Good evening, ladies and gentlemen. Welcome to NetDragon's 2016 fourth quarter and fiscal year earnings conference call. Accompanying this call, we also have a live webcast on our website where you will be able to view the earnings presentation. After the presentation, there will be time for a Q&A session. But until the Q&A session, all participants are in listen-only mode. Before the presentation, I would like to remind you all that this call may contain forward-looking statements, which may not be relied upon in the future for various reasons. Non-GAAP data is included as part of this presentation. Non-GAAP data is not expressly permitted by the Hong Kong Financial Reporting Standards, and therefore may not be comparable with other similar indicators. For more details on the Non-GAAP financial measures, please refer to the disclosed documents on the company's IR website at www.nd.com.cn/ir.
The company's results were released earlier today and are available on the IR website. A webcast replay of the conference call can also be found there following the conclusion of this call. Now, please allow me to introduce our management team who will join us today. Dr. Simon Leung, Vice Chairman and Executive Director of NetDragon, and Mr. Ben Yam, Chief Financial Officer. Simon will begin with a review of recent developments in NetDragon's operating performance, followed by Ben, who will review the company's financial performance. Following the presentation, they will both be available to answer your questions in the Q&A session. With that, I would like to turn the call over to Simon. Simon, please go ahead.
Well, thank you, Joseph. Good afternoon, good morning, good evening, depends on where you are. Thank you for joining us on this call. I think today what I'm going to do is take you on a bit of a journey, take you back to the beginning of 2016, have a quick review of what we have done, the road we have been on, and then also take you a little bit to the future and then have an outlook on 2017. So of course, we have to touch on Q4 also. So what I'm going to do, I'm going to start on the first slide, which is actually Q4 highlights. I'm not going to go through a lot of the details. I just want to say, we are very happy with the growth of our business. The details since Ben, our CFO, will go through the financials.
So I'm going to skip that. But one thing I want to mention is actually we also have been included in the Hang Seng Large-Cap and Mid-Cap Index, and also the Shenzhen-Hong Kong and Shanghai-Hong Kong Stock Connect, which is hopefully the recognition of our performance on the stock market. We're pretty happy with that. Okay, with that, I'm going to look at what I call the 2016 report card. So take you back on the journey. What I would say, I will talk about both the international business and the China business to give you a better view. The reason for that is actually because we acquired Promethean. We've done a lot of work in integrating our business, the two businesses together. So that's why I decided to make it separate for this time.
In the future, we probably will look at it as one entire business in terms of learning. Like I said earlier, we have spent a lot of time in integrating the business. Actually, to do that, really, we are trying to prepare for the future. We were seeing a significant growth of our business in international, which is actually excited about. We spent a lot of time not only integrating our businesses, but also we align our business resources so that we can capture the growth of the business in different areas. There will be basically in two different areas going forward. One is we are seeing a product refreshment cycle in the mature markets, and also we are seeing a lot of opportunities in the growth market coming up. We are well prepared to capture the growth in those areas.
We also started to build our online community, which is our future. We reach about 2.6 million users, mainly in the U.S. because when we started to build a community, we decided to focus on our largest market so we can roll that out with a large base and also have a lot of learning throughout the journey, so we can apply in the other markets. In terms of on the product, we have also executed our cost reduction strategy, which is actually very important. Now, of course, later on today, I will talk a little bit about our outlook for our business in 2017. And we spent a lot of time to develop a very robust product roadmap for both hardware and software of our Education business. Over to China, basically, we continue to do our coverage and we continue to develop relationships.
Our product covers 32 provinces and major cities, which basically is actually all across China. Also we have signed many MoUs with different government and city agencies. Then we focus to help China and then at the end, help ourselves to advance our agenda on education. On the product side, we have released quite a number of products, including a range of VR products. The one that I get most excited about is our VR Editor, that we can give it to the hands of our developers and our teachers so they can create content, which is going to be a key element of our business going forward. On top of the cooperation with governments, we also signed cooperation agreements with the likes of Pearson so we can, on top of their content, rebuild AR and VR content. Details will follow later on.
