Earnings Call: Q3 2015

Nov 17, 2015

Earnings release

Ladies and gentlemen, thank you all for standing by, and welcome to the Q3 2015 Kingsoft Corporation Earnings Conference Call Webinar. At this time, all participants are in listen-only mode. Following the presentation, there will be a question and answer session. We will be taking questions via the telephone and online via WebEx. To ask a question via telephone, you will need to press star one on your telephone keypad and wait for your name to be announced. To submit a question online via WebEx, please type your questions in the Q&A box located in the panel on the right. If you are on a full-screen mode, click on the floating tool panel located on the top of your screen and select the Q&A button from the drop-down menu. Please be advised that this conference has been recorded today, 17th of November, 2015. I would now like to hand over the conference over to your host of today, Ms. Francie Lu. Thank you. Please go ahead, ma'am. Thank you. Ladies and gentlemen, good evening and good morning. I would like to welcome everyone to our 2015 third quarter earnings call. I am Fran 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 discussions on risk factors which may affect our business and operations. Having said that, please allow me to introduce our management team who join us today. Dr. John Hu Siyao, our Executive Director and CEO, and Mr. Francis Ng, our Executive Director and CFO. Now I turn the call to Dr. John Hu Siyao. Thank you. Welcome, ladies and gentlemen. I would like to start by saying that in the past quarter, we continued to execute our proactive investment strategy and made a further progress in our mobile internet and online cloud areas. Our mobile MAU achieved a new high of 661.3 million in September, compared with 409.6 million a year ago. Cheetah Mobile in particular accelerated its mobile and global transformation in the third quarter with overseas revenue improving to 54% of its total revenue and mobile revenue increased to 70% of its total revenue. Our Kingsoft Cloud sustained its revenue growth and solidified its leading position in the game cloud, mobile video streaming, and storage service. We are very pleased to report another quarter of solid top-line growth with total revenue reaching CNY 1,506.8 million, an 18% increase quarter-over-quarter and a 77% increase year-over-year. The operating profit margin before share-based compensation cost for the third quarter was 13%, which increased by 1 percentage point quarter-over-quarter and increased by 3 percentage points year-over-year. Such a result is in line with the group's expectation and execution of our progressive, proactive investment strategies. The operating profit margin of the group after taking into account our share-based compensation cost was 4%, representing a decrease of 3 percentage points quarter-over-quarter, which was primarily due to the increase of share-based compensation cost from the new grant of Qidian Mobile awarded shares to the key employees during the third quarter. The group aims to attract more talent by such grant of awarded shares to further implement the proactive investment strategies. Given the implementation of such strategy, the group expects that the operating profit margin for the rest of 2015 continues to be impacted. We believe that those investments are necessary to lay a solid foundation for our future growth and have already seen the exciting progress. This was another solid quarter for Qidian Mobile. The mobile MAU reached 567 million in September. Its revenue reached CNY 971.7 million in the quarter, growing 18% quarter-over-quarter and 118% year-over-year. Excuse me. The strong result was driven by increasing demand for Qidian Mobile's mobile advertising services. In addition to expanding its direct sales team globally, Qidian Mobile continued to work closely with key internet players to further enhance its monetization ability. Qidian Mobile has recently reached a global strategy partnership with Yahoo, including the integration of its product with Yahoo in the native advertising platform. Furthermore, Qidian Mobile is a user and product-focused company and foremost. It is particularly encouraging that its content business part achieved some notable success in the quarter. For example, Piano Tiles 2, a light casual mobile game, actually a mobile development, reached the number one spot in the U.S. and the number five spot globally as the most downloaded free game on the Google Play in September. Looking forward, Qidian Mobile will stay focused on mobile and global to build a solid foundation for long-term sustainable growth. Also in the third quarter, our cloud storage and computing service has demonstrated very impressive progress in our focus market sectors. For mobile game industry, Kingsoft Cloud continued its tremendous momentum and gradually shifted to become a global game cloud ecosystem service provider in addition to providing computing capabilities. We established the first game industry economy base in the Hainan province, aiming to build the largest game cloud platform in China. From cooperating with GEX and today's ForeverOn, Kingsoft Cloud has also emerged as a key player in video cloud services. Kingsoft Cloud has also actively extended its services into government and the corporate market, and in