Dear investors, hello everyone. Welcome to the investor meeting for IGG's 2025 full year results announcement. Today, both our presentation and the Q&A session will be conducted in Mandarin. In addition, the presentation PowerPoint has been uploaded to the investor relations section of igg.com. Before the meeting begins, please allow me to introduce the management. Executive Director and Chief Operating Officer, Mr. Xu Yuan .
Dear investors, hello everyone.
Executive Director and Chief Financial Officer, Ms. Jessie Shen. Dear investors, hello everyone. Today's meeting has two parts. Management will first introduce the group's business and financial performance for the full year of 2025. After that, we will have a Q&A session. Now, let us invite Mr. Xu to introduce the group's annual results for 2025. Mr. Xu, please.
All right. Thank you. Hello everyone. Thank you for attending our 2025 full year results announcement. First of all, on behalf of IGG, I would like to thank everyone for your continued support. 2025 was a relatively stable year for us. The company's total revenue reached HKD 5.5 billion, representing a slight year-on-year decrease of about 4% compared with 2024. In terms of profit, we achieved HKD 590 million, representing a year-on-year increase of 1%. Our core game products, such as Doomsday and Viking Rise, contributed HKD 1.14 billion and HKD 720 million respectively. Lords Mobile has launched for 10 years. It remains very resilient. Last year, it contributed HKD 2.17 billion in revenue. The reason a 10-year-old game has been able to rejuvenate itself is that we changed our own operating strategy.
We introduced a large number of third-party IP collaborations and deeply integrated them into our games. By leveraging external strengths, we successfully reactivated a large base of both new and existing users. For example, Lords Mobile collaborated with the well-known designer toy IP tokidoki, as well as the popular casual game Angry Birds. As for Doomsday, we collaborated with major IP brands such as Attack on Titan and others. After entering December, we saw Doomsday begin to gain strong momentum, with its revenue hitting new highs for two consecutive months. At its peak, monthly gross billing of approximately $16.5 million. What makes us particularly happy is that this performance was not achieved by heavy advertising spend, but through successful operations. Looking back, our overall advertising expense last year actually decreased year-on-year, down by 1%. Our gross margin also improved.
Through better operations, our gross margin increased by 3%, and our net profit margin increased by 1%. These are all very encouraging signs, showing that game operations do not rely solely on advertising. There are other effective approaches. This is something we have finally managed to figure out. As for our app business, monthly active users reached 67 million, representing a year-on-year increase of five million. Revenue amounted to HKD 1.062 billion, which we view as relatively stable performance. The net profit margin of the app business was maintained at around 9%, and we will see whether we can further improve this year. Our new game, Fate War, has benefited from its strong quality and innovative gameplay. In December, its gross billing exceeded HKD 30 million. The game is still undergoing continuous iteration and optimization.
As its metrics continue to improve, we believe its gross billing this year should continue to reach new highs. It is precisely the success of our new operating approach in Lords Mobile and Doomsday, together with the growth we are seeing in Fate War, that has given us strong confidence going forward. Regarding dividends, we have decided to declare a dividend of HKD 0.544 per share. Together with the interim dividend paid in the first half, IGG distributed a total of HKD 0.683 per share in dividends for the full year. In terms of share buybacks, we repurchased shares totaling HKD 110 million over the year, representing about 18% of our full-year profit. Through dividends and share buybacks combined, we returned a total of HKD 890 million to shareholders, equivalent to 152% of our net profit.
We will now move on to the PPT section. Please turn to slide seven. Slide seven shows our gross billing performance. Over the past year, both our game and app businesses have remained broadly stable. We can see that Lords Mobile recorded monthly active users of 6.3 million, Doomsday reached 5.3 million, Viking Rise reached 2.2 million, and Fate War reached 1.2 million. Overall, all of these titles are operating in a very stable manner, each with a relatively large MU base. Overall, this demonstrates that our long-term operation is very healthy. Let's now move to slide nine. Actually, let's first look at slide eight. Slide eight covers the operating metrics of our core games. Sorry, now turning to slide nine. For Fate War, the total number of registered users has reached 4.7 million, with monthly active users of 1.2 million.