Last but not least is actually we have started to build relationship with world-renowned universities. I think you're quite familiar with our relationship with Beijing Normal University, but we added Harvard to our list of institutions that we are working with. We are making good progress in that. Turning over to gaming, it's a very good year for a mature business. We are seeing growth in every which way, double-digit growth. Our new theme and our main flagship game both on the online and the pocket version is actually we see a record high revenue, increased ARPU. That's very exciting because we are using many different ways to monetize the game. Mobile game is actually making tremendous progress in 2016. That will be one of the main growth areas for us going forward. I did talk about ARPU.
That is very exciting. Also, we launched a long-awaited game called Heroes Evolved in China in December. We are very excited that that is being recognized as one of the top downloaded mobile games in January 2017. Last but not least is actually a very interesting VR version of our game called Dragon Knight. It combined the VR technology and very rich content, which we launched in Q4. Unfortunately, you guys are not in our building. If not, I will invite you to go and try the game. You get on the mechanical horse and playing a VR game at the same time. I was told it is very tiring, so that is good news. Next, I want to give a quick report card to Cherrypicks.
We do not usually mention them that much, but I thought when I look at what they have accomplished in 2016, I felt compelled that I have to take you through on what they have done. They have won a lot of major high-visibility projects in Hong Kong and abroad. So a well-recognized name like the Hong Kong International Airport and the Hong Kong Jockey Club, MTR, and Hongkong and Shanghai Bank. We started to go abroad. I hesitate to say overseas. So that is Taiwan. It is actually we install a system for Kaohsiung, which is in the southern part of Taiwan. A lot of these projects, not all by the way, is that you use a technology called starbeacon, which is pioneered by Cherrypicks. At the end of the day, it is an intelligent location technology with big data using small base stations called starbeacon.
So far, we have over 30,000 of those base stations installed in Hong Kong and with a small number in Taiwan. We do expect the trend to continue. Also very exciting is actually our first B2C product in education is that it was developed by Cherrypicks. It combines a lot of different technology in there, which is actually very exciting, VR, AR, and AI. So we have two products. One is actually Kids VR, is actually the other one is called English Galaxy. That will take us into the B2C world in 2017. Of course, when we talk about Cherrypicks, we cannot talk about them without AR. So they have also released a product basically, it is a do-it-yourself AR product called AR Rich.
I want to kind of take you through, if you remember what we have said at the beginning of 2016, is actually we are following a roadmap, and we have done a lot of work that we set out to do at the beginning of 2016. With that, I want to turn it over to Ben Yam, our CFO. He will take you through all the financial numbers.
Thanks, Simon. Thank you, Simon. Hello, everyone. Let me go over the financials in more details. In the fourth quarter, revenue was about CNY 740 million, representing a 48% increase year-over-year. Gross profit was CNY 421 million, representing a 35% increase year-over-year. Non-GAAP operating loss was CNY 67 million, and net loss attributable to owners of the company was about CNY 94 million. I just wanted to make a quick comment on the net loss because this net loss was actually after a CNY 78 million provision for impairment of a product called Active World, which is a product that we have end of life, and this is a product that we acquired from our Promethean acquisition. This is also being replaced by our newer product lines. It is an impairment of capitalist R&D where a lot of the expense was actually spent before we acquired Promethean.
If you exclude this CNY 78 million provision, our net loss attributable to owners of the company was actually reduced by roughly 50% compared to Q3 of this year. I just wanted to kind of make a point on that. Also, if you look at the non-GAAP EBITDA and also the non-GAAP operating loss on page 12, you can see that we have also executed an improvement in Q4 over Q3. In terms of cash, our cash balance at the moment is roughly about CNY 1.1 billion. If we turn to the next page, which is the non-GAAP operating loss bridge. I guess, the point that I wanted to make here is you can see that our non-GAAP operating loss narrowed from CNY 89 million in Q3 to CNY 67 million in Q4. There's actually a couple of factors which we should normalize.