October, we won a contract after a fierce competition in providing a cloud service platform for Beijing municipal government. During the past quarter, the revenue of our flagship game, JX Online 3, achieved a new record high to CNY 223.9 million, a growth of 24% quarter-over-quarter and 23% year-over-year. In October, we released the largest expansion pack of the year. JX Online 3 has received quite positive feedback, which indicated its sustainable growth potential. In mobile game, both 3D versions of Journey to the West and Brave Cross ranked as one of the top ten popular games on Xiaomi and iOS game platform after they were launched. The mobile games developed on the basis of our core IP, JX World and JX Online 3, are expected to be launched in next year. In the third quarter, revenue from our WPS Office, net of itemized revenue derived from cooperation with Qihoo Mobile, delivered double-digit percentage growth quarter-over-quarter and year-over-year to CNY 108 million. We are encouraged to see these sales contributions from the enterprise customers continue to increase. In the traditional WPS PC version sales, the global MAU of the WPS family reached 167 million, among which mobile MAU were 72.3 million, a 22% increase year-over-year. In July, WPS Android was awarded by Google Play as a Top Developer and Editor's Choice. In September, WPS Android partnered with Huawei and launched its latest edition with 100 top applications. As we make proactive investment in our core strategy, we have experienced pressure on shelter and profit in the past few quarters. We believe 2015 is a year of major strategic expansion for Kingsoft, and we're excited with the progress achieved strategically and operationally so far. We will strive to keep up the growth momentum and seize the opportunities in mobile internet and cloud business that will come to fruition in the near future. Now I will turn the call to Francis, our CFO. Thank you, Dr. Jiang. Hello, everybody. As usual, I'm now going to discuss the Q3 of 2015 operational and financial results using CNY as a currency. Revenue increased 18% quarter-over-quarter, and 77% year-over-year to CNY 1,507 million. The revenue split was 22% for our online game, 64% for Qihoo Mobile, and 14% for office software and others. Revenue from online game business mainly consists of revenue from operations of proprietary PC-based online games, mobile games, and game licensing services, which is generated from the group company other than Cheetah Mobile and its subsidiary, through research, development, provision of online game across devices. Revenue from our online game business increased 11% quarter-over-quarter and 9% year-over-year to CNY 331 million. The quarter-over-quarter increase was mainly due to the strong growth of JX Online 3, which was benefit from the activity of the sixth anniversary of the commercial launch of JX Online 3 in August. The year-over-year increase was primarily attributable to the healthy growth of JX Online 3, with continuous improvements in game experience, which in turn affect the revenue contributed from mobile game business. Daily average PCU increased 7% quarter-over-quarter and 9% year-over-year to 0.6 million. The quarter-over-quarter increase was largely due to a decline in the user engagement of ADPCU of JX Online 3. As a result, no expansion pack released in the third quarter. Year-over-year decrease was mainly due to the decline in the ADPCU of game in DSL. The APA, average paying account, decreased 4% quarter-over-quarter and increased 39% year-over-year to 3.3 million. The quarter-over-quarter decrease was primarily due to the natural compression of JX Online 3 after the expansion pack launch in the second quarter. The year-over-year increase was due to the expanded user base of JX Online 3, and the monthly ARPU increased 19% quarter-over-quarter and increased 22% year-over-year to 32. Revenue from Cheetah Mobile business mainly consists of revenue from online marketing services, internet value-added services, and internet security services and others, which is generated from the Cheetah Mobile and its subsidiary through research, development, operation of information security software, internet browser, mission-critical mobile applications, and operation of games and provision of global content distribution channel for its business partner. Revenue from Cheetah Mobile increased 15% quarter-over-quarter and 118% year-over-year to $972 million. The QOQ and YOY increases were primarily due to the revenue growth from mobile advertising business, in particular in overseas market, driven by the growing global mobile user base and substantial improvements in mobile monetization. Mobile MAU from Cheetah Mobile reached 567 million in September 2015, representing a 13% quarter-over-quarter and 66% increase year-over-year. In September 2015, approximately 74% of the mobile MAU were from the overseas market, mostly from the U.S., Asia, Europe, compared to approximately 69% in December 2014. Our mobile user installation reached a new record of 1.9 billion as of September 30, 2015, a 22% increase quarter-over-quarter and 125% increase year-over-year. The robust mobile user growth mainly reflected that our mission-critical applications, particularly Clean Master and CM Security, continue to gain traffic share and were expanded widely in the