Earnings Call: Q2 2018

Aug 21, 2018

Ladies and gentlemen, thank you for standing by, and welcome to second quarter 2018 Kingsoft Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation, followed by question and answer session. At which time, if you wish to ask a question, you will need to press star one on your telephone. I must advise you that this conference is being recorded today, Tuesday, 21st of August 2018. I would like to hand the conference over to first speaker today, Ms. Francie Lu. Thank you. Please go ahead. Thank you, ladies and gentlemen. Good evening and good morning. I would like to welcome everyone to our 2018 second quarter and interim result earnings call. I am Francie Lu, the IR director of Kingsoft. I would like to start by reminding you that some information provided during the earnings call may include forward-looking statements, which may not be relied upon in the future for various reasons. These forward-looking statements are based on our own information and information from other sources, which we believe to be reliable. Please refer to the other publicly disclosed documents for detailed discussion on risk factors, which may affect our business and operations. Having said that, please allow me to introduce our management team who joined us today. Mr. Zou Tao, our Executive Director and CEO, and Mr. Francis Ng, our Executive Director and CFO. Now I am turning the call to Mr. Zou. I will do the translation for Mr. Zou. We maintained a steady operation during this quarter and achieved our established goals. We launched YSYY, our new 3D costume-changing mobile game in June, which topped the free game ranking on App Store on the day of its release. Kingsoft Cloud delivered a steady growth, and all of its business segments performed well on track to meet our strategic targets. WPS Office continued its strong momentum with the global MAU of WPS family reaching 300 million in June. In the first half of the year, it also released several brand-new products, including WPS Office 2019 and WPS Office for Mac. Our revenue was RMB 1,345 million in the second quarter, up 5% year-on-year and 6% quarter-on-quarter. The revenue of the first half of 2018 was RMB 2,609 million, up 4% year-on-year. In the second quarter, revenues from cloud services and office software and services and other businesses maintained healthy growth, up 54% and 68% year-on-year respectively. After rapid development in the past few years, China's online game market, including the mobile game market, appeared to have experienced a relatively sluggish growth in 2018. Facing the increasingly intensive competition in the mobile game market, we decided to push back the release date of our new mobile game, JX Online 3 mobile game, so as to align with our strategic deployment plan of our key gaming products. As currently expected that the commercial launch time of JX Online 3 mobile game will be determined in November after our internal testing results. Now I will turn the call to our CFO, Mr. Francis Ng. Thank you, Francie Lu. Thank you, Zou Tao. Hello, everybody. During the quarter, JX Online I mobile game, which launched in May 2016, continued to enhance the game quality and context, and contributed steady monthly growth billing, with outstanding performance and great vitality. Although this quarter brand-new mobile game, YSYY, did not achieve the expected performance financially, it did receive recognition from a wide range of player and ranked it number 1 on the free game chart on App Store on the day of its release. It reflected our endeavor to develop in the game segment and our commitment in achieving more breakthrough to adapt to the rapid changes in the game market. Our first animation, Dream Tower, premiered online on June 1st, and it has been viewed more than 40 million times up to now, which has great potential to develop into another core IP. The theme song for our animation, JX Online III, made its debut on bilibili.com and was highly rated by the fans of JX Online III. This helped to sustain the flagship game's popularity among users ahead of the upcoming ninth anniversary celebration. The JX World II mobile game was released on iOS on