NTES 网易

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the NetEase, Inc. Fourth Quarter 2013 Earnings Call. (Operator Instructions). This conference is being recorded today and at this time, I'd like to turn the conference over to Brandi Piacente. Please go ahead, ma'am.

Brandi Piacente

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 risk 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 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 20-F. The company does not undertake any obligation to update these forward-looking information, except as required by law. As a reminder this conference is being recorded. In addition a webcast replay of this conference call will be available on the NetEase corporate website at ir.com. I will now turn the conference call over to Mr. Onward Choi, acting Chief Financial Officer, who will read the prepared remarks on behalf of Mr. William Ding, Chief Executive Officer of NetEase.

Onward Choi

Thank you, Brandi. Before I begin, please note that for the purposes of this discussion, all percentages are based on renminbi. 2013 was another dynamic year of growth for NetEase. Throughout the year we made a number of advancements that diversify and expand our reach among China rising Internet community. Out dedication to quality and innovation continue to play a critical role in our success. During the year we introduced a host of outstanding new games, content and services to our loyal and growing community, while simultaneously strengthening our financial position. Out total revenue increased by 16.6% in 2013, led by a 14% in online game revenues and 28.8% growth in advertising services revenue. We completed the year with solid financial results with total fourth quarter revenues growing by 11.1% year-over-year and 2.8% quarter-over-quarter. During the year we introduced comprehensive upgrades for some of our most popular games, namely Fantasy Westward Journey, Westward Journey Online II and Ghost. We also launched several online games in new genres to further diversify our portfolio. In addition we've broadened our reach among China's rapidly growing mobile population by entering the mobile gaming and social networking markets. Taking a look at our online game portfolio, Kung Fu Master, New Westward Journey Online II, Heroes of Tang Dynasty II and Ghost II are delivered standout performances in 2013. Our games are known for their ability to withstand the test of time. Much of this success can be attributed to our advanced technology, unified research and development process and our ability to continually optimize our products and services. During the fourth quarter Fantasy Westward Journey II celebrated its 10th year anniversary with an exciting comprehensive upgrade of this game and the launch of the mobile version in July. Both the mobile and PC versions have demonstrated outstanding performances that are indicative of the resilience of our self-developed games. In the fourth quarter we also launched new expansion packs for Kung Fu Master, Heroes of Tang Dynasty II, Tianxia III and Legend of Fairy. One of our newest game additions is Legend of Tibet. This game’s performance has been in line with our expectations since its small scale commercial launch in November and we plan to cultivate additional users in 2014. During the fourth quarter we also launched Burst Sky. This new game is a western fantasy style sight scrolling shooter game. Hence we expect this game to be highly appealing to overseas players. We are currently looking for opportunities to launch Burst Sky in overseas market. At the same time we will continue to grow the user base with this game in Mainland China. Growth in China’s online gaming market continues to grow at a steady pace and our strategy to broaden and diversify our portfolio through new game introductions continues to attract new users to our self-developed games. Since the beginning of the year we have already introduced new expansion packs for Fantasy Westward Journey Ii, New Fly for Fun and New Westward Journey Online III. In additions we launched open beta testing in Mainland China of Blizzard Entertainment’s Hearthstone, Heroes Of Warcraft in January. And this free-to-play digital strategy card game has been highly popular with players. Players continue to show great enthusiasm for Tianxia III and Kung Fu Master. To capitalize on this popularity we plan to introduce new expansion packs for these two games in the first half of 2014. We are particularly excited about two of our newer games under development, Crisis 2015, NetEase Premier, first-person shooter game which we plan to release later this year and Revelation, our 3-D epic fantasy MMORPG which we expect to launch an initial small-group testing later this year. NetEase has long been a leader in China’s online game market and we are pleased to be augmenting the success of our online games with our mobile initiatives. Having entered the mobile gaming space in 2013 we now have three mobile games on the market. As the year progresses we expect to launch a number of new mobile games. In additions to new games we plan to introduce mobile versions of our existing and more popular online games so that our users can enjoy our top quality games through both PC and mobile platforms. Turning to our advertising services. We are supporting our advancement in advertising services with a strong pipeline of mobile applications that augments our comprehensive and growing mobile portfolio. Our current applications are doing well and as of December 31, 2013 we have more than 200 million installations of our leading mobile news applications. To further build on the success of our mobile initiatives, we are planning to introduce several new mobile applications later this year that further extend our mobile reach. The success of our mobile applications is creating an additional draw for our advertisers and for the fourth quarter our advertising services revenue increased by 19.9% quarter-over-quarter and 38% year-over-year primarily driven by the automobile, Internet services, financial services and real estate sectors. The introduction of YiChat has also been an exciting new endeavor for NetEase. YiChat marks our entry into the mobile networking space and we are making substantial inroads with users. This application continues to gain attraction in china’s