NetEase, Inc. (NASDAQ:NTES) Q4 2020 Earnings Conference Call February 25, 2021 7:00 AM ET

Company Participants

Margaret Shi - Investor Relations-Director
Charles Yang - Chief Financial Officer
William Ding - Chief Executive Officer

Conference Call Participants

Jialong Shi - Nomura
Alex Poon - Morgan Stanley
Alicia Yap - Citi
Alex Yao - JPMorgan
Thomas Chong - Jefferies
Kenneth Fong - Credit Suisse

Operator

Good day and welcome to the NetEase 2020 Fourth Quarter and Full Year’s Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Margaret Shi, IR Director of NetEase. Please go ahead, ma'am.

Margaret Shi

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 US 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 the announcement of the filings on the website of Hong Kong Stock Exchange. The company does not undertake any obligation to update these forward-looking information except as required by law.

During today's call, management will discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the 2020 fourth quarter and full 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 corporate website at ir.netease.com.

Joining us today on the call from NetEase senior management is Mr. William Ding, our Chief Executive Officer; and Mr. Charles Yang, our Chief Financial Officer.

I will now turn the call over to Charles, who will read the prepared remarks on behalf of William.

Charles Yang

Thank you, Margaret and thank you, everyone for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on renminbi. We closed 2020 with a solid set of results in the fourth quarter centered around content creation and user experience.

Each of our key business segments showed impressive resilience and delivered sustainable growth during the year. We generated total net revenue of RMB 73.7 billion for the whole year up 24% year-over-year and RMB 19.8 billion in net revenues for the fourth quarter up 26% year-over-year.

2020 was a challenging year for many businesses around the world. It was not a time to standalone and survive, but the time to work together and thrive. While Collins Dictionary has declared the word lockdown as the word of the year, we believe the word breakthrough also defined for life and career of many in the past year.

We are grateful for the initiatives our employees take to care for the impacted to respond quickly and act responsibly to help both of our company and the broader community overcome these hurdles. In doing so, we are proud to have weathered the obstacles growing each of our businesses in a meaningful way supporting our business partners to stay safe and strong and generating sustainable returns to our stakeholders.

We are also proud to have achieved a few milestones in 2020 as we celebrated our 20th anniversary on NASDAQ and completed our listing on the Hong Kong Stock Exchange. We are delighted to have seen a positive reaction from the market, especially, after our dual listing in Hong Kong, a market that is closer to our roots.

Turning to our Q4 results. During the quarter, the popularity of our online games business continued with steady performances from our existing titles. Net revenues from our online game services were up 15% year-over-year reaching RMB 13.4 billion. Our legacy titles such as Fantasy Westward Journey and Westward Journey Online series continue to resonate with players.

FWJ Online and New Westward Journey Online II once again reached record revenues in 2020, further strengthening their position as two of the China's biggest MMO titles.

On the mobile side during very effective celebrations FWJ mobile games and WWJ mobile games once again reached the number one and number two position respectively on China's iOS games top grossing chart.

Other games launched in more recent years are also enjoying an impressive player traction with highly active core user bases, for example Life-After and Invincible. Following its launch in 2018 Life-After has become an iconic title since reaching its initial phase of stabilization in 2019.

Gross billings of Life-After regained its growth momentum in 2020 as we launched a couple of highly popular expansion packs bringing avid players a series of new themes and innovative gameplay.

Similarly, our SLG title Invincible remained steady in 2020 with strong user engagement in its own right amid increasing competitive marketing spend. Celebrating its fifth year anniversary in October Invincible once again reached the number five position on China's iOS top game grossing chart.

Based on Onmyoji, one of our flagship titles, our IP strategy has paved a smooth road for creating various IP-based pan-entertainment productions. As of today, the estimated value of Onmyoji IP exceeds $10 billion according to iResearch. Since its initial blockbuster launch in 2016, we have been seamlessly growing this important IP.

To-date, we've introduced three Onmyoji spin-off games in mobile, card, and simulation genre. We have two more new spin-off games in the making Project: World, an RPG game; and Onmyoji Idol Project, another simulation game.

On the overseas front, we continue to make solid progress. For the past four consecutive years, revenue contribution from overseas market has been growing continuously as a proportion of our overall games revenue.

Some of the key drivers include titles such as Knives Out Life-After, and Identity V all of which had a record year in 2020. Japan is a key hub for the global games industry. We deeply value these creative minds and our success in Japan has allowed us to work more closely with local partners.

