第十一届GACA（金口奖）获奖名单公布，FGIS启动中
NetEase, Inc. (NASDAQ:NTES) Q4 2024 Earnings Conference Call February 20, 2025 7:00 AM ET
Brandi Piacente - Investor Relations
Bill Pang - Vice President, Corporate Development
William Ding - Chief Executive Officer
Conference Call Participants
Yang Liu - Morgan Stanley
Lincoln Kong - Goldman Sachs
Good day and welcome to the NetEase 2024 Fourth Quarter and Fiscal Year 2024 Earnings Conference Call. Today's conference is being recorded.
At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead.
Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the Safe Harbor from my ability 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 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 20-F and in announcements and filings on the website of the 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 certain comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the fourth quarter 2024 and 2024 fiscal year 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 NetEase's corporate website at ir.netease.com.
Joining us today on the call from NetEase's senior management are Mr. William Ding, Chief Executive Officer; Mr. Bill Pang, the Vice President of Corporate Development.
I will now turn the call over to Bill, who will read the prepared remarks on William's behalf.
Thank you, Brandi and thank you everyone for participating in today's call. Before we begin, I will remind everyone that all percentages are based on RMB. At NetEase, we are dedicated to innovation and strive for continuous breakthroughs across our businesses.
While 2023 was a year of expanding our portfolio across various game genres, 2024 was about pushing boundaries with both innovation and accelerating our brand awareness in the global market. These strategic steps reinforce our foundation for sustainable long-term growth.
By the end of year, our total net revenue reached RMB105.3 billion, with RMB83.6 billion from games and related value ad services, both marking new record highs. Notably, this marks the 22nd consecutive year of revenue growth from our online games operations.
The successful launch of new blocks of titles in the fourth quarter, advanced each of our growth drivers, innovation, diversification, and globalization. By redefining gameplay and setting new industry standards for premium quality, we have created tremendous player enthusiasm. Our games captured attention across genres, within and beyond the traditional gaming community and on both domestic and global scale.
Let's start today by reviewing our new games performance, then we'll take a look at our broader portfolio and pipeline. Marvel Rivals, our fast-paced Superhero shooting game spark massive excitement across global markets following its launch. It claimed the number one spot on Steam's top seller chart within four hours of its release, attracting over 10 million players in its first 72 hours and 20 million players in the first two phases. With over 40 million players accumulated so far. Marvel Rivals is redefining the Hero shooter experience through its unique lifestyle, innovative combat system and ever-changing battlefields.
Its key team of ability and a dynamic layer of immersive interactions among players, while recreating iconic Marvel moments with our fresh take that adds a new dimension to the Marvel universe.
During the Season 1 update, Marvel Rivals once again topped Steam's top seller and most-played charts. Our collaboration with Marvel Comics also bought Marvel Rivals to live for comic fans through our Infinity comic series of Marvel Unlimited. The synergy not only amplified the game's momentum but also bridge the world of gaming and other media forms, captivating audience beyond the gaming community and solidifying Marvel Rivals as a corporate phenomenon.
With more superheroes and exciting events on the horizon, Marvel Rivals will continue to evolve. We are thrilled to be even more new experiences to the game that keeps players engage and inspire.
At the end of December, we launched our highly anticipated open-world action adventure RPG, Where Winds Meet. Within four days of its PC launch in China, the game has amounted 3 million downloads and topped the iOS download chart for around two weeks following its mobile launch. The booming mobile version drove total players across PC and mobile to over 10 million within a week and over 50 million after two weeks.
Rooted in the rich crafted world with deep historical backdrop, Where Winds Meet innovatively introduced the Chinese martial arts in the open-world exploration experience. On top of that, we pioneered a mode that caters to both single player and multiplayer preferences, which reinterpret our [indiscernible] story in a brand-new way. Players can immerse themselves in the interline conflict of Asian cities like [indiscernible], witness characters contrasting fate during historical changes and develop social network with other people along the journey.
Building on the single player experience, the game seamlessly integrates challenges that encourage social exchange, while continuously refining the experiences, we aim to create a compelling blend of solar and multiple elements, offering players a diverse way to experience the world with community high price, we expect the audience of Where Winds Meet to continue expand over time with the game becoming another flagship evergreen title.