social networking markets and we are revealing areas in which we can further improve this product for our users to make it even more attractive and fully optimize its capabilities. We are satisfied with the ongoing popularity of YiChat and we expect to continue to grow this user base as we add new features such as games and payment solutions. During the fourth quarter we made a number of enhancements to optimize the features of our popular mobile applications and email services with a positive response from our community. For example we integrated our email services with YiChat with [Yixin] that is taken to increase the quality and functionalities of our product and services. We are attracting more users, and as of December 31, 2013 we had approximately 620 million registered email users. Looking at the year ahead we are off to a solid start. We plan to continue to diversify and optimize our games and services across our PC and mobile offerings. This multi-platform approach enables us to reach a broader audience. As we introduce new online and mobile games and content across Mainland China we will simultaneously continue developing our social networking platform and further enhance our mobile applications portfolio. Our international endeavors are also at the forefronts of our growth. As we explore options in the overseas online game market we seek opportunities to expand our geographical footprints. Through the combination of these efforts we can continue to deliver the highest quality content and service to our dedicated community while demonstrating additional growth across our traditional and mobile Internet business lines. In addition we are pleased to announce that our Board of Directors has approved an annual cash dividend of US$1.4 per ADS. We are grateful for the support of our shareholders and our annual dividend is one of the way in which we can improve shareholders returns as we continue to increase the value of our company. Also the Board has approved a new US$100 million share repurchase program. This concludes earnings update. Now I will provide a review of our fourth quarter and fiscal year 2013 financial results. I will primarily focus on the discussions of margins and expense fluctuations, along with net profit. First, we will look at the fourth quarter. Total sales tax for the fourth quarters of 2013 were RMB 162.7 million or US$26.9 million compared to RMB 157.7 million and RMB 55.8 million for the preceding quarter and the fourth quarter of 2012, respectively. The year-over-year increase in sales tax was mainly due to a change in the tax rules in China, which resulted in our online game revenues gradually becoming subject to value-added tax, instead of business tax during 2013. This change in tax rules did not have a significant impact on gross profit from our online game services business segment, as the increase in value-added tax was substantially offset by a reduction in business taxes on intra-group revenues, which were previously recorded in cost of revenues. As a result the year-over-year improvement in gross profit margin was primarily attributable to lower net revenue due to the increased value-added tax in sales tax. Gross profit for the fourth quarter of 2013 was RMB 1.73 billion or USD 285.3 million compared to RMB 1.75 billion and RMB 1.61 billion for the preceding quarter and the fourth quarters of 2012, respectively. The year-over-year increase in gross profit was primarily attributable to increase the gross profit from both the online games and advertising businesses. The year-over-year increase in online game revenues was primarily driven by increased revenues from our self-developed games, primarily Fantasy Westward Journey II, New Westward Journey Online II, New Westward Journey Online III, Ghost II and Heroes of Tang Dynasty II which was partially offset by a decline in revenue from World of Warcraft, a game licensed from Blizzard Entertainment. The year-over-year increase in advertising services revenues was primarily due to a rise in demand, mainly from the automobile, Internet services and property sectors. The quarter-over-quarter decrease in gross profit was primarily attributable to decreased gross profit from online games which was partially offset by quarter-over-quarter increase in gross profit from advertising services which was mainly due to a rise in demand from the automobile, financial services and real estate sectors. The quarter-over-quarter decrease in gross profit from online games was primarily driven by a decline in revenues from our self-developed games due to seasonality, which was partially offset by an increase in revenues from games licensed from Blizzard Entertainment. Gross profit margin for the online game business for the fourth quarter of 2013 was 77.7% compared to 79.7% and 75.3% for the preceding quarter and the fourth quarter of 2012 respectively. The year-over-year increase in gross profit margin was mainly due to the changes in tax rules which I previously mentioned. The quarter-over-quarter decrease in gross profit margin was mainly due to increased revenue contribution from latest games which carry lower gross profit margin. Gross profit margins for the advertising services business for the fourth quarter of 2013 was 37.8% compared to 59.4% and 54.3% for the preceding quarter and the fourth quarters of 2012 respectively. Gross loss margins for the email, WVAS and others business for the fourth quarter of 2013 was 4% compared to gross profit margins of 4.1% and 13% for the preceding quarter and fourth quarter of 2012 respectively. The quarter-over-quarter decrease in gross profit margin was mainly due to a one-time revenue contributions from sales of higher margin game accessories in the preceding quarter. Total operating expenses for the fourth quarter of 2013 were RMB 648.3 million or US$107.1 million, compared to RMB 635.2 million and RMB 580.4 million for the preceding quarter and the fourth quarter of 2012 respectively. The year-over-year increase in operating expenses was mainly due to increased stock-related cost, resulting from an increase in the number of employees and average compensation as well as higher research and development investments. The quarter-over-quarter increase in operating expenses was mainly due to increased salary and marketing expenses for our advertising services