC platform game, its vitality, and not die, innovative game content on the PC side can still radiate vitality, Netease will It will soon launch another traditional Chinese cultural characteristics of PC games that we mentioned in the earnings of "war."
So, from a development point of view, do not simply think that PC gaming is going downhill, moving end game is growing, I think there is only a good balance this experience of game terminal, we can succeed in this market. While the mobile device is a hand, and users have many fragments of time, but some products are not suitable for mobile end experience, such as online players too often, network bandwidth will be more powerful, more powerful mobile phones also have fever, these problems We need to spend time to gradually resolve.
In addition to correct, second-quarter revenue growth in our end of the tour is not declining.
Bank of China Analyst: Recently Netease cloud music in the capital market for a new round of financing, what the company is positioning this business? Which will be more large-scale investment?
Ding: NetEase cloud music three years ago by the R & D team in Hangzhou released mobile applications, this product in three years and achieved great success, a lot of music lovers are like this product. I think this product really help users to solve a problem that we need to listen intelligently tells the user what kind of music, but the music is recommended that they really like.
Currently we are looking for some sense of strategic partnership. I think not just listen to music on headphones, listen to music only, which contains many interactive online resources, we can, and a lot of television stations, record companies and theaters to collaborate online and offline, the ultimate goal is to work with these partnership instrument to provide users a better experience online + offline.
I believe that this product will be in the near future for all people who love music will surprise product, I can tell you that hardly anyone can go beyond our products. This process requires a lot of innovation and artisan spirit. The biggest difference Netease cloud music products and other products on the market that other products to meet the user's function is to hear what song when provided to them, and Netease cloud music in user does not know what song to listen to when they should tell listen to what.