Our plans to build on the game's initial success are underway. We are currently working to bring Where Winds Meet to console platforms and introduce the Saga to players in more regions.
In addition to our new game launches, the return of Blizzard game to China has been highly successful, with a strong momentum throughout the fourth quarter. The return of or World of Warcraft has consistently spared tremendous enthusiasm from the community, supported by our diverse localized events that are driving the franchise to new highs.
Shortly after Hearthstone's return, we quickly reorganized the highly anticipated Hearthstone go series in China. The events set new records, drawing in over 10,000 fans in person and more than 10 million players gather to watch online. Just yesterday, Overwatch 2 made its return to China, reigniting player excitement as present portfolio gradually returns to Chinese markets. We are further strengthening our partnership with Blizzard, exploring localization opportunities and bring more exciting content for China's robust game community.
Whether developing or operating title, we are always committed to innovation and operational excellence, we apply this across our portfolio and continue to see the results of our dedication reflected in our new and legacy franchises. With operations across decades, our beloved legacy franchises continue to set new records and advance fans serving players with enduring popularity.
Turning to Westward Journey, continues to bring players fresh experiences through well-timed events and new content in the fourth quarter. The firewall expansion pack featuring the iconic transformation abilities of Monty King Sifu introduced all new skills and some on this.
Meanwhile, the swing festival event plan turn around the year of snake, brought the community of vibrant new year atmosphere. For Fantasy Westward Journey in mobile, we continue to infuse new content into the game, which gained heightened popularity throughout the year led to the record high revenue for 2024, nearly a decade after its launch.
Westward Journey Online II also achieve record high annual revenue, driven by enriched gameplay and activities, as well as refresh the gaming experience powered by new servers. Players flock to the in-game ceremony for account benefit [indiscernible] and explore new maps and missions set into driving Asian cities of [indiscernible].
Stepping into 2025. We also introduced our major new annual server update for Westward Journey Online mobile. We continue to updates with the sharing system. It generated a significant new community interest and further strengthens balance among players, while keeping long-term fans coming back for more.
Identity V is another testament to our long-term operational success with our established titles. After second consecutive new quarterly records in the first three quarters both in terms of player numbers and revenues, Identity V achieved record high revenue in 2024.
In the fourth quarter, we sustained intense player activity with our comprehensive operational strategy, which players love. For example, in November, we launched across branding campaign with Persona 5 Royal, introducing the beloved [indiscernible] of heart to our game. Fans appear in group for the crossover event driving Identity V to number two position on the iOS top revenue chart.
Naraka: Bladepoint franchise also continued to impressive with action-based comeback community. With the December update, Naraka: Bladepoint partnered with City product rep for special crossover on the [indiscernible], Wild Hunt introducing more beloved characters through new customs and in-game events. Most recently, our January collaboration with King of Fighters brought iconic TLF characters [indiscernible] into the game, bringing a high level of player interest. Naraka: Bladepoint Mobile has also been growing its player base since its launch in the third quarter and surpassed 50 million players in December.
For [indiscernible], we continue to nurture its dynamic GDC ecosystem. The community is highly connected to innovate supply and demand for content creation. The platform consistently and diverse game modes to build on its rich content offerings, allowing players to enjoy relaxing and hard warming moments with their buddies. So far, we have successfully introduced several popular game modes, including mobile, Asymmetrical Battle Arena, Werewolf, [indiscernible] each cultivated a large audience within the Eggy Party community.
Our innovative MMO Justice Mobile maintained its large and active player base in the fourth quarter. In late December, Justice Mobile hold a groundbreaking virtual concert for its cross-year celebration, emerging players in festivities and inviting them to participate in an attractive pace. The event created a truly unforgettable audiovisual experience by emerging cutting-edge technology with Asian art.
Beyond conventional concept, all players who join their in-game characters embarking on exposure journey through various immersive scenes. The concert ignited consider robust among players, attracting over 3 million concurrent viewers online. The robust community engagement and related since content updates per cloud-dated Mobile to number two on the list of top grossing chart shortly after the event. Since its launch in July, Once Human has cultivated a dedicated survival player fan base around the world, and we continue to build on this.