business. This increase was partially offset by decreased general and administrative expenses caused by the reversal of bad debt provisions and decreased research and development incurred in the fourth quarter following the commercial launch of several new products. We recorded a net income tax charge of RMB 49.4 million or US$8.2 million for the fourth quarter of 2013, compared to RMB 206.5 million and RMB 184.2 million for the preceding quarter and the fourth quarters of 2012 respectively. The effective tax rate for the fourth quarter of 2013 was 3.8% compared to 16.5% and 15.4% for the preceding quarter and the fourth quarter of 2012 respectively. Our various principal subsidiaries renewed their qualification as High-end Technology Enterprises in 2011 and enjoy the preferential enterprise income tax rate of 15% from 2011 to 2013. In addition certain companies were approved as Key Software Enterprises in the fourth quarter of 2013 and are subject to a preferential tax rate of 10% for fiscal years 2013 and 2014, which have the effect of reducing the effective rate in fourth quarter of 2013. During the fourth quarter of 2013 we have reported a net foreign exchange loss of RMB 17.6 million or US$2.9 million, compared to a net foreign exchange gain of RMB 5.9 million and a net foreign exchange loss of RMB 5.8 million for the preceding quarter and the fourth quarter of 2012 respectively. The quarter-over-quarter and year-over-year changes in foreign exchange gains and losses were mainly due to the unrealized exchange gains or losses arising from our foreign currency denominated bank deposit and short term loan balances as of December 31, 2013 as the exchange rate of the U.S. dollars against the RMB fluctuated over the periods. Net profit for the fourth quarter of 2013 totaled RMB 1.2 billion or US$204.3 million, compared to RMB 1 billion for the preceding quarter and for the fourth quarter of 2012. We have reported basic and diluted earnings per ADS of US$1.57 each for the fourth quarter of 2013. Our basic and diluted earnings per ADS were US$1.33 each for the preceding quarter and we have reported basic and diluted earnings of ADS of US$1.27 each for the fourth quarter of 2012. Now an overview of the 2013 fiscal year financial results. Gross profit for fiscal year 2013 was RMB 6.7 billion or US$1.1 billion, compared to RMB 5.6 billion for the preceding fiscal year. The increase in gross profit for fiscal year 2013 was primarily driven by increased revenues from online game services and advertising services. The increase in online game services revenues in 2013 was primarily attributable to increased revenues from our self-developed such as Fantasy Westward Journey II, Kung Fu Master, New Westward Journey Online II, Heroes of Tang Dynasty II and Ghost II which was partially offset by decreased revenues from games licensed from Blizzard Entertainment. The increase in advertising services revenues in 2013 was due to a rise in demand mainly from the Internet services, automobile and food and beverage segment. Total operating expenses for fiscal year 2013 were RMB 2.4 billion or US$390.7 million compared to RMB1.9 billion for the preceding fiscal year. The increase in operating expenses in 2013 was primarily due to increased research and development expenses resulting from increased headcount and increased sales and marketing expenses as a result of marketing and promotional activities for our advertising services and online game services. For the full fiscal year we recorded a net income tax charge of RMB530.6 million or US$87.7 million, compared with RMB 691.6 million for the fiscal year of 2012. The effective tax rate was 10.7% for fiscal year 2013, compared to 16.2% for fiscal year 2012. The change in the effective tax rate was mainly due to the fact that certain subsidiaries were approved as Key Software Enterprises for fiscal years 2013 and 2014 and enjoy a preferential tax rate of 10% as I previously mentioned. Furthermore, we obtained such preferential tax treatment with respect to the fiscal years 2011 and 2012 in the first quarter of 2013 and recorded related tax benefit in 2013. Net profit for fiscal year 2013 totaled RMB 4.4 billion or US$734.1 million, compared to RMB 3.6 billion for the preceding fiscal year. For fiscal year 2013 we reported a net foreign exchange loss of RMB 15.3 million or US$2.5 million, compared to a net foreign exchange loss of RMB 0.6 million for the preceding fiscal year. The net foreign exchange loss in 2013 was mainly due to exchanged losses arising from our U.S. dollar denominated bank deposit and short term balances as the exchange rate of U.S. dollars against the RMB fluctuated over this period. We reported basic and diluted earnings per ADS of US$5.65 and US$5.64 for fiscal year 2013 respectively. Our basic and diluted earnings per ADS were US$4.58 and US$4.57 for the preceding year respectively. As of December 31, 2013 our total cash, bank deposit and short-term investment balances were RMB 19.5 or US$3.2 billion compared to RMB 16.3 billion as of December 31, 2012. Cash flow generated from operating activities was RMB 5.2 billion or US$864.9 million for the fiscal year 2013 compared to RMB 4.2 billion for the preceding fiscal year. Before we open the call to your questions I would like provide an update on the repurchase program and our cash dividend. Today our Board of Directors announced that our annual cash dividend for fiscal year 2013 would be in amount of US$0.0564 per ordinary shares which is equivalent to US$1.41 per ADS and is expected to be paid on March 7, 2014. As a reminder each ADS represents 25 ordinary shares. The dividend will be payable to shareholders of record as of February 26, 2014. The total cash payment associated with this dividend will be approximately US$183.3 million. Additionally prior to the November 20, 2013 expiration date of our share repurchase program which commenced in November 2012 we repurchased 2.02 million ADS for approximately US$83 million under this program. Our Board of Directors has approved a new share repurchase of up to US$100 million of our outstanding ADS for a period not to exceed 12 months. We plan to fund repurchases made under this program from our available working capital. Thank you for your attention. We would now like to open the call to your questions. Operator, please go ahead.

