NetEase, Inc. (NASDAQ:NTES) Q3 2022 Earnings Call Transcript

Alex Poon: My first question is related to overseas games. In the last 1 to 2 years, we have launched many new games overseas. Can management share the gamers’ feedback and longevity of these new games? And secondly, about the developments, we’re developing more cash flow genres to fit the ties of overseas games about our cost structure. Can we talk about our head count trends and other OpEx trend in the future?

William Ding: Since we launched Naraka last year and to Xbox in June this year, we’ve been very closely monitoring the reactions and feedback from the game of community. So from what we’ve seen, we think the players overall is very satisfied with this — with our game with this — it’s very unique mainly combat user experience. Some games value is about hundreds of hours a day and still feel good. One of the things we noted that there are a lot of statements the gamers who are on the lower spec platform, such as X one, they are also craving for this game. So we are now working on adapting this game on to different levels of devices, different level of platforms. And at the same time, also optimizing the beginners guide. So, if the game is harder to kind of get into — so we’re looking — we are optimizing finding ways for beginners to kind of get into the game more quickly.

And this is a task that we are working on with our Montreal office. So every day, we are having discussions on how to make our users happier within the game. So hopefully, we’ll be able to bring at point to more game players on more platforms.

Charles Yang: And Alex, for your second question about the overall trend of head count and operating expenses over the last 5, 6 quarters, our overall total head count stays relatively steady at above 30,000 overall head count. More specifically in the last quarter, by the quarter end, we have north of 31,000 overall head count, representing quarter-over-quarter about incremental 1,000 head count which is consistent with our summer recruiting season of campus recruiting. I think in terms of the overall operating expenses — for many of you who have been tracking NetEase for long enough. We are very, very cost conscious and effective in expanding our investment, organic investment into ourselves in a very I would say, our oriented manner.

Oftentimes, when you see an increase in R&D, in selling and marketing, that is actually an indication that we are developing a strong pipeline or we are about to launch an exciting new games — and if we are patient enough, you will see the huge reward that we are planting the seeds today. So for the future outlook, I think we are continuing to grow. We will continue to invest. Absolute dollars of operating expenses will continue to increase but we will be hugely rewarded by operating leverage when we see the next cycle of product launched in both domestic and international markets.

Operator: Our next question today will come from Felix Liu of UBS.

Felix Liu: My question is on the overseas market. We noticed that we had updated publishing time for Harry Porter. So could you share more color on the market — overseas market to focus on for Harry Potter power and any pipeline to share after Harry Potter’s launch? And more on the longer-term question is on the overseas position in terms of genre and market position. What are these genres in markets you’ll be focusing on with your extensive investments right now?