In December, its gross billing reached HKD 30 million. Overall, we believe this title has significant potential. As such, our R&D team continues to refine and optimize the game, focusing on improving various retention and monetization metrics. We hope to further enhance its day one retention, day 30 retention, and other short-term retention indicators. At the same time, we also aim to improve its long-term retention, such as six-month retention, whether at the day 180 or day 360 level. With these improvements, we believe this game will continue to set new highs over the course of this year. Let's turn to slide 10, which covers our app business. Monthly active users reached 67 million, representing a year-on-year increase of 5 million. Revenue amounted to HKD 1.062 billion, and overall, this segment remains relatively stable. Slide 12 shows our annual performance analysis.
Starting with consolidated revenue, for the full year, we achieved HKD 5.497 billion. Gross profit amounted to HKD 4.56 billion. As mentioned earlier, our gross margin increased to 83%, representing a year-on-year improvement of 3 percentage points. R&D expenses totaled HKD 844 million, increasing slightly by 7%, mainly due to the addition of several new projects. Net profit reached HKD 586 million, up 1% year-on-year, and our net profit margin also improved by 1%. Let's turn to slide 13, which shows our cash position. Our cash position remains very solid as always. We currently hold HKD 2.41 billion in cash and cash equivalents. Driven by solid profitability, net cash inflow from operating activities amounted to HKD 700 million. Slide 14 covers our group's total assets.
Total assets currently stand at HKD 4.65 billion, of which current assets are HKD 2.99 billion and non-current assets are HKD 1.66 billion. Let's move on to slide 15, which covers share buybacks and dividends. As mentioned earlier, we have decided to declare a final dividend of HKD 0.544 per share. For 2025, total dividends amounted to HKD 0.683 per share, representing 134% of full-year profit. In terms of share buybacks, we repurchased shares totaling HKD 110 million, accounting for 18% of full-year profit. In total, share buybacks and dividends amounted to HKD 890 million, return to shareholders equivalent to 152% of our profit. To conclude, our mid-generation title, Doomsday, after more than a year of testing and upgrading, has seen a significant improvement in both ROI and retention.
Since December last year, its gross billing has continued to set new highs, and we expect this momentum to continue into this year. Our app business will continue to follow its steady growth model. While improving profitability, we will also continue to scale the business. For our new game, Fate War, we will further increase our marketing and promotion efforts with the goal of taking IGG to a new level. Thank you all very much. We will now move on to the Q&A session. Thank you.
Thank you, Mr. Xu. We will now move on to the Q&A session. We will take questions from both the telephone line and the online platform. For participants joining via the online platform, please submit your questions in text through the Q&A section on the webcast page. We will read your questions aloud later. Let us first take questions from participants on the telephone line. Investors who wish to ask questions via the conference call, please follow the operator's instructions to prepare your questions. I will now turn the call over to the conference operator.
Hello, everyone. To ask a question, please press asterisk then one on your telephone keypad. That is, press the star key followed by the number one. Please begin asking your question after you hear the prompt. Thank you. Again, to ask a question, please press asterisk then one. We will now take the first question from the participant with the last four digits, 5682.
Thank you for taking my question. This is Xinyao from CICC. Could management please share your overall outlook for 2026, particularly in terms of revenue trajectory and profit expectations? Could you also elaborate on your forward-looking plans and considerations regarding dividend policy? Thank you.
Sure. Regarding our core games, their performance has been relatively stable. For Doomsday, we expect it to deliver solid growth for the company in 2026. Our current target for Doomsday is to achieve monthly gross billings exceeding $20 million in 2026. Lords Mobile is expected to remain relatively stable. As for Fate War, it is still undergoing continuous iteration. We do hope that Fate War will be able to perform well this year. At this stage, its outlook is not yet fully clear. We may proceed with large-scale promotion during the year, the decision to scale up will depend on its performance metrics. Specifically, we will base our decision on indicators such as retention rates and ROI after optimization before committing to large-scale marketing investment.
Excluding the impact of Fate War, we expect our revenue this year to remain broadly stable compared with last year, reflecting a relatively steady development trend. On the profit side, we also expect results to remain relatively stable. The reason we declared a relatively large dividend this time is that we are confident in our ability to maintain our current performance. We also expect that by the end of this year, or by the time of our next earnings release next year, our cash balance will return to a level similar to the current position.
Understood. Thank you very much. I have no further questions. Thank you.
Thank you.
To ask a question, please press asterisk then one on your telephone keypad. That is, press the star key followed by the number one. Please begin asking your question after you hear the prompt. Thank you. We will now take the first question from the participant with the last four digits, 0213.
Thank you, management, for taking my question. My question is regarding the new games currently under development. Kevin, could you share which upcoming titles shown on the presentation deck are potentially the most promising, and what the expected launch timelines might be? Thank you.