July 4th, which ranked at number 1 on the most frequently searched list, and number 2 on the chart of free games in App Store on the day of its release. We also plan to launch a series of game product in coming quarters, including the new expansion pack for JX Online III, JX Online II mobile game, and the Chinese Paladin. Kingsoft Cloud maintained a stable growth in the second quarter, and each business segment was in line with our strategic planning. Using three technologies, including AI, artificial intelligence, edge computing, and blockchain, Kingsoft Cloud not only helped the video cloud and game cloud clients strengthen their position in their ecosystem, but also work on smart cities and make breakthrough in area of government cloud, healthcare cloud, and finance cloud. As one of the first contractor of Beijing government health project, one of the largest government cloud project in China, Kingsoft Cloud has served 42 municipal committee offices bureaus in Beijing. It also reached a strategic cooperation agreement with Rizhao City to build a smart city together. Kingsoft Cloud launched Cloud HIS, meaning the healthcare information system, the China's first cloud-based medical and healthcare information system, and applied it in more than a dozen provinces and cities. Driven by new technology, Kingsoft Cloud successfully made breakthrough in technology upgrading for its video and game cloud. Looking ahead, Kingsoft Cloud will further improve product quality and expand its serving scope. It will also seek opportunities in overseas market, and continue to lead the industry to grow healthily. In the second quarter of 2018, WPS Office continued its strong momentum, launching a series of product and services to create better user experience. In July, WPS Office officially released several brand new product, including the WPS Office 2019, WPS Office for Mac, and WPS Documents. Equipped with the cloud and AI technology, these new product provide user with smarter office services that fit different working scenarios. For the personal value-added service of WPS Office, we continue to improve the membership benefits and enhance the content quality for our user. We also initiated the membership promotion, which successfully drove the number of paid membership and the growth of revenues. Furthermore, WPS Office participated in the World Intellectual Property Day, showing our commitment in the innovation-driven business and proprietary research and development. We look forward to contributing to proprietary innovation, intellectual property protection, and information securities. Users preference for domestic software will continue to bring more development opportunity to WPS Office. I will now discuss the Q2 and first half of 2018 operation and financial results. Let me start with the Q2 using CNY as the currency. Revenue increased 5% year-over-year and 6% quarter-over-quarter to CNY 1,346 million. The revenue split was 43% for online games, 35% for cloud services, and 22% for office software and services and others. Revenue from online game business decreased 28% year-over-year and 8% quarter-over-quarter to CNY 582 million. The year-over-year decrease was largely due to the decreased revenue from JX Online III and the existing mobile game. Partially offset by the revenue contribution from our newly launched mobile games. The mild quarter-on-quarter decrease was mainly due to the natural declining life cycle of the existing mobile game, and slight decrease in revenue from JX Online III. Daily average PCU decreased 15% year-over-year and increased 14% quarter-over-quarter to 800,000. Monthly average paying account decreased 24% year-over-year and 1% quarter-over-quarter to 3.3 million. The year-over-year decreases in ADPCU, average daily peak concurrent user, and the average paying account reflected the natural declining life cycle of the existing games, which was partially offset by the release of the new mobile game. The quarter-over-quarter increase in ADPCU was mainly due to the newly launched mobile game, resumed growth of JX3 after the expansion pack launch in the second quarter, which was partially offset by the natural declining life