The first one is the staff cost of CNY 47 million here. This staff cost increase was actually due mainly to the year-end accrual of the bonus. The second factor that I wanted to mention is the CNY 22 million decrease in the international revenue, which is due to expected seasonality in Q4. We have been telling the market, we have been communicating to the investors and to the capital market that Q4 has always been a slow season in the international market. If you take out those two factors in the bridge, that's roughly about CNY 17 million. Obviously, you may have to offset that by the government grant, as you can see on this page, which is CNY 36 million. If you take out those three factors, the net of those three factors is roughly about CNY 34 million.
You would have to take out CNY 34 million on this page in order to do a more apple-to-apple comparison in Q3 to Q4. In other words, I just wanted to mention that we could have done better than CNY 67 million non-GAAP operating loss in Q4, but I just wanted to identify those items that you may want to normalize as you analyze our financials. On to page 14, which is our segmental disclosure. You can see that basically across the board, we have an increasing revenue and our gross profit, as well as our segmental profit, both on a year-over-year basis and also on a quarter-over-quarter basis. One thing that I would like to draw your attention to is actually if you look at this page, on the education side, you can see that there's an increase of segmental loss or core segmental loss on the education side.
I just wanted to kind of make a statement of that, because again, if you look at the reason behind that loss, it's really because of there's two main factors. One, again, is the year-end staff bonus accrual factor, which is roughly about CNY 24 million. Then there's also, again, the seasonality factor of our international business, which I've also just talked about. That factor is roughly about CNY 22 million. So if you take out the sum of those two factors is roughly about CNY 45 million. So if you take out CNY 45 million from the variance of the CNY 106 million versus the CNY 157 million, and also if we add out a number of smaller one-time items. In fact, our segmental loss on our Education business is actually largely stable if you take out those items in order to normalize that line.
I just wanted to make a comment on that. On to the next page, which is the financial highlights for our Learning business. Our international Education business delivered solid growth with a 37% increase in revenue on a year-over-year basis, also on a pro forma basis, and also 32% increase on a full-year basis. Also, I just wanted to mention that our gross margin for our international business increased from 26% in 2015 to 31% in 2016, and that is on the back of our integration efforts to improve a lot of the operational efficiencies. Again, I wanted to point out that, again, that the seasonality factor. If you look at Q4 versus Q3, there's a reduction in the international revenue. But again, this seasonality is consistent with the historical trend and the market norm.
Again, we've talked about this to the capital market many times in the past. So if we turn to China delivered a 58% increase year-over-year in Q4, and also a 109% increase in revenue on a full-year basis. In 2016, we delivered a very strong contracted sales of over CNY 200 million. On to page 16. So if we look at the Gaming business, again, as Simon mentioned, we have had a great year in gaming in 2016. We delivered 21% and 23% year-over-year revenue growth in Q4 and full year 2016 respectively. If you look at our core segmental profits, it increased by 9% year-over-year and also 43% on a full-year basis. Again, that is supported by our operating leverage. If you look at ARPU in Q4 increased by roughly about 29% to CNY 369.
Mobile gaming, we have had a big quarter in mobile gaming in Q4. If you look at Q4, our mobile gaming revenue increased year-over-year by 120%. If you look at a full year basis, mobile gaming increased by 100% in revenue. If you look on a sequential basis, mobile gaming revenue also increased significantly. Quarter by quarter, in Q4, mobile gaming revenue increased by 45%. I also wanted to make a point on the successful launch of our new game, Heroes Evolved pocket version. This is actually a long-awaited launch. By the way, Heroes Evolved is our new brand. It used to be called Calibur of Spirit, so just wanted to make sure that you guys know that.
We launched the mobile version of this game in late December, and we've had extremely positive feedback, and we expect that this game is going to be able to catalyze revenue in the first half of 2017. With that, I'm going to turn back to Simon, and Simon can talk about the outlook.