Sure. There are two new games listed on the presentation slides, and I think it is sufficient to view them at a high level for now. Based on our many years of operating experience, if a game has not yet launched and does not have formal operating data or real user feedback, it is not something we believe should be overhyped or overly anticipated. Therefore, at this stage, we prefer not to provide extensive commentary on future new titles. Although the games may look very polished visually, whether they can ultimately succeed depends more on whether the gameplay is accepted by players. Currently, our focus is on making substantial iterations, updates, and gameplay innovations in Doomsday and Fate War. Once certain innovative gameplay features prove successful, we will try to integrate those proven elements into subsequent games. Of course, this is somewhat aspirational.
I hope that each successful feature can be transferred to the next title and continue to perform well. However, this still needs to be validated by actual data before we can make a final judgment. Historically, we have missed the mark many times when trying to forecast performance of new games. As a result, this time we prefer to be more conservative. For now, we believe our existing games deserve more attention, such as Doomsday, which we expect to deliver solid growth this year, and Fate War, which we also hope can generate meaningful growth. As for newer titles that have not yet launched, we would prefer to wait until they are officially released and tested.
We will look not only at short-term metrics, such as day one or day seven retention, but also longer-term indicators, including day 30 retention, day 90 retention, and even day 180 retention, before making a proper assessment of a game's potential. We kindly ask for a bit more patience. Once the games are officially launched and we have concrete alpha and beta test data, we will provide timely updates on their performance. This way, we can help investors make more informed investment decisions. Thank you.
Thank you, Kevin. I have one additional question regarding our R&D investment. I noticed that R&D expenses increased by approximately 7% in 2025. Could you share whether there will be any additional investments in 2026, either in terms of headcount or project development? Thank you.
At this point, we expect R&D expenses to remain broadly at the current level. The year-over-year increase in R&D expenses last year was mainly due to the addition of several new projects. We will not go into details on those projects for now, as they are still exploratory in nature and have not yet demonstrated clear traction or generated any materialized revenue. These initiatives include some experimental areas, such as new IP-related consumer businesses. As a result, R&D expenses saw a modest increase. In 2025, we expanded our development team, and the full-year compensation impact of these new hires will be fully reflected in 2026. Therefore, we expect R&D expenses in 2026 to increase slightly compared with 2025, but not by a significant amount. While we may not strictly control headcount, we are very disciplined when it comes to overall cost control.
As such, we do not anticipate any substantial increase in total expenses in 2026, only limited marginal fluctuations.
Understood. I have no further questions. Thank you, Kevin.
Thank you.
Thank you, management, for your responses. We will now move on to questions submitted online. This question asks about the company's outlook for Fate War this year. In addition, could management systematically elaborate on how the company plans to narrow the product gap versus leading players in the SLG genre, particularly from the perspectives of talent and creativity? Thank you.
Yes, that's right. As for Fate War, it's actually still ongoing now, meaning it's continuously being updated and iterated. As I mentioned earlier, IGG's R&D strategy is to conduct a large number of tests across many different aspects on the game Doomsday. This includes things like GVG gameplay, PVP gameplay, and various brand-new, unconventional, even quirky gameplay ideas. We test all of them in Doomsday first. After testing, some gameplay features succeed and some fail. For the ones that succeed, we directly transfer them into Fate War and implement them there. In this way, on the one hand, it helps reduce the cost of trial and error, and at the same time, it should also improve the overall success rate. From the current perspective, Fate War as a game is actually performing quite well. This, in a way, represents our overall creative approach.
With this approach, we continuously run tests and let players actually play the game, then use big data to analyze and summarize which ideas are likely to succeed and which may fail. Of course, even for successful ones, we can't say with 100% certainty that they will definitely work, but our ability to assess and control the probability of success is much higher than relying on blind testing. Therefore, this is one of the ways we use to narrow the gap between ourselves and other competitors. At the same time, with Fate War, we've also tried our best to make the game more lightweight. Over the past one to two years, everyone has seen that the successful SLG titles have mostly been more casual, lighter SLGs.
Starting from Q4 of last year and continuing through Q1 of this year, the past 2-3 months, we made extensive modifications to Fate War to make it much more lightweight. You can see that when Fate War was first launched, it was in a horizontal layout, and the beginner area was a very large map. Players had to grind monsters inside it, sometimes for 5-10 hours, and it was easy to get lost as well. This kind of design really made the game overly heavy. Over the past year, we've carried out a series of revisions. First, we switched the game to a vertical layout. At the same time, if you go in and play it now, you'll notice that the beginner map has been significantly reduced in size.