cycle of the existing mobile games. Revenue from cloud services increased 54% year-over-year and 12% quarter-over-quarter to CNY 469 million. The strong year-over-year increase was mainly driven by the robust increase of customer usage from mobile video and internet sector, demonstrating that Kingsoft Cloud further gain competitive advantages in particular industry through improving the quality of products and services by technology innovation. The steady quarter-over-quarter increase was largely due to the increased revenue from internet and government sectors, reflecting our effort on exploring new opportunity by providing high-quality cloud services. Revenue from office software and service and others increased 68% year-over-year and 39% quarter-over-quarter to CNY 295 million. The increases were largely due to the rapid growth from value-added service of WPS Office Personal Edition, driven by fast increase of premium member reflecting enhanced popularity of our membership privilege, infused with the rich and practical function. Increased sales of WPS Office to enterprise as a result of the increased user engagement driven by consistent product upgrades. Cost of revenue increased 38% year-over-year and 4% quarter-over-quarter to CNY 765 million. The year-over-year increase was primarily due to higher bandwidth and IDC cost resulting from increased customer usage of cloud services. Gross profit decreased 16% year-over-year and increased 9% quarter-over-quarter to CNY 671 million. The group's gross profit margin decreased by 12 percentage point year-over-year and increased by 1 percentage point quarter-over-quarter to 50%. The decrease of the group's year-over-year gross profit margin is a result of our change in sales mix, reflecting a significant increase in revenue contribution from cloud services, which has a relatively low gross margin with greater growth potential. Our research and development expenses increased 17% year-over-year and 13% quarter-over-quarter to CNY 431 million. The year-over-year and quarter-over-quarter increases were primarily attributable to the increased investments on new products and advanced technology. Selling and distribution expenses increased 17% year-over-year and 25% quarter-over-quarter to CNY 158 million. The increases were primarily due to the expansion of channels as well as an increase in marketing and promotional spending for our online games. Administrative expenses increased 81% year-over-year and 28% quarter-over-quarter to CNY 106 million. The year-over-year and quarter-over-quarter increases were mainly due to an increase in staff-related costs. Share-based compensation costs decreased 15% year-over-year and 11% quarter-over-quarter to CNY 52 million. Operating profit, excluding ESOP, decreased 80% year-over-year and 22% quarter-over-quarter to CNY 65 million as a result of the combination of above reasons. The operating profit margin excluding the impact of ESOP decreased by 20 percentage points year-over-year and 2 percentage points quarter-over-quarter to 5%. Net other losses were CNY 74 million, compared to losses of CNY 42 million in the corresponding period last year, and gain of CNY 90 million in first quarter 2018. The losses in the second quarter 2018 were mainly due to the recognition of foreign exchange loss in this quarter. The losses in the second quarter 2017 was mainly due to the additional provision for impairment on investment made in Xinyi and 21Vianet. We recorded share of profits of associate of CNY 66 million for the second quarter 2018, compared to the share of losses of CNY 3 million for the second quarter 2017, and share of profit of CNY 20 million for the first quarter 2018. The change was mainly due to that Cheetah Mobile has been accounted for as an associate since October 1st, 2017 and its continued profit margin improvements. Income tax expenses increased 18% year-over-year and 32% quarter-over-quarter to CNY 57 million. As a result, our profits to owner of the parent, including that from continuing operation and a discontinued operation, was CNY 101 million, CNY 250 million, and CNY 118 million for the three months ended June 30th, 2018, June 30th, 2017, and