Well, thank you, Ben. I took you guys through kind of a journey in the past, but now I'm going to take you into the future. I have to admit, I myself, when I look at a lot of things that we are looking at doing in 2017, I get very excited. Starting with our product, it's actually in 2017 for learning. We have the best product portfolio ever in our company because it's actually both for hardware and software. For the hardware, we have a very complete range of high-performance panels with the latest touchscreen technology. We are the only one that have it in the market. In addition to that, we also added a range of emerging market products that allow us to capture the high-growth emerging market that is coming on board.
Now, on the software side, two areas I talk a lot about, AR and VR already, but I want to point out we also will launch our App Store and content store starting in the U.S. together with ClassFlow. That's part of our strategy to start monetizing our community, which I get very excited about. I mean, we can have the world's largest community, but without content I don't think we'll go anywhere. One of our tasks, well, is actually our main task in 2017, is actually going to acquire and partner with companies so we can gain access to more content. We started to do it in 2016, but we'll do even more in 2017. I did talk about Pearson and the likes, and those are the companies that we are talking to. I talk about gaining traction in capturing the emerging market.
A case in point, we made an announcement just recently. It's our cooperation with the Moscow government. It's actually the first phase alone that's close to 8,000 classrooms that we're going to be installing. We are very excited, and I can assure you that's the first of many to come in 2017. Of course, we'll continue to build the learning community, both international and China. I did talk about the big push into the B2C market, leveraging our very first product called KIZVR in English Galaxy. The other very exciting thing for me is actually, as you heard me talk a lot about the lifelong learning vision, but for the past two years, we've been very focused on K12. Starting at actually the beginning of this year, we venture outside of the K12 arena. We started to look at the professional learning area.
We launched an engaged community in the U.S. by running a few seminars using our technology, which is the holographic technology, which is the investment we made in our media. We held quite a few events in the U.S., in Portland, in Seattle, featuring Tony Robbins, and he's going to be somebody we're going to be working with. Tomorrow night, right here in Hong Kong, we will bring that into Asia for the first time. We're going to use the same technology. We're going to bring Professor Stephen Hawking from Cambridge into Hong Kong without having him leaving Cambridge to give a one-hour presentation and then spend half an hour interacting with the audience. That's our implementation called O2O. Instead of online to offline, we do it the other way around, which is offline to online, using all these offline activities to acquire our customers.
I think it's going to be very exciting. I have a page I can describe very quickly to you on what we mean by how to acquire the customer and how we monetize going forward. On the gaming side, I just want to mention two points here. Ben talked about the mobile gaming with Heroes Evolved. We expect it to be a breakout year because it's a mobile game and also is part of the game that you all know very well. The other one is actually the number of new games that we will be launching in 2017. We said will be at least five new games, which is actually very exciting. The next page is actually just a pictorial to show you what we mean by the overall implementation.
One of the interesting things for this holographic technology is actually all the content that we developed is actually afterwards. We can use it on any other device and anytime, anywhere. This is actually a way when not only we can acquire customers, but also we can use it to create content that we can use later on. Maybe at a later date, when we meet face-to-face or something, we can take you through the whole business case. To me, the interesting part is that you use an offline event and then you can acquire customers. That means your customer acquisition cost will be quite low. With that, I'm going to pause and then go into kind of the KPI we set for ourselves and what we'd like to share with you. Of course, it's at a very high- level.
In general, that's how we look at 2017. We continue to see growth in both of our businesses. That's an obvious statement. For the learning side, we expect our growth in 2017 is even faster than 2017 because there's two factors driving it, product refreshment cycle, and also we start to optimize on our position in the emerging market. A different way to look at it is the countries along the One Belt, One Road initiative, and Russia being one of them. We expect our gaming revenue growth will continue to be in double digits. We'll continue to grow our learning community. We set a goal for ourselves to reach over 10 million users in our community with 3 million teachers. That's a very aggressive goal we set for ourselves. We also expect to start monetizing our learning community.