The tasks inside have become very simple, and players no longer get lost or have to run around unable to find monsters. This is our way of narrowing the gap between our previous heavy SLG design and the current generation of lighter, more casual SLGs. Overall, we remain very confident in Fate War. Based on what we're seeing so far, we believe that this year the game has a strong chance to continue reaching new highs. In December, it achieved around $4 million in revenue. The growth has been quite solid. Looking ahead, we hope that this year we'll be able to see even higher and better results. Thank you.
Thank you, Mr. Su. The next question is also about Fate War and includes three parts. First, does Fate War have a relatively clear promotion schedule for this year? Second, will Fate War be promoted in mainland China? Finally, at what stage of testing do you expect to begin large-scale promotion? Thank you.
Sure. As to the exact timing of when we start promotion, that is entirely driven by our testing results. What we are looking at mainly comes down to a few key metrics. First is long-term retention. Second is the payback period. If a game needs more than two years to break even, then it's simply not viable for us. If it can break even in around one year, then we would begin promotion. At the moment, Fate War's payback period is roughly 14-15 months, so it's already getting quite close to our internal decision threshold for scaling up promotion. We should be rolling out a fairly major update in the next couple of days, likely in late March or early April. After that update goes live, we'll observe the overall data performance.
If the metrics trend positively, there's a good chance we could start promotion around mid-April or toward the end of April. That said, if the results are still not at a level we consider ideal, because Fate War is not our only title. Within IGG, we also have Lords Mobile and Doomsday. If Fate War's retention or ROI does not outperform Doomsday, then our advertising budget will be allocated entirely to Doomsday instead of Fate War. However, if Fate War's data reaches the level of Doomsday or even surpasses it, then the advertising budget will be directed to Fate War. As for mainland China, we have already begun the process of applying for a publishing license. The exact timing of approval depends on the relevant government authorities' review process. We believe the submission was made starting in end of last year.
Based on this, we expect that there's a possibility of obtaining the mainland China license sometime this year. That's essentially the current situation. Thank you.
The next question is about the company's future dividend policy. Does the company have a specific payout ratio or a target range so that investors can have a more stable and predictable expectation? Thank you.
On dividends, our long-standing approach has been that we would like to maintain a relatively high payout. However, there is one point I always have emphasized. When deciding on future dividend levels, we must first ensure that the company has sufficient cash reserves to support business development. Only on that basis do we make a comprehensive assessment of the dividend level. That is the most responsible way to look at dividends. As everyone can see, the dividend payout this time is quite substantial. Why are we able to pay such a large dividend? Fundamentally, it's because we have confidence in our business. We have seen Lords Mobile come back to life, Doomsday begin to enter a growth trajectory, Fate War showing potential to start growing, Viking Rise performing well, and our app business generating solid profits.
Under these circumstances, we are confident that even after distributing such a large dividend this year. By the time we release our annual report next March, our cash position could return to roughly its current level. This large dividend reflects our confidence. By this time next year, we will reassess again whether there are more new businesses that require additional funding, whether pushing Fate War further would require more capital, whether our current funds are sufficient, and what its payback period looks like. If the payback period is around one year and our funds are sufficient, it is also possible that we would continue to consider another large dividend. To put it responsibly, on the premise of ensuring ample cash reserves for the company's business development, we will aim to determine our dividend policy at the highest level that we prudently can. Thank you.
Thank you, Mr. Su. The next question: Could you share the trend in user acquisition costs per individual user for several SLG games? As a follow-up, could you also talk about the company's thoughts or plans regarding AI games? Thank you.
Last year's success was actually not driven solely by paid user acquisition. User acquisition has always been one of our strengths, and our strategy is global marketing. We don't concentrate spending in a single market. Instead, we spread it globally. For example, acquiring tens of thousands of users per day in the U.S., a few thousand in Europe such as Germany and France, a few thousand in Southeast Asia, and a few hundred to one or two thousand in markets like Japan. By distributing our acquisition efforts across regions, we are able to keep the cost per user at a relatively low level. At the same time, our biggest operational success this year has been leveraging collaborations with third-party IPs and deeply integrating those IPs into our games. By doing so, we can borrow strength from others to successfully reactivate both new and existing users.