Initial momentum in this arena includes our established collaboration with the Pokémon Company and a series of IP collaborations between Knives Out and other famous IP such as EVA and Attack on Titan.

We have also been more active in attracting and collaborating with local Japanese R&D talent complementary to our own as well as opened up our own Sakura Studio which focuses on building next-generation console games.

2021 is a super exciting year for us with a number of strong titles ready for launch. We started this year with Revelation mobile game, the long-anticipated mobile adaptation of its PC version capturing both returning fans and brand-new MMO players including a large group of female and younger players. Revelation mobile game quickly became a top-ranking title on China's iOS grossing chart following its launch.

Additionally, in January, we brought to market Yu-Gi-Oh! Duel Links, a competitive car game on mobile calling on the nostalgia of a generation of Yu-Gi-Oh! fans. The mobile game topped China's iOS downloads chart soon after its launch.

Catering to the local preference we optimized the range of items for the Chinese market including a new mode and select each new design which are proving quite popular amongst our players.

Harry Potter: Magic Awakened marks another game that has been long anticipated by our player community. We hope the hard work poured into making this game will do it the justice that this global IP command.

Featuring a blend of strategy RPG elements, players will become a Hogwarts freshman. This diversified wizard partner, learn spells, gain magic knowledge, and experience amazing wizardry life. We will also be bringing our next-generation SLG titles, Infinite Lagrange and The Lord of the Rings: Rise to War to players around the globe. Infinite Lagrange is a space-themed SLG where players can explore an uncharted galaxy command and build space crafts, involve themselves in strategic battles and plan the development of their own space stations. The Lord of the Rings: Rise to War is based on the famous trilogy. Set in a multilayered fantasy world the game will recreate a visually stunning and completely faithful renditions with iconic characters and locations from the original masterpiece. With these two games we look forward to extending our success in SLG from China to overseas markets, where we see greater potential for this thought-provoking genre.

In addition, we had a handful of other exciting titles in our pipeline all have received license approval in China. These include, Elysium of Legends, Nightmare Breaker, Ghost World Chronicle, Diablo Immortal and Pokémon Quest. As we further enrich our game portfolio, we have been gradually broadening our skill sets in different areas of our R&D team, particularly over the past few years. Our sophisticated R&D infrastructure, user-centric corporate culture and passion for games attract all kinds of talent joining us from both China and overseas. We believe our team's artistry and drive will bring to life even more great titles across diverse genres expanding our success beyond our MMORPG world and newer successes in RPG and SLG and so on.

We are relentless in our drive to invest in and empower our people. This year we were once again the proud recipient of the ATD Excellence In Practice Award, one of the most recognized awards in the global talent development industry. To leverage the creativity of our young producers even more, we are working to further reform our games' project initiation and review mechanism to encourage more innovative ideas and give young producers more autonomy to bring their vision to fruition.

In summary, 2020 has been a strong year for our online games business and for the industry. Despite a high base, we are excited to see what 2021 will bring. We look forward to introducing more titles to our users in the coming years in China and globally.

Turning on to our education business. Youdao has witnessed the tremendous growth potential of China's online education industry over the past year. Faced with an influx of need across the country, we feel more responsible than ever to ensure our students receive the best quality teaching and most effective learning possible. Youdao closed the year with an impressive quarter. Total net revenue for Youdao in the fourth quarter were RMB 1.1 billion, representing a 170% increase year-over-year. Gross billings from Youdao's online courses in the fourth quarter increased by 223% year-over-year to RMB 1.1 billion, driven by rapid growth across each segment.

Growth from our K-12 segment continues to lead the way reaching a record RMB 767 million in gross billings, up 355% year-over-year with K-12 paid enrollment expanding to over 659,000. Despite intense market-wide competition for user acquisition during the summer, Youdao's advertising strategy promoted healthy results and was ROI driven. We made sure that our unit economics and marketing spend were positive and our advertising content was conducted responsibly for our users and our investors. In the fourth quarter, we achieved another quarter of positive operating cash flow of RMB 129 million. To meet our growth needs and ensure our teaching quality, we continue to expand our high-quality servicing team which now comprises 240 instructors and over 3,700 tutors. Learning devices is another component of Youdao that gives us a competitive edge with a mission to make learning more efficient. They have proven to be very popular among users, generating total net revenues from learning products of RMB237 million in the fourth quarter, a significant increase of 254% year-over-year.