Operator

Thank you, sir. (Operator Instructions). Our first question is from the line of Dick Wei with Crédit Suisse. Please go ahead.

Dick Wei

Hi. Thank you for taking my questions. Two questions. First question is on some of the game performance, if you can comment on the recent trend for Q4 for the existing games such as Fantasy Westward Journey and [inaudible] World of Warcraft, and certain new games such as Legends of Tibet if you could. And second question is on the margin strength, operating margin strength, do you expect that to continue to come down due to the investment in advertising that [could lead] to a combined loss? Thank you.

William Ding

So, Dick. Regarding your first questions on the game performances of our various games in the fourth quarter of 2013, basically we are quite satisfied with their performances in the fourth quarter of 2013. And with regard to your second question on the potential trends on our operating margin trends so to call, I think basically we do feel that we would still try to achieve a relatively stable operating margin in the upcoming years. But in view of the fact that there would be more intense competitions in the market and more amounts that we will be spending in promoting our various products and services we do see that there would be some compressions to our existing operating margins a little bit.

Dick Wei

Okay. Maybe just a quick follow-up to that. Was it the World of Warcraft performance in Q4 so that gross margin comes down or was it more from others and mobile games? Thank you.

Brandi Piacente

Can you just repeat that one time you just have a slightly bad connection.

Dick Wei

Okay. Sure. So for the Q4 gross margin will be down sequentially was it because of the World of Warcraft performance – other games or was it for some of the other say mobile game investments? Thank you.

Onward Choi

I think basically the gross margins the fall would be because we have more cost being spent for our self-developing in this quarter. But at the same time you also see that we have also got an increase in the revenues contributors from our licensed games in this quarter.

Dick Wei

Got it. Thank you.

Operator

Thank you. Our next question is from the line of Alicia Yap with Barclays. Please go ahead.

Alicia Yap

Hi, good morning, William and Onward, thanks for taking my questions. My first question is online advertising. So since like your year-over-year sequential growth is very strong this quarter and the sequential improvement is actually much better than previous year. So I wanted to know what are some of the reasons for the strong growth and what are some of the main contribution areas and is there any -- how much of the mobile actually contribute for the total ad revenues? And also with that is that is the trend will continue in your view and what is your overall expectations for the advertising demand environment for 2014 given that we also have some popular sports event this year?