The new PVP TV scenario we introduced in the fourth quarter, sparked a player surge. The spike in total concurrent users drove Once Human to rank on Steam's top 10 Most played chart and to number three on Steam's Top Sellers chart. Anticipation on the much awaited mobile version is also mounting. We now have over 10 million pre-registrations as we finalize the game's mobile version with global launch in this April.
With the addition of a mobile version, we expect to attract even more fans worldwide. Adding to our ever expanding and increasing diverse portfolio, we have a great lineup of new titles in our pipeline with several key games planned to hit key markets in the coming months.
The global launch for FragPunk, our fast paced five versus five tactical shooter game is set to begin on March 6th. We expect the game to become a dynamic force in the shooting experiences for fans worldwide. Featuring an innovative free car system with shifting combat dynamics and a colorful punk art style through meticulous game development. FragPunk is set to disrupt the traditional shooting experience with all new rule breaking gameplay that we think players will love.
Next up is Destiny: Rising, which successfully concluded its first closed beta test in December. The community's broad enthusiasm one Destiny: Rising Pocket Gamers annual most anticipated game award. Using the valuable insight we gained from early tests in target regions, we are currently working to make the game even better. Our goal is to bring this fresh shooting adventure set in an alternative Destiny timeline to players around the globe.
Lastly, I'd like to highlight our superhero team based tactical RPG, MARVEL Mystic Mayhem. It just finished closed beta cross-country testing in January with a unique art style, rich cast of characters, and varied and rewarding gameplay that thrilled the community. Sweeping positive player feedback gives us confidence that players will love Mystic Mayhem experience as they fight with beloved Marvel characters across various bizarre dreamlands.
As many of you know, we have been steadily expanding into new game categories over recent years. Diversifying our portfolio has allowed us to carve a path beyond the traditional MMO game that defined our early journey in the gaming industry. Along the way, we have achieved significant milestones and gained invaluable insights into genres that were once new to us.
Each successful vertical we enter reinforces our ability to craft impactful games across diverse categories. Moreover, our diversified game portfolio has strengthened our global presence, enabled our games to reach and resonate with audience worldwide.
As we expand our game offerings, upholding superior quality and stay agile in our operational iterations, we're confident that we can continue captivating global audience with new innovative titles and grow our international reach.
Now let's move to Youdao. With its continued focus on technology-driven innovation and profitability enhancement, Youdao's operating profit increased by over 10% year-over-year in the fourth quarter, and it achieved its first-ever annual operating profit in 2024.
In the fourth quarter, Learning Services revenue declined as we further focused on long-term growth, balancing revenue and profitability. By prioritizing high-demand courses, we achieved healthy development and reinforced profitability. Notably, Youdao flagship course, featuring tiered learning videos and AI-powered support, continue to thrive. With strong engagement and loyalty, it achieved a retention rate of over 70% in the fourth quarter.
Recently, we launched Confucius-o1, China's leading step-by-step reasoning model for education. As a 14B lightweight model, it supports deployment on consumer-grade GPUs and delivers detailed problem-solving processes. With its high accuracy and robust reasoning capabilities, Confucius-o1 has been seamlessly integrated into our AI learning assistant, Mr. P AI Tutor, earning excellent user feedback and surpassing 100 million users.
Youdao's online marketing services has also continued to advance. Domestic performance-based advertising reached record-breaking revenue, led by gaming and the AI tool sector. Internationally, we recently established an official partnership with Google, laying a solid foundation for further expansion. We have also sharpened our technology edge in overseas KOL marketing. By developing an evaluation model, we can precisely match KOL selection with specific demands, driving high conversion rates.
Our smart devices segment maintains healthy growth. Our flagship Youdao Dictionary Pen solidified its leading position in the W11 online shopping festival, dominating the top position in this category on JD and TMOS sales chart for five consecutive years.
Building on this success, we launched Youdao Dictionary Pen A7 Pro in January, featuring higher performance to further fuel growth ongoing.
Turning to NetEase Cloud Music, NetEase Cloud Music continue to drive quality development across its music-centric ecosystem, searching a unique community and distinctive content offerings. We continue reinforcing our signature music consumption experiences while expanding consumption scenarios and brand awareness.
We launched and iterated several innovative features to improve users enjoy and interface with music and music inspired contents in Q4. For example, our new feature Lyric Book allow users to highlight the favorite lyrics, create a personalized lyric collection and share that unique Lyric Book with others.