In December, we released our new Dictionary Pen 3.0, which features two exclusive new experiences. The Tap and Check function and the Interactive Reading function. Through the support of advanced AI technology and cooperation with multiple authorities publishing houses, it keeps learning options fresh and progressive.

Moving through 2021, we will continue in this vein and invest in content offerings and technology to bring our students optimal learning experiences and realize sustainable growth with compelling smart education products and services. In February, Youdao raised US$232 million through a follow-on offering. We are determined to extend Youdao's competitive edge in this highly promising intelligent learning segment in China.

On to our music capabilities, NetEase Cloud Music has been in operation since 2013. Based on our passion for music and our understanding of music lovers, we created a unique product and community to give our users an unprecedented music experience. Seven years later, we now have more than 200,000 independent musicians and over 800 million registered users while over 90% of them are post-90s or even younger.

In our newly launched version 8.0, we focused on bringing our young users elevated personalized experiences to express themselves. It extends the playlist mode capabilities to videos and podcasts and offers new karaoke functions in the app.

On the content side, we have witnessed some important changes in the industry. For the third time we reached a direct nonexclusive agreement with UMG. Under the new agreement framework, we can give our users wider range of benefits and choices. We further enriched our content library during the year, reaching agreements with Studio Ghibli, Rock Records and BMG among others. Most importantly, we continued our efforts to invest in and cultivate independent musicians. In 2020, approximately one million original soundtracks, music tracks were uploaded to our platform and the total play time of all the music tracks on our platform exceeded 300 billion. As one of China's most influential music streaming platforms for original music, we continue to empower independent musicians, giving them the tools and audience to help them create more hit songs.

In terms of monetization, we have been setting up this effort since 2019 and continued its journey in last year. As a result, during the year we saw strong growth in all three forms; membership, live broadcasting, and advertising. Given our somewhat fixed cost structure, we continue to see improvements in margins as we further scale up the music business.

For Yanxuan, we have firmly established its position at our private label consumer brand targeting young professionals who are looking for trendy, high-quality and at the same time affordable living. Centered around this notion, we have increasingly built up our brand recognition among these target consumers.

We are developing products that revolve around their needs particularly in household products, personal care, food and pet supply. During the year, we launched a number of super-popular products with annual sales exceeding RMB100 million. This product popularity furthers our confidence in our design capabilities and understanding of the user needs.

With the right content and product offerings, we were able to attract an increasing number of membership subscriptions in 2020. One of our main focuses moving forward is to continue improving the benefit of shopping experience we offer to these loyal customers. All-in-all despite the difficulties the world has faced in 2020, we are grateful to have achieved continued growth and are standing strong in the new year.

With a solid ground regained across our online games, online education, online music and e-commerce businesses we are poised to build on this growth in 2021. Our focus on content creation and elevating users' experiences with NetEase products and services remains at our core. We continue to innovate, diversify and expand our reach to generate value for our users and investor communities.

This concludes William's comments. I will now provide a brief overview of our 2020 full year and fourth quarter financial results. Given the limited time on today's call, I will be presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for more details.

Total net revenues for the year were RMB73.7 billion or US$ 11.3 billion, representing a 24% increase year-over-year. Net revenues for the fourth quarter were RMB19.8 billion or US$ 3 billion, representing a 26% increase year-over-year. For 2020 our net revenues from online game services were RMB54.6 billion, up 18% from 2019 and RMB13.4 billion for the fourth quarter, up 15% year-over-year.

The year-over-year increases were primarily due to the increased revenue contribution from Fantasy Westward Journey H5, Sky, Life-After and Invincible as well as PC client games such as Fantasy Westward Journey Online in the fourth quarter.

Net revenues from our mobile games accounted for approximately 72.4% of net revenues from online games in the fourth quarter. Youdao's net revenues reached RMB3.2 billion for 2020, up 143% year-over-year.

On a quarterly basis net revenue increased 170% to RMB1.1 billion in the fourth quarter driven by fast growth of both Youdao online courses and sales of intelligent learning devices.

Net revenues from innovative businesses and others were RMB15.9 billion for the full year, up 38% year-over-year and up 41% year-over-year in the fourth quarter to reach RMB5.3 billion. This is mainly due to the increased contribution from NetEase Cloud Music NetEase PC live streaming and Yanxuan.