One key difference between IGG and many other game companies, especially newer ones, is that we have a very large base of legacy users. For example, Lords Mobile has accumulated over the past 10 years, more than one billion registered users. When you introduce other well-known brands or IPs, you see situations where old players think, "Wait, why is Angry Birds appearing in Lords Mobile? I have to go take a look." As a result, many of these users return. Similarly, the introduction of designer toy IPs, such as tokidoki, has brought in a large number of Japanese players, as well as younger, next-generation players globally. In this context, user acquisition is no longer purely dependent on paid buying. It becomes a more integrated, holistic strategy. Beyond paid acquisition itself, we also work with third parties and leverage external IPs to amplify our reach, using leverage to create leverage.
This has been the biggest shift in our approach over the past year. Thank you.
Thank you. The next question is for management. Could you talk about some of the more interesting products currently in your pipeline? Also, do you have any plans or strategies in casual games or mini-games? Thank you.
Yes, regarding mini-games, we are currently in the planning stage. This is because we've seen that various mini-games have been very successful in mainland China, so we've already started working in this area. This also links back to the earlier question about how AI can help our games. Many of our mini-game projects are now being developed with the support of AI technologies. Sorry, just to confirm, what was the other part of the question? The second part was about something beyond mini-games, right?
Yes, the question was whether there are plans for casual games and mini-games, and whether there are any interesting products in the pipeline.
Right. As for casual games and mini-games, at the moment, we are not heavily investing in traditional casual games. This is because IGG's core strength has always been in SLG games, so for now, we want to stay focused on what we do best. That said, one important direction we are pursuing is to casualize SLG, making SLG games lighter and more accessible. This is currently a key strategic focus for us. In other words, we want to concentrate our resources and efforts on our strengths rather than spreading ourselves too thin by experimenting extensively with other genres. The casual mini-games we are developing are largely still casualized SLG-type games. Thank you.
Thank you, Mr. Su. The next question is: Last year, management mentioned that simulation management gameplay would be added to Lords Mobile. Could you share an update on the progress? Also, what is the company's outlook for the game's monthly revenue in 2026? Thank you.
Regarding the simulation management gameplay, we already introduced it in the March 12th update. Player feedback has been quite positive. Of course, this is Lords Mobile's first attempt at lightening the experience and integrating simulation management gameplay, which are quite different from traditional SLG gameplay. There are inevitably some areas that are not yet perfectly smooth. That said, the Lords Mobile team has been very effective. Around the Qingming Festival, they are planning another update to fine-tune and adjust the March 12 version. From what we see now, players are actually very optimistic about the simulation management features. We expect Lords Mobile's revenue this year to remain relatively stable. Assuming advertising spend does not increase, the game should be able to maintain its current revenue level and continue to contribute a solid net profit to IGG. Thank you.
The next question is for management. Could you comment on the recent global reduction in fee rates by the Google Play Store? Do you plan to reinvest the savings into advertising, or will they flow through to profits? Thank you.
This is actually a major positive development for all game companies. Previously, the platform fee for existing users was 30%, which will now be reduced to 25%. For new users, the fee is reduced further to around 20%. As a result, for new users in particular, net revenue can increase by roughly 10%. For IGG, an additional key point is that Google Play has lifted restrictions on third-party payment options. This means that we can not only benefit from lower platform revenue shares, but also introduce third-party payment solutions. By doing so, payment processing fees could be reduced even further. For example, with options such as PayPal, the fee may be only around 3%. Therefore, this should lead to a meaningful improvement in IGG's overall gross margin. Looking toward 2026, as for how we will deploy these savings, it will depend on circumstances.
If advertising delivers very attractive returns on investment, we would reinvest part of the cost savings into advertising to expand both revenue and profits. However, if advertising becomes relatively saturated, we would rely more on IP collaborations and operational initiatives to grow our user base. In that case, a larger portion of the incremental revenue will be retained as profit, thereby further improving our profit margins. Thank you.
The next question is, what is the company's planned marketing budget for Doomsday this year? Thank you.
At the moment, Doomsday is in a very healthy state. We are allocating roughly 50% of its monthly revenue toward marketing and promotion. As you can see, even without significantly increasing ad spend, its DAUs continue to rise, and its revenue has also been growing. While the growth is not explosive, it has been steady, which is a very encouraging sign. This year, if there are no particularly major content updates, we plan to maintain the current pace of promotion. At certain key milestones, we may moderately increase spending. For example, adding an incremental $5 million-$10 million in marketing investment. Our goal for this year is for Doomsday to gradually grow to around $20 million in monthly revenue. We emphasize gradually, because maintaining profitability is very important to us.