March 31st, 2018, respectively. Profit to the owners of parent excluding ESOP was CNY 139 million, CNY 306 million, and CNY 158 million for the three months ended June 30th, 2018, June 30th, 2017, and March 31st, 2018, respectively. The net profit margin excluding ESOP was 10%, 12%, and 12% for the three months ended June 30th, 2018, June 30th, 2017, and March 31st, 2018 respectively. I now turn to the first half 2018. Revenue increased 4% year-over-year to CNY 2,610 million. Online games make up 47% and decreased 25% year-over-year to CNY 1,214 million. Cloud services make up another 34% and increased 55% to CNY 888 million. Office software and services and other services make up 19% and increased 67% year-over-year to CNY 508 million. Our gross profit margin decreased by 11 percentage points year-over-year to 49%. As a result of the above reasons discussed, profit attributable to the owners of parent, including those from continuing operation and a discontinued operation, was CNY 290 million, CNY 489 million for the six months ended June 30th, 2018, and June 30th, 2017, respectively. Profit attributable to owners of parent excluding ESOP was CNY 296 million, compared to CNY 592 million in the prior year period, and the net profit margin excluding ESOP was 11% and 12% for the six months ended June 30th, 2018, and June 30th, 2017, respectively. Our statement of financial position. We have a cash and bank deposit of CNY 10 billion as at June 30th, 2018. Net cash from operating activity, including those from continuing and discontinued operation, was CNY 363 million and CNY 1,118 million for the six months ended June 30, 2018, and June 30, 2017, respectively. Cash used for capital expenditure was CNY 499 million and CNY 254 million for the six months ended June 30, 2018, and June 30, 2017, respectively. We managed to deliver a steady quarter. Looking ahead, we believe Kingsoft Cloud and WPS Office will continue to expand in revenue and maintain a steady performance. Considering the estimated commercial launch time of the new mobile games, continuous competition in CDN market, and the investment in the R&D for office software business, our operating results are expected to remain under pressure for the second half of the year. While when we look into 2019, we believe the overall performance will improve on account of the debut of our new mobile games, as well as the steady growth of Kingsoft Cloud and WPS Office. On behalf of Kingsoft, I would also like to extend our appreciation to Kingsoft's customer, shareholders, employee, partners, and you for your continuing support. Now, I hand over the floor to question and answers. Hi, operator. We're ready to take questions. Ladies and gentlemen, 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 a name to be announced. If you wish to cancel your request, please press the pound or hash key. Please ask your questions both in English and in Mandarin. Our first question comes from the line of Hillman Chan from Citi. Please ask your question. Hello, management. Thank you for taking my question. My first question is regarding your game pipeline. Could management share with us the timeline of game launches of JX Online 2 Mobile and also the Chinese Paladin: Soul and Fairy? What is your expectation on the performance? My another question is for your JX Online 3 PC title. What is the current grossing? What is the new feature in the coming expansion pack and your expectation for that as well? Thank you. 然后我用中文来翻译一下吧。我第一个问题是想问一下我们那个JX2手游，还有那个仙剑四，这个推出的时间，还有我们对他们表现的预期。然后另外一个是关于这个JX3 Online的那个端游，我想问一下接下来那个expansion pack有什么新的一些features可以跟我们分享，还有你对他们的预期。谢谢。我来说吧。你好，我来回答你的问题。剑侠2呢，目前我们跟腾讯这边最后敲定的时间应该是在10月份上线。具体哪一天呢，应该现在可能还不方便最后确认，反正10月份肯定会上。仙剑四呢，我们最后对的结果应该也是在Q4，但是如果是剑2的时间定在10月中旬的话，仙剑四应该至少会隔开一到两个月，可能就是11月或者12月份上。但具体时间我们还要跟腾讯那边去具体协商。但是大体的时间表应该是这样的。剑侠3端游这个新的资料片的内容我们在月底的，就是北京的这个水立方，我们会有个828金网山的嘉年华，我们会在那次发布会上对外正式去曝光我们的内容。 