Our total gross profit margin in the fourth quarter was 50.2% with the breakdown as follows: GP margin for our online gaming services was 63.1%. As a reminder, this number is generally stable with some narrow fluctuation based on the revenue mix of mobile and PC as well as self-developed and licensed games.

Gross margin for Youdao for the fourth quarter was 47.5% compared to 29.8% in the same period of last year. The significant growth was primarily attributable to improved economies of scale continuous optimization of our faculty compensation structure.

Gross profit margin for innovative businesses and others was 18% compared with 20.6% in the fourth quarter of 2019. While the margins for NetEase Cloud Music and Yanxuan have improved year-over-year, the impact was offset by the decrease in GP margin from NetEase CC live streaming which covered a longer period of the annual celebration event in 2020 compared with 2019. Additionally, gross profit margin of innovative businesses and others also fluctuate based on the revenue mix of this line item.

For the fourth quarter total operating expenses were RMB6.9 billion, 35% of the total revenue. Our selling and marketing expenses, as a percentage of net revenue, was 15.6%, down from 18.5% in the prior quarter.

The quarter-over-quarter decrease was mainly due to lower marketing costs related to Youdao. Excluding Youdao, our selling and marketing expenses as a percentage of net revenues were 12.2% compared with 12.9% in the prior quarter, which is relatively stable.

R&D expenses were RMB 3 billion, up 9% from the previous quarter. We remain committed to investing in content creation and product development, which is core to our future revenue growth. On a full year basis, R&D expenses as a percentage of full year net revenue were 14.1%, compared with 14.2% in 2019.

Other income loss was RMB 1.5 billion for the fourth quarter, which included a net investment loss of RMB 272 million and a net foreign exchange loss of RMB 1.8 billion due to the US dollar's exchange rate continued depreciation against the RMB. The net investment loss and the net FX loss, both mainly booked loss in nature and most of them did not impact our cash flow.

On a full year basis, total net foreign exchange loss for 2020 were RMB 3.1 billion compared with a net gain of RMB 25 million in 2019. The effective tax rate was 37.2% for the fourth quarter and 19.8% for the full year of 2020. The effective tax rate represents certain estimates by the company regarding the tax obligations and benefits applicable to it in each quarter.

Non-GAAP net income from continuing operations attributable to our shareholders for the fourth quarter of 2020 totaled RMB 1.6 billion or US$244.9 million. Our non-GAAP diluted earnings per ADS from continuing operations were RMB 2.34 or US$0.36 for the fourth quarter of 2020.

We would also like to point out with the rapid growth of Youdao, it is having a much more material impact on our NetEase group financials. For 2020, Youdao generated total revenue of RMB 3.1 billion and a non-GAAP net loss attributable to Youdao's shareholders of RMB 1.7 billion compared with net revenue of RMB 1.3 billion and non-GAAP net loss of RMB 612 million in 2019.

Our cash position remains strong. As of end of 2020, our total cash and cash equivalents current and non-current client deposits and short-term investment balance totaled RMB 100.1 billion compared with RMB 74.4 billion as of the end of 2019. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of US$0.012 per share or US$0.06 per ADS.

As a reminder, we changed our ADS ratio on October 1 from one ADS for every 25 ordinary shares to one ADS for every five ordinary shares. And finally, under our current share repurchase program for up to US$ 2 billion, as of December 31 2020 approximately 21.1 million ADS has been repurchased under this program for a total cost of US$1.6 billion.

On February 25, 2021, our Board announced the approval of a new share repurchase program for up to US$2.2 billion of our outstanding ADS and ordinary shares for the next 24 months, beginning on March 2, 2021.

Thank you for your attention. We would like now to open the call to your questions. Operator let's go to the Q&A session.

Question-and-Answer Session

Operator

[Operator Instructions] We will take our first question from the line of Jialong Shi from Nomura. Your line is open. Please proceed.

Jialong Shi

Thanks. Good evening, management. Thanks for taking my question. Let me ask my question first in Chinese. [Foreign Language] How much of native's Android version of mobile game revenue is contributed by third-party app stores? For this part of revenue what is the average revenue share charged by third-party Android channels? We heard from media one of NetEase online gaming peers was trying to negotiate for a lower revenue share paid to the third-party app stores. Just wonder, if NetEase has also started to talk with your channel partners about this revenue share. And if you did how's the progress so far?