That's why I talk about App Store and content store. Last but not least, we are target to achieve profitability in the year 2017. With that, what I want to do is I will ask Ben, our CFO, to give you a little bit more insight into our definition of profitability.
Sure, Simon. In 2017, we target to achieve operating profitability and that is going to be on the back of a few things. First, Simon talked about gaming revenue growing in double digits this year. We're very confident of that. As gaming revenue grow, the operating profits from the Gaming business is going to grow more than the revenue because of the operating leverage. That will contribute to our bottom line increase. On to the Education business, we're also going to see revenue to grow both in China and also in overseas market. As you can see, we've acquired Promethean for over a year now, and we have done a lot in terms of integration and also operational efficiencies improvement and cost rationalization.
This year on the top line, we're going to continue to grow our revenue by penetrating into emerging markets and also by growing our revenue in our base markets such as in the U.S. With that, we're going to be able to increase our revenue significantly, especially in the international markets. Then with operating expense being very controlled, we will be able to grow our operating profit significantly for our Education business. With the combination of all of the above, we are confident that we will be able to achieve profitability on an operating level this year. With that, I think we will turn back to the operator, and we will be ready for Q&A.
Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hashtag. Once again, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Please feel free to ask your questions in both English and Chinese. Participants are requested to limit the questions to one or two questions at each time. Thank you. Your first question comes from the line of Hillman Chan of Macquarie. Please ask your question.
Thank you, management, for taking my question. I have a question about our mobile game publishing strategy in 2017. I understand that one of our mobile Eudemons game is being published by Kingsoft. Going into 2017, for the rest of the mobile games, how is our publishing strategy like? Are we partnering with further publisher or distribution channel?
Yes, I think the answer to that question is going to be both. I think it's going to be case by case. If you look at Calibur of Spirit, our mobile version in China, we're actually going to be publishing it on our own. Obviously, we're going to be operating the game on both iOS and Android. But if you look at Eudemons Online, we are working with Kingsoft closely on the new game launch scheduled in the middle of this year.
It's really going to be case by case. I think it will really depend on the game itself, and also the terms and also the dynamics with our partners.
But I would expect the majority of sections to be published by ourselves.
Okay. Got it. My other question is on your Moscow cooperation. Could you help us to quantify a little the impact? Just now, I think you mentioned 8,000 classrooms who install our product. Also in the announcement, you also mentioned about 15,000 educators will be engaged with the products, right? Could you help us to quantify the financial impact from this cooperation with the Moscow City?
I don't think we can disclose the financial information. Let me kind of repeat it at a very high-l evel. We announced phase one is 8,000 classrooms and covering, I think 15,000, maybe a little bit more than that in terms of teachers. Phase one. Okay. That's all we announced. I don't think we can talk any more than what the press release will indicate.
Okay. Understand. Thank you.
Thank you.
Just a reminder, participants are requested to ask in English only. Your next question comes from the line of Thomas Chong of BOCI . Please ask your question.
Hi. Thanks management for taking my question. I have a couple of quick questions. Can management talk about the profitability for education revenue in China market in 2017? On the other hand, if I remember correctly, we talk about our total revenue in 2017 to grow faster than 2016. Is there any business line which we see revenue re-acceleration? Thirdly, is about the 2C strategy that we talk about last quarter. Is there any big picture about how much revenue that we are going to generate from 2C initiative in 2017? Thanks.
Thomas, I have to apologize because if I talk about the revenue, I will be giving guidance. That is why I term it this way. Let me repeat myself in terms of learning growth. Overall growth in revenue, we expect it to be faster than 2016. I think that is about the only thing I can disclose at this point. We started to go into the B2C market. We just launched our product, so we will go into it. You can kind of do your own model on that one. I think that is about all I can say. Thank you.
Thank you.
The next question comes from the line of Ryan Roberts of MCM. Please ask your question.
Good evening, management. Thank you for taking my question. Just a couple of real quick ones from me. Just in terms of the Education business, it looks like the margins have bounced around a little bit there. I am just kind of curious, can you give us a sense of, and I think you mentioned before we have rationalized the cost structure, and we are kind of ready to push forward. Can you give us a sense of how some of those cost items might be impacting the margin as we look ahead?