Okay, I will translate for Mr. Zou. After our discussion with Tencent, the final launching time for JX Online 2 mobile game will be in October, but the exact date is not determined yet. The mobile game 仙剑四 will be launched in the fourth quarter this year, either in November or December, roughly about 2 months after the JX Online 2 launch. We need to confirm the exact time with Tencent in the near future. Also for the expansion pack for JX Online 3, we will hold a conference for the JX Online 3 expansion pack game by the end of October on October 28th. We will tell you the exact time for the expansion time launching time in the conference. Thank you. Can I have a quick follow-up question? Do we have the required license for monetization from GAPP please? [Foreign language] 版号，他在问什么什么版号，是哪一个游戏的版号？我们剑二、剑三的版号早就拿到了。这个，还有这个仙剑四，这些全都可以有那个变现的那个。对，仙剑四还没拿到。这就是为什么说它放在Q4，可能具体的还没定的原因。其实产品已经测试过好几轮了，这个就是要根据具体的一些版号的拿到的时间，如果拿到得早，就可能会推早一点。最主要的话，我补充一下，那个邹总讲的话，就剑二跟剑三那个，这个都不是问题了。版号已经拿到。那个翻译一下吧。 Okay, Hillman just asked the question on the license information for the JX Online 2, JX Online 3 mobile games, and also 仙剑四 mobile game. Mr. Zou explained that we have already got the license for JX Online 2 and JX Online 3 mobile earlier. That is not a problem for JX Online 2 and JX Online 3 mobile game. But for 仙剑四 mobile game, we have not got the license yet. That is why we say the exact launching time is not determined at this moment. The game itself has been tested for several rounds already, so now the final launching time will depend on when we get the license for the 仙剑四 mobile game. Thank you. Thank you very much everyone for the color. Our next question comes from the line of Thomas Chung from Credit Suisse. Please ask your question. Hi, thanks management for taking my questions. I have a couple of questions, if I may. First is about the beta testing for the mobile version for JX3. Are we going to monetize JX3 in November when it starts testing? How long will the testing go? If it's very satisfactory and meets our expectations, when is the earliest time that we expect it to be launched? My second question is about the 2018 and 2019 revenue and margin outlook, if there's any color. Then I have a follow-up. Okay. Do you want to translate in Chinese first? 好的，想问一下的就是，现在管理层想问一下就是手游版的剑网3，我们在11月份就会启动那个beta testing。想问一下我们那个时候会收费吗？然后就是说了，如果做得很好的话，我们什么时候会推出来呢？第二个问题呢，就是说我们18年，因为我们出了Q2了嘛，Q2的业绩其实我们都是盈利，也没有说是亏损。想问一下，其实我们18年跟19年，其实那个revenue、收入跟margin那边是怎么看的？然后我还有一个follow up，谢谢。第二让你讲吧。剑网3从10月份开始比较大规模测试，肯定是会去测付费的，因为付费也是整个测试环节的一环。10月份的这个版本如果好的话，具体什么时候上呢？因为我们是10月份推剑侠情缘2，所以我们肯定会把这两款产品错开一个时段，否则就变成了自我的一种竞争。所以如果测试的效果好的话，我想可能在19年的Q1推出的几率就比较大了。 OK。 OK, I'll do the translation for Mr. Zou first. We'll start the JX Online 3 testing in November in big scale, and also we'll also test the monetization for JX Online 3 mobile game. In October, we're going to launch JX Online 2 mobile game first. There will be some time in between the JX Online 2 and JX Online 3 mobile game to avoid any self-competition. If the testing result for JX Online 3 mobile game is good, then it's very likely to launch the game in the first quarter of 2019. Thank you. Thomas, thank you for your question. Let me answer your second part of your question regarding the outlook for 2018 margin. As I said in the early announcement that I made on Monday, we expected that the second half Q3 will incur a loss due to the delay in launching the mobile games and also the under expectation of the new mobile game launch. Also the operating loss on the cloud will be slightly higher than what we originally expected due to the competition in the CDN business. Overall, the first half of 2018, as you see, we got a very thin margin and we expected that we will incur a loss in Q3. Q4 from what I could see right now, it will be more or less breakeven in Q4, or maybe depending on the timing of the game, it might incur a slightly loss in Q4 as well. Overall, for 2018, we expecting that as what we said in the announcement that there likely will be a loss for 2018. Thank you. My follow-up question is about the online games regulatory environments. How would management think about when the licensing approval will get started? Because for a new game, we do expect it to get licensed in November or December. Is there any color that you can share about how we should think about the regulatory environment? [Foreign language] 这个问题说实话，关于版号的申请审批，我觉得应该是超出了我们公司的经营范围了。这个你要问的话，可能找到游戏的主管部门去了解，去沟通，我觉得更直接吧。我们确实没有办法对这一块去做出什么评论，或者说结论吧。