William Ding

[Foreign Language]

Margaret Shi

I'll help translating. The China has probably obviously the highest revenue sharing ratio among all the market around the world, up to as high as 50%. It's true a few of our native games enjoys a more favorable sharing around 30% such as FWJ. And so we think the way we are seeing in China right now is unhealthy and it's probably unsustainable because it's about 20% higher than how much Apple is charging the content providers. And we see, we'd like to see with the Chinese Apple partners to be more in sync with our international – with the international peers to be charging the content providers a more reasonable rate. And we want to work very closely with our channel partners to create a healthy environment for the gaming industry.

Charles Yang

And Jialong to supplement your earlier part of the question. On our channel split on the ballpark roughly half of our game revenues were generated through iOS which again is only a very, very few game content providers in China can have such a high percentage contribution from iOS channels roughly one-third is coming from Android channels and the remainder coming from our official channels. That's a ballpark split of the channel split.

Jialong Shi

Thanks for the color.

Margaret Shi

Thank you.

Charles Yang

Okay. Operator, the next question, please.

Operator

Okay. We will take our next question from the line of Alex Poon from Morgan Stanley. The line is open. Please go ahead.

Alex Poon

[Foreign Language] I'll translate myself. Back in 2019 we had a revenue target -- overseas revenue target of 30%. In the following three to five years and because of COVID-19 the growth especially outside of China has accelerated a lot. And so, wondering if there is any change to this target – revenue mix target. Would it come earlier than expected? And then secondly is I want -- I hope to get some thoughts around casual games versus hardcore games outside of China. What's – which one do you think would be better to achieve the growth and the ROIs compared to the China market?

Unidentified Company Representative

[Foreign Language] 2021 will definitely be an important year for NetEase in terms of internationalization. We have a number of games we're making such as Harry Potter and Infinite Lagrange which are expected to be launched during the year and we hope to see fruitful results from those games. Thank you. Thank you Alex.

A –Charles Yang

And Alex on your second question -- second part of the question on our strategy of thinking of overseas game introduction. We are not betting on our future on one or two genres, but rather we think with our stronger and getting more diversified R&D capability we want to see multiple genres of games being introduced to different geographies and different users. So shooting game like Knives Out has been proven successful in Japan.

SLG games like Infinite Lagrange and The Lord of the Rings we are confident that we can leverage our domestic success into the international market as well as games like Harry Porter which is a more casual card RPG game and others. So I think what we want to do is to have multiple genres targeting multiple geographies and catering to multiple user needs. That is our overall direction for internationalization.

Margaret Shi

Thank you Alex. Next question.

Operator

We will take our next question from the line of Alicia Yap from Citi.

Alicia Yap

Hi, yeah, thank you. [Foreign Language] Thank you, management for taking my questions. My question is related to the overall growth driver for the Cloud Music for 2021 was that growth mainly driven by the subscription revenue ramp or to be driven by the online advertising revenue or even the live streaming could be growing faster?

And then a small related questions on the one billion video content investment initiative recently could management share the rationale behind? And do you expect this initiative to actually revise the online advertising revenue or even further push the NetEase media business growth? Thank you.

William Ding

[Foreign Language]

Margaret Shi

Yes. I'll help translating. So Alicia, you're right. The three main forms of monetization for music is membership advertising and live streaming. And one of the key focuses for music going forward will continue to be about creating our own content, helping independent musicians to create original content on our platforms. So in that sense memberships will definitely be one of the key drivers to our monetization growth.

In terms of radio, what was noticed is that music is about listening. But what we've noticed in the industry in China and globally is that the consumers' habits have evolved from the listening to watching, which is why short-form video platforms have become extremely popular in the recent years.

So when we think about making short to mid-form video we want to leverage our existing know-how. For example, we're interested in making short to mid-form video centered around games, or centered around knowledge. So we have this -- we actually have one project within NetEase called NetEase Information World [ph] [Foreign Language]. So we -- during the Chinese New Year we realized -- we noticed that the play time on our videos have actually increased 1 to 2 times compared to previously. So going forward, we'll continue to work hard on creating content on short to medium -- mid-form video content is centered around our key businesses, games, music, et cetera. Thank you.

Alicia Yap

Thank you.

Margaret Shi

Thank you, Alicia. Next question, please.

Operator

We will take our next question from the line of Alex Yao from JPMorgan.

Alex Yao

[Foreign Language] So my question is regarding your view on the PC gaming market. How do you think about the future outlook for this market in both domestic China market, as well as the rest of the world? And then how do you position yourself in such industry? Do you still allocate new R&D resource in the PC gaming development, or you just want to strategically maintain the current PC portfolio? Thank you.