I do not know kind of definition of bounce around, because it is actually what Ben said is actually we improve our margin in 2016. That is a couple of things. One is actually on SG&A, we optimize it. It is actually that helps. Oh, you did say margin, right. It is actually, okay, so forget about what I said.
Yes.
What we did is actually we execute our supply chain strategy. Instead of doing the manufacturing ourselves when we move the panel, we outsource a lot of it. It is actually we outsource to OEM. We outsource to more than one OEM. That is kind of result in the improvement in margin. Going forward, I think two things will come into play here. One is, we continue to be very aggressive in doing cost reduction for our product. I think the other one is actually we have a strategy to either maintain or improve our ASP. You say, how do we improve our ASP. It is actually with new features in our product. That is why I highlighted we have the best product portfolio from a hardware perspective in 2017. Our number one is actually on our high-performance panels.
We are putting a latest technology called FlatFrog, which basically the way you think about it is actually basically the big panel is more like a giant iPad for you. The writing is just like you write on a piece of paper, and then you can draw and you can paint on it. With that, you can demand a higher ASP. The other one is actually we introduce an emerging market product, so we don't have to take the high-performance product to sell it into an emerging market, and price cut to do it. So we have all these different effort to continue to improve our margin.
Got it. Thank you very much.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. Once again, it's star one if you wish to ask a question. There are no further questions at this time. Oh, we have another question just queue in from the line of Ryan Roberts from MCM. Please ask your question.
Thank you for indulging me for one last question, just a quick one.
Sure.
Just looking at the game portfolio, for 2017, I think you said there were at least five games in the pipeline. Can you give us a sense of what you're expecting, or if you have expectations you can share with respect to the impact of, I guess, the mix of mobile, and how you're going to see that pushing the top line and more the legacy stuff?
Okay. I think what I can say is, if you look at our pipeline of at least five games that we're going to launch this year, I would say that most of them, or majority of them, is going to be mobile. For example, we just launched Heroes Evolved mobile version in China, and we have received very good feedback, in terms of the new users that we've ramped and also the activities. We're confident that this game is going to drive up our mobile gaming revenue significantly. Also, if you look at our Eudemons Online, the Kingsoft version, that is also a mobile game as well, and we also have high hopes for that game as well. Those two games will be a significant driver of our mobile gaming growth for this year.
If you look further down the road, we also have another Eudemons Online mobile game, that's going to be a 3D mobile game that we're targeting to launch in the second half of this year. Also, we have two more games, that is going to be leveraging the technologies and the IP of Heroes Evolved, which is going to be launched also in the second half of the year. One is a mobile game, which is going to be a TCG game. Then there's a TPS game, which is third-person shooting, that actually will be on both mobile and client base. Just for sake of completeness, we also have Titanite PC version in China, which is also going to be launched in the first half of the year.
You can see that a lot of those games will be mobile, and that is why we are confident of the mobile gaming growth for this year.
Got it. Thanks, Ben. Appreciate it.
Thank you.
The next question comes from the line of Eric Qiu of CCBI. Please ask your question.
Hi, Eric.
Wait. Hello?
Yes. Hi, Eric. Go ahead.
Hello, Simon and Ben. Thank you for taking my question. My question regarding to the, is for the Education business. I just want to get a sense of how would you expect to monetize in China market. You probably cannot say how much you tuck into growth in China market for the revenue. I just want to have a sense of where the revenue for China market mainly comes from.
Well, it actually came from, I talk about the B2B side. That we will continue. Then the additional revenue, we are looking at how we can expand on the B2C side with our first product, which is actually, again, KIZVR and English Galaxy. But one of the big focus we are going to have for this year is actually really to ramp up our user base, our community base, in China. So I would characterize our strategy in China is actually two-pronged. One is actually we will continue to aggressively grow our revenue. As you can see, in the last two years, we have been growing at a very high percentage, and that will continue. But the other one, because it is actually we have also have to build our future.