As everyone can see, there is significant global uncertainty right now, with ongoing conflicts such as the Russia-Ukraine War and the escalation in the Middle East. These uncertainties make revenue and profitability especially important. As a result, we are not pursuing overly aggressive advertising strategies. Growth this year will be more measured, and we expect revenue to steadily approach our target of $20 million in monthly run rate. Accordingly, you should not expect extremely aggressive spending scenarios, such as HKD 30 million-HKD 50 million of ad spend in a single month. Thank you.
Okay, the next question is, do you expect further improvement in revenue and profit margins for the app business? Thank you.
Regarding the app business, it is currently relatively stable. The team is continuously experimenting with new apps. If we are able to identify and scale a successful new app, we will continue to invest and drive revenue growth. In this sense, the app business is somewhat similar to games. You need to keep trying. Once you discover a new growth driver, revenue can increase very rapidly. If, on the other hand, we do not identify a clear new revenue driver, then performance will remain relatively stable. In that scenario, our focus would shift toward improving profit margins. The profit margin for the app business was around 9% in 2025. We expect some improvement this year. If there are no major new app launches that require heavy promotion and therefore dilute margins, we expect the overall profit margin of the app business to show a meaningful improvement in 2026. Thank you.
All right, the next question. When does the company expect to see the next generation of lightweight or casual SLG games begin large-scale testing? As a follow-up, what kinds of innovations or differentiation will these games have compared with current leading SLG titles? Thank you.
Regarding lightweight SLG, we actually started moving in this direction with Fate War. Originally, Fate War was a very hardcore, heavyweight SLG. After this year's updates, Fate War will be the first title to transition into a lightweight SLG. Beyond that, we are also developing additional titles. In our current pipeline, we expect to launch 2 to 3 lightweight SLG games this year, with testing likely to begin around Q3. As for innovation, gameplay in the early stages will lean more towards simulation and management mechanics. For the mid to late game, many of the innovations and experiments we are currently conducting in Doomsday will be incorporated. Any gameplay mechanics that prove successful in Doomsday will be integrated into our new titles, including this new generation of lightweight SLG games. Overall, we expect to see testing of our next-generation SLG titles around Q3, roughly in August, October. Thank you.
All right, the next question, could you share the latest progress on how AI technology is reshaping game development and operations, including any quantifiable impacts? What is the company's headcount plan for 2026? Thank you.
AI is evolving so rapidly that it's actually quite difficult to predict its ultimate impact on staffing. At IGG, we were early adopters of AI technologies. For example, we introduced AI-powered customer service and AI-assisted art production relatively early on. More recently, as AI programming tools have matured, our engineering teams have also started to adopt AI extensively to assist with development tasks. That said, games are inherently complex systems, particularly on the programming and architecture side. Under current conditions, it is still quite challenging for AI to fully replace human developers. As a result, at this stage, it's hard for us to clearly quantify how much AI will ultimately affect our staffing levels, especially given the pace of AI advancement. We're also not a SaaS company, where the impact of AI tends to be more immediate and pronounced.
In the SaaS and software services space, products are relatively standardized and therefore easier for AI to automate or replace. The game industry, by contrast, is much more creativity driven. Even strong creative ideas do not always guarantee success. We sometimes joke that game development is not just about creativity, it's almost a kind of alchemy. AI, at least for now, doesn't fully understand that aspect. That said, we will continue to experiment and actively adopt new AI technologies wherever possible to improve efficiency. While cost reduction may not always be guaranteed, productivity and efficiency gains are, in our view, absolutely achievable. Overall, everyone will see that our R&D efficiency will improve significantly compared with the past, this is a contribution and value that AI brings to IGG. Thank you.
All right. The next question is how the company plans its capital expenditures for 2026. Thank you.
As for capital expenditures, there should not be any significant impact going forward. This is mainly because the large-scale capital expenditures have already been paid completely. IGG has always been a relatively asset-light company. Over the past three years, we have been constructing an office building for our own use, which has now been completed, and the related costs have basically all been paid. Our capital expenditures in 2026 are expected to decrease significantly year on year. Thank you.
Thank you, Mr. Xu. The next question is how Viking Rise is currently performing in terms of gross billing. What is the company's overall plan for the future of this game, including its promotion strategy and gross billing expectations? Thank you.