William Ding

[Foreign Language]

Margaret Shi

Yes. The outcome from both William and [indiscernible] our -- the mastermind behind many key titles in NetEase. So, yes, that's something that we do care very much about PC, because of unique specifications that the PC games can have and the user experience that PC games can deliver to our gamers that we'll probably continue down this road.

So on one hand we'll continue to maintain our existing titles on PCs and we'll continue to develop new PC titles too. In May, we're actually going to launch a game called [indiscernible] which has actually the license is a very unique and creative PC game. And also around the middle of the year we are going to create -- we are going to probably going to launch another PC game called [indiscernible]. And this is a competitive -- and it's made by the [indiscernible] standards.

And William wanted to add that in addition to our self-developed games we actually run lots of very, very popular PC game from Blizzard such as Overwatch, World of Warcraft, StarCraft to name a few. So we'll probably have the richest collection of PC games in China. And so PC will continue to be an important part of our game strategy. Thank you. Next question, please.

Operator

We will take our next question from the line of Thomas Chong from Jefferies. Your line is open.

Thomas Chong

[Foreign Language] Thanks management for taking my questions. And the first question is regarding overseas game operations. Will we consider accelerating the pace through the use of M&A or in-house development?

And then my follow-up -- another question is about the regulations. Can management share about their thoughts regarding the regulatory environment in online games live streaming and music? Thank you.

William Ding

[Foreign Language]

Margaret Shi

In terms of the overseas expansion, we're interested in both and talked about these self-developing games and also through M&A. In terms of the self-development side, there's a number of things -- there's number of ways we can do it. For example, Harry Potter, this is leveraging the use of a very famous UK IP and using our own internal R&D to develop things for the global markets.

On M&A side, yes, we are obviously very interested in achieving greater success through collaborations with different partners around the world. We've actually -- we've always been active in -- invested in good content globally. Thank you.

Charles Yang

And Thomas on your second question asking for the regulatory environment for game broadcasting and music. Well, in general we see that this is becoming more and more popular format of entertainment. So e-sports has been now qualified at the Asian Games and there are rumors that it can even potentially be eligible for Olympic Games. It is a kind of sports for the young people. So game live streaming is important.

NetEase CC live streaming is building on our unique edge of self-created game content and it is developed -- it's also been growing quite healthy and sustainably. Music obviously is becoming an increasingly important entertainment content and it is not only restricted to the enjoyment of our ears by listening, but just as William previously mentioned, watching is becoming even more popular and trendy format of enjoying music as a format of entertainment content.

So, we think, everything takes on it's -- a progressive way of developing. But in general, the regulatory environment is also more and more encouraging for innovation and catering to the user preferences and behavior in general. So we are very confident and we have our own plans of investing ourselves into these areas.

Operator

We will take our next question from the line of Kenneth Fong from Credit Suisse.

Kenneth Fong

[Foreign Language] I will translate myself. I want to ask about the pace and is there approximately timing of the launch of the few key IP including Diablo, Immortal, Pokémon as well as Harry Potter? Would that be like spread across different quarters to avoid competition, or we will just launch it right when they are ready? Thank you.

Charles Yang

Thank you, Kenneth. For our pipeline, first of all, we are very confident and excited about our lineups for 2021, including just now William and Junxiong just introduced a couple of exciting PC games. On the mobile side, as you have all noticed, Harry Porter, Diablo, Immortal and Pokémon now all have already received their license approvals. And all these games are developed with the intention for a global launch. So now that we have got the approval for the China part, as to the exact timing point of these game launches, we do not rush our producers and our studios.

If we are confident that these high-quality games are developed and designed for a long-anticipated longevity, then we are not overly concerned about whether launching this game in this particular month or the next. But all in all, I think, we have more confidence, now given that the license approval has been obtained, that many of these highly anticipated games will be introduced to the gamer community within this year, some might be potentially as early as the first half of this year.

Kenneth Fong

Thank you, very much.

Operator

Due to time constraint, that concludes today's questions-and-answer session. At this time, I will turn the conference back to Margaret Shi, for any additional or closing remarks.

Margaret Shi

Thank you, once again for joining us today. If you have any further questions, please feel free to contact us directly or TPG Investor Relations. Have a great day. Thank you.

Charles Yang

Thank you everyone.

Operator

That concludes today's conference. Thank you everyone for your participation.