William Ding

So Alicia. Regarding your questions on the increased contributions from our advertising business on a sequential basis, basically we do view that in terms of the mobile contributions at this point of time it is still not very significant. But we do see that from our various mobile initiatives like the mobile news applications, our cloud music, our news reader and other applications still to go, they are having a very nice growing trend in millions of users. And at the moment we do see that the main contributions will be coming from our traditional portals and also the -- and things like that.

Alicia Yap

Just a follow-up on that, is that will this kind of like the 38% type of year-over-year growth momentum can continue into the 2014?

Onward Choi

This is what we are expecting, yes.

Alicia Yap

Sure. And then my second question quickly is that on the update on the mobile games. So I know that you will be launching a number of new mobile games this year. Is there any particular games that management would think will be more meaningful or potentially a good hit? And then will there be any games that will be come from the game studios that you have invested?

William Ding

Okay, so basically regard to various mobile game strategies we can take it back in 2011 when we first started on this part of the business market and we focused on two ways. First would be our self-development games and the other way would be investing on some outside studios or some teams that we consider that would be of good quality. Okay and other philosophy that we always focused on it the professions or the highest qualities of the team products that we happen to roll out into the market. Unlike other peers that would just roll numerous games to the market without pursuing a very good quality, we always try to make sure that the qualities of our products would be of the highest before we actually put them through to the market. And one more point that William we would like to supplement is that at the moment we have already licensed two more new games that are going to roll out to the China market and they are now in the process of being localizations. And at the same time going back to what we have done so far in 2013 by far we have got a number of a new mobile games in the markets like the pocket versions of our Fantasy Westward Journey and the other one would be our mini Westward Journey. And we also expected that progressively in 2014 we would got kind of more new games to roll out in market and one of those would be a touch games type mobile games that we are expecting.

Alicia Yap

Okay just quickly follow up on William's comments on the through overseas mobile games, so that is in additions to these Heartstone world class mobile versions that will be -- Blizzard will be launching. So this in addition to that you have two more overseas mobile games right?

William Ding

Yeah.

Alicia Yap

Okay thank you, Onward.

William Ding

And so what Williams would supplement is that currently for the Heartstone it in fact technically speaking is not a mobile game and what we have done is actually licensed two new games that would be categorized as the mobile games that are going to roll out to the markets soon.

Alicia Yap

Okay thank you, Onward, William.

Operator

Thank you. Our next question comes from the line of Jiong Shao with Macquarie. Please go ahead.

Jiong Shao

Good morning. Thank you for taking my questions. I have two questions for William if I may. The first question is on mobile games again. So most of your peers in both PC game and a mobile game developer industries are sort of launching their mobile game center or publisher business. I was just wondering what your sort of a longer term whether or not Netease is going to sort of heading towards that version as well. And related to that many of our developers now are spending quite a bit of money marketing their new wares, new games where we are or what are we thinking about potentially spending how we control the spending to promote these games that’s my first long question sorry?

William Ding

So basically with regards to your first question about our view on how we again cooperate with the various developers externally, basically we would hold an open-ended discussion and we always welcome to some developments and projects and kind of cooperation’s with other studios and things like that. Then with regard to our own studios we are quite [indifferent to] the needs to watch our external counterparts kind of doing because we have our own platforms and our own media and our own marketing channels and things like that and basically our potential users that need to spend on procuring our various products would be much lower and we do see that our studios got this own competitive act in this respect.

Jiong Shao

Okay great, thanks and my second question is among your few, quite a few interesting mobile properties we noticed that you have a lottery app as well. Could you comment a bit on sort of your thoughts and your outlook for this particular segment and any kind of regulatory risk in your view, thank you?

William Ding

So basically with regard to our strategies in certain of our mobile businesses, basically we have very extensive and comprehensive assessment before we are doing so. At the moment we have quite number of applications already in place on the mobile area and we have our own, in the news category we have our mobile implications and for the two utilities category we have our [cloud dictionaries] and also the cloud nodes and for the information categories we have our cloud music and also the news reader, and in terms of our social category we have our YiChat and also another savings tool called the [Quadrant]. And basically we have our own logic behind in booting our various category and with regard to our business on the lottery tickets sales, the mobile applications regarding the lottery ticket sales, basically, we have a very good payment platforms and also experiences being offered to our users. And before, one month ago, we have got a user that has won RMB 200 million prize, which is the highest ever in this area of selling the lottery tickets on behalf of the service provider. And one week ago, we have also got another user that has won another price of RMB 5.32 million as well and we do this kind of selling on behalf our business model is very good to our potential users and we do see that the application offer a very good usage businesses to them.