As for Viking Rise, its performance is currently very stable. By the end of last year, it had already reached around $9 million in monthly gross billing. We will continue to promote the game in a gradual and steady manner. As mentioned earlier, given the uncertainties in the global market, including geopolitical conflicts and other factors, we do not intend to adopt overly aggressive promotion strategies. Viking Rise is a very high-quality game in terms of its art style, gameplay, and overall design. Although it is relatively intensive, it is very popular in Western markets, including Europe and the Nordic regions. We plan to continue operating and promoting the game at the current pace. Looking ahead, we hope that in 2026, the game will once again surpass $10 million in monthly revenue. This is our expectation for Viking Rise in 2026. Thank you.
The next question is whether the management members have any plans to increase their shareholdings. Thank you.
Yes. Members of our management team have been steadily increasing their shareholdings over the past three years. Following this round of dividend distribution, we believe there will likely be a continued willingness among management to further increase their holdings. This is because we see the company's overall performance continuing to improve. While the external environment remains uncertain, the company's operations have been very stable. After the large dividend payout, we expect that, on an individual basis, management may have plans to further increase their shareholdings. Thank you.
All right. The next question is whether, in the AI era, the company has made any changes to its advertising, marketing, and user acquisition strategies. Thank you.
AI has now penetrated virtually every industry. The advertising sector is no exception. With the support of AI, external advertising platforms and channels are able to build more precise user profiles, thereby improving the efficiency of our user acquisition and achieving better advertising performance. As a result, we continue to focus our spending on the platforms and channels that deliver the strongest results. At present, we are actively leveraging AI in areas such as marketing asset creation and strategy analysis. We have already seen positive outcomes. For example, advanced AI tools in China, such as Seedance 2.0, have been extremely helpful for ad creation. In the past, producing a video could take up to a month.
Now, with Seedance 2.0, even though there may be a queue of six to seven hours, the task can essentially be completed in a single run. Overall, AI has provided significant support for our advertising creativity and related processes. We will continue to explore the application of AI across more marketing scenarios to further empower our business growth.
Thank you. The next question is, under what circumstances the company would consider canceling the treasury shares repurchased by the company? Thank you.
We do not expect to consider doing so. In the past, we repeatedly repurchased shares and then canceled them, only to realize that after cancellation, our market capitalization kept shrinking further and further. This runs counter to our objective of returning to the Stock Connect program. Based on our experience over the past several years, we believe it is more appropriate to retain the treasury shares rather than cancel them. This helps prevent a decline in IGG's overall market capitalization and allows us to use these shares for employee incentive plans. By utilizing treasury shares to incentivize our employees and management, we can encourage them to work even harder and create greater value for shareholders, forming a positive cycle.
Otherwise, continuing to repurchase and cancel shares would cause our market capitalization to keep shrinking and move us further away from Stock Connect eligibility, which would be contrary to our operating strategy. Therefore, at this stage, we do not plan to cancel the repurchased treasury shares. Instead, we will retain them as treasury shares for employee and management incentives, with the goal of continuously creating greater value and returning that value to shareholders. Thank you.
All right. The next question is whether the company currently has any AI application products and whether there are any AI application products or AI games under development. Thank you.
On the AI application side, we are currently developing one or two products within our app team. At the same time, we are also experimenting with application areas such as AI manga series. This is an area where we are continuously exploring and testing new possibilities. In addition, we are planning to make some attempts in AI-powered games as well, including exploring the integration of games with AI manga series to see whether this could form an entirely new direction. Overall, these are some of the AI applications and initiatives we are actively experimenting with.
The next question is whether the efficiency boost from AI will increase the output of our game content and improve the frequency of new releases and updates, or whether the impact has not been significant. I also have a second question.
All right. Let me address the questions one by one. The efficiency boost from AI has, in fact, been quite significant. In the past, developing an SLG game typically took around two to three years. Now, however, we are generally able to bring a game to the testing stage within about a year. As mentioned earlier, we will have new games ready for testing this August or September, and these projects have largely been developed in just over a year. What has enabled this acceleration? It is primarily the result of AI-driven improvements across our development processes. In this sense, AI has delivered a very tangible efficiency boost. What previously required three years of development can now be completed and tested in under a year. This represents the most significant way in which AI has benefited our game development operations.
The second question is: Looking ahead to the medium-term competitive landscape of the gaming industry, does management believe the future will be characterized by the strong getting stronger, or by a more pronounced long-tail effect?