As you know, we are an online community company, so, we have a very aggressive target for us, to grow our user base in China.
About how much percentage of the domestic revenue were from 2B, and how much were from 2C? For both parts, what is the ASP?
Eric, if I answer those questions, then you probably can tell how much revenue we are going to do. So I try not to go to jail because of that. The way I will answer it, Eric, is actually, we are starting to go into the 2C market. I would expect that 2017, for our entire Learning business, majority is still on the 2B market. I think for the 2C market, we get to look at it from a different area. If you remember, we built a community in the U.S., so we start to monetize it. So it is actually some 2C market is from the monetization of the community. The other part is actually pushing out 2C market.
That will be similar to China, but I would say in China, because we only started to build our community second half of 2016, the community is not as big at this point as the U.S. one. The 2C part is actually more from the product. But at the end of the day, 2B market is still bigger than 2C in 2017.
Okay, thank you.
The next question comes from the line of Susanna Chui of DBS. Please ask your question.
Hey. Hello, Ben, and also Simon. Thank you for taking my questions. I am so happy that you will launch the App Store and also the content store in 2017. Can you give me more color on them? For example, have you contacted any third-party developer already on the App Store and also the content store? Any killer applications you think that there will be on the App Store and also the content store? Any target for the ARPU per user? Thank you.
Well, actually, we are very happy, too. I am glad that you are happy. I think I can only answer those questions in general terms. As you remember, launching an App Store, this is not new to us. Because we have built 91.com, we know how to run the App Store. We know how to make it happen. To answer your question, yes, we have contacted people. We have partners. We have all that. But we haven't launched it, so I can't divulge the detail at this point. Don't forget, there are two stores we are launching. One is the App Store, the other one is the content store. I think the difference between this one is actually we have even more ways to monetize the community than before. Again, I can't talk about ARPU. We have internal targets and all that.
We are going into it. Throughout the year, you will see the progress in that one.
Okay. I have a second question. I see that you have the target of 3 million teachers in 2017. They are mainly the target is mainly come from overseas or any teacher target in China as well? Thank you.
China is actually is a part of it. I would say China is a major part of it.
Okay. Now yo u have around 2 million teachers in overseas market. The extra 1 million, the target is mainly come from China, right?
No, it doesn't work exactly like that. In the 2.6 million users we have in the U.S., over 1 million are teachers, and the rest are students. We have a small number of parents. Let me step back. The way we see our community in the future is actually they have teachers, students, and parents. Okay? All of them. Because it's actually the way we build our community is actually we go and embrace the teacher first, and then the teacher will connect with the students, and then the student will connect with the parents. That's how the sequence works. That's why you see the 2.6 because we started towards the end of 2015 to build it.
That's why you have more teachers in there, which is actually over 1 million, and the rest is actually a lot of them are students and then a few parents. Okay? Then it will be the same journey in China. That's how we work it. That's why if you look at in one of my slides, our target is to build a community is actually over 10 million total users. Then with 3 million of them are teachers. The rest will be students and parents. In the 3 million, if you do the math, in there already, there's 1 million teacher in there. We will add another 2 million. Without China, it's hard to make that goal.
Okay, got it.
Okay, thank you.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. If there are no further questions at this time, I would now like to hand the conference back to Simon for the closing. Please continue.
Well, thank you, operator. Thank you for attending our call. As a management team, we are very excited about 2017. We are very confident we can meet all the KPIs we set out for ourselves. The key points are this: We continue to see a growth in the L earning and the Gaming business. We see even faster growth in our Learning business than 2016. Those are the two key points. The next two is actually one is we will aggressively grow our user community, which is actually very important. Our target is actually over 10 million cumulative users. Last but not least, is actually Ben went in and explained it to you, we are target to achieve profitability in 2017. With that, thank you so much for your time, and we'll hope to see you face to face very soon. Thank you.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.