global market through our efforts in market exploration, market expansion, and continuous improvement of our user experiences. Revenue from office software and other business consists of revenue from all other business, including office application software, cloud storage, dictionary services, et cetera. Revenue from office software and others increased 45% quarter-over-quarter and 100% year-over-year to $204 million. The QOQ and YOY increases were primarily due to the combination of the following factors. Firstly, rapidly growing revenue from cloud services as a result of strong increase in the user base and the steady contribution from the sales of WPS Office. Cost of revenue increased 20% quarter-over-quarter and 166% year-over-year to $369 million. The QOQ and YOY increases were largely attributable to higher traffic acquisition costs associated with Cheetah Mobile advertising platform and higher overseas bandwidth and IDC costs, which is associated with Cheetah Mobile increased user traffic and big data analytics, as well as an increase in bandwidth and equipment depreciation expenses of Kingsoft Cloud as a result of rapid usage growth and investments in cloud computation and data platform. Gross profit increased 17% quarter-over-quarter and 16% QOQ to $1,138 million. GP margin decreased one percentage point and nine percentage point year-over-year to 75%. Our R&D expenses, net of government grants, increased 12% quarter-over-quarter and 33% year-over-year to $363 million. The quarter-over-quarter and year-over-year increases were mainly due to the headcount expansion of our mobile and cloud business and increased salary and benefits. The selling and distribution expense increased 20% quarter-over-quarter and 108% year-over-year to $477 million. The quarter-over-quarter increase was mainly due to the marketing and advertising expenses for mobile games of online game business. The year-over-year increase was primarily due to the promotion activities for the core mobile products of Cheetah Mobile. Our administrative expenses increased 12% quarter-over-quarter and 76% year-over-year to $131 million. The QOQ and YOY increases were mainly due to an increase in staff costs, as well as professional service fees. Share-based compensation costs increased 108% quarter-over-quarter and 92% year-over-year to $125 million. These primarily reflect the new grant of Cheetah Mobile's awarded shares to selected employees. Operating profit before share-based compensation costs increased 26% quarter-over-quarter, 39% year-over-year to $190 million. The margin of operating expenses, profit before share-based compensation costs increased one percentage point quarter-over-quarter and decreased three percentage points year-over-year to 13%. Our net recorded loss of 50% compared to a gain of $22 million for the second quarter 2015, and gain of $196 million for third quarter of 2014. The other gains in the third quarter in 2014 last year, primarily represented the gain on disposal of one of our discontinued businesses by Kuaipan Personal Version business. Finance income increased 10% quarter-over-quarter and increased 25% year-over-year to $15 million. Income expense decreased 21% quarter-over-quarter and increased 30% year-over-year to $26 million. Our effective tax rate increased 16 percentage points quarter-over-quarter and 35 percentage points year-over-year to 42%. These high effective tax rate were primarily due to the fact that there are some losses in our subsidiary, which we have not recognized the first-time taxes. As a result, our profit to owner of parent decreased 49% quarter-over-quarter and 79% year-over-year to $48 million. Profit to owners of parent before ESOP decreased 13% quarter-over-quarter and 55% year-over-year to $119 million. In our statement of financial position, we have cash and time deposits of approximately $8 million as of September 30, 2015, representing a cash per share of around $6.1. Revenue as of September 30, 2015, was $422 million compared to $325 million last year. Net cash flow from operating activity was $214 million compared to $343 million last quarter and $105 million same period last year. Our capital expenditure in the third quarter amounted to $20,183 million. I turn the floor back to David Tang or to Tony. Thanks, Dr. Jiang. Operator, we are now ready for the question and answer session. Thank you, ma'am. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question via the telephone, please press star one on your telephone keypad and wait for your name to be announced. To submit a question online via WebEx, please type your questions in the Q&A box located in the panel on the right. We have our first question from the line of Thomas Chung from Citigroup. Please ask your question. Hi, thanks for taking my questions. I have two questions. The first question is that, if I look at your office applications, software, and others revenue, it is surprisingly strong on a QOQ basis. Can management give us some color about the breakdown in terms of how much is coming from the cloud business, and on top of that, how many mobile games are you working on right now? Any update on the medical cloud will be great. Secondly, if I look into your online games revenue, JX Online 3 resumed QOQ and YOY growth. I'm just wondering, as we are heading to the fourth quarter together with the