Additionally, Lightbulb enhanced users' music discovery journey, offering recommendations that flow naturally with each user's distinctive taste. These functions were highly popular with music fans and increase user engagements, building our compelling consumption experiences.
We continue diversifying music consumption scenarios. For example, co-branding activities in cooperation with our game division helped expand our existing audience while introduced an enhanced music-inspired social interaction features in games further extended our brand process.
Expanding our music library also allows us to keep bringing users the best range of licensed and original music. In Q4, we deepened our partnership with Kakao Entertainment and strengthened our Chinese music collection is generated by collaborating with renowned artist Lee Chan [ph] brining his full discography back to our platform, including many beloved concerts.
On the in-house music side, we step up our efforts as well, several tracks gained widespread recognition in Q4, including Heat Follow. We're also growing our corporate collaboration with popular artist, generate tens digital album [indiscernible] rebuilding on our platform, selling over 1 million copies within 24 hours. In Q4, we celebrated the tenth anniversary of our independent decision platform with special events highlighting our musicians journeys, helping to deepen the connection between artists and fans.
As of December, our platform voted over 770,000 registered audits, making it one of China's top platforms for independent physicians. As we continue to improve our music-focused model innovation, subscription-based membership remains an important driver of online music revenue growth to further optimize our premium offering, we enhance our content appeal, introduce cutting-edge features, added membership privileges for subscribers and we find our cohesive marketing strategy. This effort boosted subscriber growth and deep engagement, laying solid foundation for more sustainable growth.
Finally, let's look at Yanxuan. Yanxuan continues to focus on key categories and drive growth through best-selling products. In 2024, core categories like pet products and home claim recorded solid growth, reinforcing the market leadership. Meanwhile, other key categories keep getting popularity through its star products, our [indiscernible] Down Jackets known for exceptional quality and strategic marketing, remain a standout performer in the fourth quarter, breaking into top five position for mass ware on Tmall sales chart, across our NetEase family of businesses, we pursue innovation that advances our company and the industries we serve.
We are extending this to our global aspiration for our games as we further diversify our portfolio and bring the live titles to fans worldwide in 2025 and beyond. We believe these initiatives will fuel lasting value creation across our business and for players, partners and shareholders level.
This concludes William's comments. I will now provide a brief review of with a focus on the fourth quarter, given the limited time of today's call, I will present some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details. As a reminder, all amounts are RMB unless otherwise stated.
Our total net revenue for 2024 were RMB 105.3 billion, were US$14.4 billion, representing a 2% increase year-over-year. For the fourth quarter, total revenue were RMB 26.7 billion or US$3.7 billion. For 2024, net revenue from games and related BES were RMB 83.6 billion, up 3% from 2023 and up 2% year-over-year in Q4 to RMB 21.2 billion. Specifically, net revenues from online games were RMB 80.4 billion, up 6% from 2023 and up 5% year-over-year in Q4 to RMB 20.5 billion.
Through 2024, our PC client games delivered strong performances, achieving 17% year-over-year growth with an impressive 57% increase in Q4, with the Q4 growth was primarily driven by titles such as NARAKA: BLADEPOINT is we Westward Journey Online II and several licensed titles. While the positive momentum in PC games have shifted our revenue mix mobile games remain a significant part of our business.
In the fourth quarter, they accounted for approximately 65% of our total net revenue from online games and operations -- online game operations and for the full year, it made up about 73%. Youdaon's net revenue for 2024 were up about 4% for the year to RMB 5.6 billion, primarily due to revenue growth from online marketing services. They declined 9.5% year-over-year in the fourth quarter to RMB 1.3 billion primarily due to the decline in learning services revenue as we focus on the business that serve our long-term growth objective with better profitability.
NetEase Cloud Music's net revenue were up a little over 1% at RMB 8 billion for the full year, and RMB 1.9 billion in the fourth quarter, a 5% decrease year-over-year. As discussed in previous quarters, the decline reflects lower revenue from social entertainment service, which aligns with our refined focus on sustainably improving profitability.
Net revenue for innovative business and others were only RMB 8.1 billion for the year and RMB 2.3 billion for the quarter, down 6% and 17%, respectively, year-over-year. The decline was mainly due to decreased revenue -- advertising services and some other innovative businesses.