Jiong Shao

RMB 200 million jackpot, I guess I better make a bet right now. Thank you, William, Onward.

Onward Choi

Thank you.

Operator

Thank you. Our next question from the line of Tian Hou with T.H. Capital. Please go ahead.

Tian Hou - T.H. Capital Research

Good morning, everyone. I have a question related to your overseas efforts. So I wonder what are some games that you plan to roll out in the overseas market and how -- what the potential revenue contribution could be in 2014? So, that's a first question.

William Ding

[Non English]

Tian Hou - T.H. Capital Research

Okay.

Brandi Piacente

One second Tian. First for the translation.

William Ding

Okay. So with regard to Tian's first question about how our overseas business expansion plan would be for our own self developing, basically at the moment we have got two game one would be the Ghost that is already in operation in Vietnam and the other one would be the Heroes of Three Kingdoms which is a mobile type game that we are working on to operate in Vietnam and also Thailand. We are expecting that those games would be hopefully be launched in the first quarter of 2014. And with regard to your second question about the potential revenue contribution from those overseas games, at the moment we do not expect that their contribution would be very significant.

Tian Hou - T.H. Capital Research

Thank you. And the second question regarding your 2014 game pipeline. So I wonder how many games in the MMORPG area are you going to plan to launch and also what game and also how many mobile game in total are you planning to launch?

William Ding

Okay. So basically with regard to Tian's second question about some of these game pipeline in 2014 for the MMORPG we will do plan to have about four new games coming out in the market in 2014 and no new web games will be coming out and for mobile games be somewhere around five or more. Okay. So if you supplement on what William has commented earlier, the previous number does not include our license game. If we also take the license game into account we do expect that the total number of new games that we are going to roll out in the market for MMORPG will something around five to six mobile games by taking into account the latest mobile games as well, this will be somewhere more than 10.

Tian Hou - T.H. Capital Research

That's very helpful. So the last question is related to the Yixin. So, I wonder how many registered users you have now and is that possible to also give us an active user either daily or monthly.

William Ding

Okay. Because of the unique features of our Yixin product because all the users would possess the real identities. So we do not have any numbers to disclose for the moment but we will have more update as we come to a more appropriate timing. Okay. So basically for using Yixin or YiC hat this is a very important strategic product and we will continue our commitment to invest in this area in order to make this to be a very successful flagship product in the social networking area and on the mobile area.

Tian Hou - T.H. Capital Research

Thank you, William and thank you Onward. That’s all my questions.

Onward Choi

Okay.

Operator

Thank you. Your next question comes from the line of Thomas Chong with Bank of China International. Please go ahead.

Thomas Chong

Hi, good morning. I have two questions. My first question is relating to your overseas strategy. Can management comments about in terms of the user behavior and the preferences how is it different from the China market? And my second question is regarding the first quarter games performance. Given right now we are in the middle of the quarter can management comment about the performance of your sales developed in titles as well as more upfront cost? Thanks.

William Ding

Basically with regard to the questions about, on the user behavior of the users the overseas versus those in China, I think basically first of all NetEase has been a very good company that it is capable and experienced on self-developed games and by going outside overseas expansions is what we have aimed and our goal going forward. And through the co-operations with some overseas counterparts we will be able to learn some new experiences as well and after over 16 years of business operations in the market this is also one of the aim that we are always tracking for. And we are also through the overseas expansion we do also look forward to further improve the qualities of our products so that this can give a balanced experiences to our users. And to quote for one examples on our overseas expansion in Vietnam by licensing our Ghost products there we do learn one thing that Haku versus the GDP we got somehow relationships there.

Thomas Chong

Thanks. And my second question relates to the first quarter performance for the self-developed games and mobile forecast given we are in the middle of the first quarter. Thanks.

William Ding

Basically we are still very confident and quite satisfied with all the various games whether they are the self-developed or licensed games so far in the first quarter of 2014.

Thomas Chong

Got it, thanks. Thanks, William, thanks, Onward.

Operator

Thank you. At this time I would like to turn the conference back to management for any closing remarks.

Brandi Piacente

Thank you everyone once again for joining us today. If you have further questions please feel free to contact Cassia Curran, NetEase's IR manager, based in Hangzhou or The Piacente Group, Investor Relations. Have a wonderful day.