或者我补充一句吧，邹总刚才所讲的，有关部门的这个确实我们不好预测。这个其实其他游戏公司我看它之前对这个问题，都是同样的类似的回应。另外我想补充一点，就是刚刚第一个分析师朋友问的那个，我们也提到，我们下半年的pipeline里面，主要几个相对大一点的话，包括剑2、剑3，这些都不牵扯到版号的问题，因为我们已经拿到，所以我想补充这一点。 OK, I'll do the translation for Mr. Zou. Mr. Zou said the question on the game licensing approval is really beyond our company operation, so it will be better to communicate with the game regulatory department itself. It's hard for us to comment on this question. Francis Ng also added that the other companies also respond to this question in a similar manner. But for Kingsoft, as we said that in the second half of this year, the major mobile games we're going to launch is JX Online 2 mobile game, and later also JX Online 3 mobile game. These two games we already got the license approval, so the license regulation problem does not affect us on these two major mobile games. Thank you. Thank you. Our next question comes from the line of Liping Zhao from CICC. Please ask your question. 邹总晚上好。Francis晚上好。我这边有两个问题。第一个问题是关于我们西山居这边，我想了解一下咱们今年整体手游游戏环境不好的原因是什么？因为在Q1的时候，邹总提到是因为吃鸡的那个游戏占用了一部分用户的时长。我不知道在后面Q2、Q3来看，也是因为这个原因吗？还是有一些什么别的更深层次的原因在里面？那么我也注意到西山居这边也进行了一些IP相关的开发，比如说我们做了动画片啊等等，那会有相应的一些变现的计划吗？然后我第二个问题是关于WPS，我看这个季度增长甚至比Q1还要加速了，我不知道这个很强的增长后面它的驱动因素是什么？能不能给我们breakdown一下，我们个人版和商业版这边收入的贡献，个人版这边的话，广告和会员的收入贡献分别是多少，然后哪个是增速最快的呀？我自己翻译一下吧。I have two questions. The first one is related to the gaming sector. My question is what caused the headwinds for mobile games in the first half of this year? I have also noticed you did some IP initiatives on JX series. Do you have any monetization plans on that? My second question is related to WPS. I noticed that the WPS revenue growth is still quite strong. What are the drivers for the strong growth? Do you have a breakdown for the personal and commercial revenues? In the personal revenues, do you have a breakdown for the advertisement and also the membership fees growth? Thank you. 我来回答一下。我相信可能大家都注意到了，其实整个今年中国的游戏市场从收入上看，都遇到了一些瓶颈。这个原因我们自己认为，当然我Q1的时候已经讲过，吃鸡这个新游戏、新品类，它基本上把大量的游戏用户锁在里面。但本身确实又是一个免费的，不收费。你可以理解成很多以前付费玩游戏的用户，现在变成了不付费。所以这导致，说实话，整个游戏行业的收入都受一定的影响，这个因素肯定依然是存在的。另外一个因素，我们自己的分析，这个跟市场上现在涌现出来的一些视频类App有关，应该说分流了用户的游戏时长。所以这个也是我们认为的一个比较重要的原因，而且实实在在的，哪怕通过我们身边的一些游戏用户，我们都能够很直观地感受到这一点。好吧。第二，就关于西山居在做的一些围绕剑侠情缘的一些系列的动画片，这个我们更主要的是一种关于围绕剑侠情缘这个品牌的一种延续，也是西山居几年前就制定的一种战略，我们不仅仅要把剑侠情缘在游戏领域做好，我们还要把它延展到动画、影视剧，甚至线下乐园的这种可能性都会存在。所以它不是单独一个做动画片来变现这么简单，更多的是一个围绕剑侠情缘品牌的做深做厚。要不先翻译这个问题。 Okay, I will do the translation for Mr. Zou. Mr. Zou just said that he believes that you already noticed that the whole gaming market has faced some plateau in terms of the revenue generation. In the first quarter, he already stated that it has been affected by the popularity of the PUBG game, which attracted a lot of the gaming traffic, but this type of game has yet to be monetized. Other than the PUBG game impact, he also believes that the revenue was affected by the video apps in the market, which also has a negative impact on the gaming traffic flow. Regarding the question on the animation for the JX Online IP, we have developed the animations for the JX Online IP to extend the brand influence of JX Online, not only on games, but also extend its influence into animation, TV series, and even in park in the future. It is not only about monetization, it is more about extending the brand influence for the JX Online. Thank you. 这个Liping啊，我就回答你第二个问题，是关于WPS这个季度的降价。背后的主场，尤其是你问到比如说它在value-added service里面的话，广告收入或者是表现是怎么样。首先第一个，我们其实在WPS，大家看到一季度今年表现非常好。所以这个季度差不多我们整体的收入对比去年同期上涨超过60%。而其中的话，我们售于企业的增长其实也是接近60%。在个人方面，或者是增值服务方面的话，更超过了60%，平均起来大概60%左右。那么至于收入方面的话，你刚才特意问到广告，那么我就讲一下，在这个value-added service里面，我们其实是以会员数的增速，比广告的要高出很多。这个也是我们之前一直在交流的，在变现方面的话，我们会员人数从2017年初的不到50万，到了2018年的6月份，我们已经超过260万，就翻了5倍多。其中的一个原因，刚才也讲到，好多的会员的一些premium service都一直在改善。那么至于广告方面的话，其实我们是有意识地把广告的monetization压制，用非广告的来变现比较多。所以广告的年对年的增长，其实相对来讲的话，可能也就是10%几20%这样子。而会员方面的话，是超过100%的，接近200%的增长。好吧，翻译一下吧。 