In fact, the ideas of the strong getting stronger and the long-tail effect are not mutually exclusive. Once a game becomes strong, if it is operated with the right strategy and continues to evolve with the times, it can remain very resilient. Take Lords Mobile as an example. It has been operating for over a decade and is still performing very steadily. Looking ahead, for large game companies, once you successfully create a strong title and are able to continuously keep pace with the times, whether in gameplay innovation, development capabilities, or by leveraging AI to iterate rapidly and at scale, you can establish a position that is very difficult to challenge. This is also one of the reasons why we were able to declare such a high dividend this time.
AI has genuinely helped us a great deal, placing the company in a very stable position and giving us strong confidence in our future. In the current environment, I believe the industry is likely to move toward a structure where leading players continue to grow larger and stronger. Thank you.
The final follow-up question is: What impact will Apple's reduction in App Store commission rates and the improvement in the precision of third-party advertising and user acquisition have on our profitability? Thank you.
This is actually quite critical. Apple has traditionally charged a 30% commission, which has been quite burdensome. The fact that Apple is now proactively reducing its fees is very good news for the entire gaming industry. As for the improvement in the precision of third-party advertising and user acquisition, this could have a significant impact on profitability. With less targeted, blind spending, a large portion of advertising budgets can be misplaced. For a company like ours, total advertising spend can exceed $10 million USD per month. Even a small deviation of 10% could mean over $1 million USD in misplaced spend in a single month, which would add up to tens of millions of US dollars over a year. If advertising can be delivered more precisely in the future, it should provide substantial benefits to our overall profitability, as well as meaningfully support gross billing growth. Thank you.
All right. Due to time limits, we will take one final question on the company's level of AI adoption and usage. Given that AI has effectively leveled the playing field in terms of programming capabilities, which may benefit smaller and mid-sized companies and lower the traditional technical barriers of the technology giants, how does IGG view and promote the use of AI within the company today? Thank you.
Yes, AI adoption at IGG is actually very broad. Pretty much everywhere, even on the TV screens next to the elevators, we are showing content that teaches our employees how to use AI. This reflects how deeply and closely we are paying attention to AI across the entire organization. Compared to concerns in the market, we are more focused on the positive impact that AI can bring. Addressing those concerns first, successful games are highly sophisticated systems that require long-term operation and maintenance. For example, balancing game mechanics and designing gameplay loops do not follow any fixed formula. Most of the time, it is a process of continuous trial and error, iteration based on data, and ongoing refinement. There is no textbook that can tell you, "If you follow this exactly, you will definitely make a successful game." This also applies to AI.
AI is trained on large-scale data and essentially learns from existing materials. Before true AGI emerges, AI is not capable of independently creating a successful game. In this regard, human creativity and judgment still retain a clear advantage. At present, AI-generated content may appear impressive and creative at first, but tends to involve a high degree of randomness and lacks long-term stability. At this stage, we do not believe that AI alone is capable of fully generating commercially viable products that can be operated sustainably over the long term. Game development today remains a process that relies heavily on the combination of human creativity and AI tools. Over the past year, I have also conducted various internal experiments to assess whether AI could independently replace human input. Based on our experience so far, these attempts have not been successful.
As a result, our current conclusion is that over the next one to two years, successful games are most likely to be developed through close collaboration between human teams and AI. From our perspective, AI should be viewed as a highly effective productivity tool. We are able to use AI to rapidly turn early-stage ideas into visualized prototypes through large language and generative models. This allows our teams to discuss concepts more efficiently and conduct small-scale testing at an early stage, helping us quickly validate whether an idea works or not. By doing so, AI significantly shortens the exploration phase in early development and reduces trial-and-error costs. As a result, we are able to improve decision-making efficiency before committing meaningful resources. Internally, we are actively keeping pace with the latest developments in AI, and we are continuously integrating commercially available AI tools and models into our development workflow.
Based on our current experience, AI has already been very helpful to IGG, and we believe it is also delivering meaningful benefits to the broader gaming industry. Overall, we view AI primarily as a tool that enhances productivity and efficiency. Overall, AI has meaningfully shortened our development cycle. In the past, it typically took us around three years to reach a testable version of a new game. Today, with the support of AI tools, we are generally able to bring a product to the testing stage within roughly one year. We view this reduction in development time as one of the most significant benefits that AI brings to the gaming industry. Thank you.
Thank you to all investors for your active participation and insightful questions, and thank you to management for the detailed responses. Due to time limits, today's annual results webcast and conference call will now conclude. Thank you all for your continued interest in the company. On behalf of IGG, I would like to once again thank you for joining us. Thank you.
Thank you all