OK, I will do the translation for Francis. So on the question for the WPS second quarter revenue increase components. We said that WPS has always performed very well in the first half of 2018, and in the second quarter its revenue increase was over 60%. The enterprise revenue increase was close to 60%, and the personal value-added services revenue increase was above 60%, so overall the WPS second quarter increase was over 60%. In the personal and value-added service sector, we have both value-added services and also the advertisement monetization. The main growth is driven by the increase in the number of memberships. In early 2017, our membership was around 500,000, and by early 2018 it was increased to over 2.6 million. So it is more than five times comparing to the same period in 2017. Also we keep improving on the membership services, and we also intentionally control the monetization from advertisement. So the year-on-year increase from the advertisement monetization was around 10%-20%, but for membership revenue growth was over 100% and even near 200%. Thank you. Our next question comes from the line of Alex Liu from China Renaissance. Please ask your question. 谢谢管理层。我有两个问题，都是游戏这边的。第一，想问一下剑网3的端游。这个暑假，因为我们一个竞争对手，它出了一个很大型的和我们品类比较相近的端游，那我们有没有看到受竞争的影响，剑网3在暑期的表现是怎么样的？第二个问题就是，我们剑网3这个手游的延期发布，想问一下是有没有一些color可以讲，比如说是因为有一些玩法上的改变，我们想去做，还是有一些别的原因导致了我们可能想去delay？那这个delay之后，我们对这款游戏的预期是不是应该更乐观，还是说应该怎么理解这个事情？谢谢。我来翻译一下。I'll translate myself. First, on the PC game side, for the JX3 PC versions, we notice there's competing titles for that game in the summer. Just wondering how does the management think about the performance of JX3 PC version in the summer in light of the competition? For my second question is on the mobile side. For JX3 mobile, we are expecting it to be delayed in early 2019. Just wondering, is there any specific reasons or color that we can have on the delay, as well as how should we think about the performance of that title given we are already delaying it a few months? Thanks. 好，我来回答一下。剑网3端游，你刚才谈到就暑期有一个竞品上线对我们的影响，我只能是根据我们真实的这个数据来回答，实际上没有什么影响，对我们现在的在线人数，包括DAU等等。好吧。第二个关于剑网3手游delay，我理解其实就是说delay到底的真实原因到底是哪些？我觉得这个问题很多人都问，我再系统地回答一遍。分主观和客观两个维度。我觉得客观环境来讲，其实也有些分析师之前私下也问我，我也回答过，我说我们原计划是准备九十月份上，但是走到今天八月中，尤其是我们云裳羽衣，在前段时间发布，我们自己观察的结果，就刚才谈到的受刺激的影响，受一些视频类APP的影响，其实用户的时长的分流，或者说被刺激游戏这种锁定，其实用户导流是一个非常困难的工作。这个工作我们自认为在九月份是肯定不会有特别大的好转的，到九十月份。所以这是我们一个客观上的东西。然后主观上的东西，说实话，剑网3今年陆陆续续已经测了好几轮了。从这个数据本身来看，如果它不是剑网3手游，而是作为一个新的，或者说一般的手游游戏来看的话，它这个数据指标已经应该说是非常好了。但是，大家都知道，剑网3的端游或者剑网3的手游，对于西山居，对于金山软件来讲，在游戏里的它的地位，我们是一定要确保它不仅仅是成功，而且希望它很成功。要达到这种的把握度，我们才愿意去把它推向市场。我不知道大家理解吗？所以结合客观上目前的行业环境，加上我们主观上对它的期望，或者说它的地位的期望，我们都认为再给它点时间打磨，选择更合适的时机点去推出，是一个非常明智的选择。也因此，我们顶住今年整个的收入的压力，业绩的压力，我们做出了这么一个非常关键和重要的决定。当然也是希望大家能够理解。我不知道这个是不是把你的问题解答了。明白，谢谢邹总。 OK, I'll translate for Mr. Zou. You are talking about the JX Online 3 PC game. In this summer, we will have a competing title and it impact on our game. We can only discuss this based on the actual data we have collected at this moment. At this moment, in terms of the user number, including DAU, we see no impact from the competing title on JX Online 3 PC game. For the JX Online 3 mobile game, the reason for its delay, we can discuss this both objectively and subjectively. Objectively speaking, we originally planned to launch the game in September or October. Now it is already in August and we noticed that recently we launched the game YSYY. We think that its performance has been affected by the PUBG game and also the video apps in the market. It is very difficult for us to acquire its traffic. We think that this situation will not improve in September. Subjectively speaking, we have tested this mobile game several times already, that the testing result, the testing data has been very good. This game, JX Online 3 mobile game particularly, is very, very important for our Seasun and also for Kingsoft. We do not only want it to be successful, but we want it to be very successful. Considering the gaming environment at this moment and also our expectation for this game, we believe that it will be better for us to launch game at another time, at a better timing. We make this decision even under the current company financial performance pressure. We hope you understand our decision and the rationale behind the delay for the JX Online 3 mobile game. Thank you. Operator, due to the time limit, we want to end the conference call now. Thank you. Ladies and gentlemen, that is conclude the conference for today. Thank you for participating. You may all disconnect. Thank you. Thank you all for participating. Thank you