launch of the expansion pack, should we expect the momentum continues or- Any outlook for 2016 for different business lines would be great. Thank you. He said he was launching the next generation of the monitor. Let me answer this question. You asked about the first question about the speed of WPS Office and Kingsoft Cloud. As usual, we haven't sped that out, but I can tell you, in ballpark, the strong growth in Office application in the cloud is mainly driven by the strong growth of Kingsoft Cloud. Having said that, the Q3 growth for WPS is also quite strong. But in particular, Kingsoft Cloud, since small base in last year, and as well as it is on a rapid growth as we could expected that there would be 200%-300% growth for cloud base. That contributes to this rapid growth in this category. As for the mobile game, there is a number of big title under development. Namely, we are leveraging on our important IP, the JX series, JX3. We could expect that one of the JX3, they actually are planning to have three series on the JX3 mobile game. The first one is expected to be tapped and launched in the coming 1 or 2 months, with the others spread over in the next 6-12-month period. That is the biggest mobile game under development. You have a question on the momentum on JX3. The JX3, I'm very pleased to report that that is still on very strong momentum. We expected that the JX3 growth will beat or meet our guidance and budget as we give out in the beginning of the year. That is basically the answer to your three questions. Let me add a little bit on the cloud side. You talked about the cloud, the income part is obviously the game cloud and versus medical cloud. What I'd like to add on there is that the last quarter cloud revenue increased very rapidly, over 300%. Broadly, I would say the increase come from the three areas. The continued growth of our storage, and the continued leading position on our game cloud. We signed more games onto our platform, and also there is a blockbuster mobile game that was launched in June, and it start to bring in revenue in Q3. is one of the top games this year, and having the lead topping apart from Tencent and NetEase. That brings in a lot of revenue, and our continued increase with the increase in the number of games on our platform as well. Another significant increase is actually in our mobile video cloud. That's the third one, and that part is basically showcase our progress in the internet space. As we have mentioned earlier in the year, our cloud today is contributing to the storage cloud that we have, our game cloud continue to lead, and our progress in the internet space has been outstanding. On the healthcare cloud, and this is an enterprise space. As you know, enterprise space usually, when a contract is a big one, but it does take time to win. We are very happy we already won the bid of Peking University People's Hospital, and the largest Grade A hospital in Beijing. We continue to implement that cooperation. Another piece I mentioned in the public, in the government cloud, and which NetEase we just won the contract from the Beijing municipal government, which definitely will put us in a very good position to expanding our activities in the government cloud space. Thank you. Kingsoft Cloud? Yes. Thank you. We have our next question from the line of Evan Zhou from Credit Suisse. Please ask your question. Hi, good evening, Dr. Zhang. Francis here. Thanks for taking my questions. Two quick ones. First is a follow-up on JX3. I think after we launched the October expansion pack, I saw some pretty good numbers, especially like the record single-day sales plus some monthly paying account over 5 million in, I don't know, maybe in November. Just wanted to get some more sense that how is the latest momentum, how should we expect the 2016 growth for JX3 to continue in terms of success? Second question is regarding our spending. I think 3Q overall, I think we kind of spent less than what the street had expected. So I was wondering what's kind of the current expectation into 2016. Will we still be expecting the OPM, operating margin to reflect in first half 2016? Is it still the expectation? Thank you. Thank you, Evan. I didn't hear about the second part, but let me answer the first question on JX3 momentum. Yes, we are very pleased to have a very strong result from the release of the major expansion pack for JX3. As I said earlier, we expected that the JX3 will meet the expectation of the management at the beginning of the year. After 2016, of course, it might be too early to have a very detailed budget completed, but the team are very confident to expect a continued more than market industrial growth. That is for sure. But they still are expected to have a more than 20%-plus growth on the JX3 online game next year. What is your second question about the OP margin? Yes. Are we still expecting the OP margin to starting to improve in the first half 2016? Yes. The reason for that is very obvious, that is that in the full subsidiary, if you look at Cheetah Mobile, I believe that they still haven't released the guidance yet, but I can say that they will continue a strong online growth. At the same time, I believe that the strategy for the company, for Cheetah Mobile, is actually to stress less on the continued ramping up of MAU, but instead to lengthen its user engagement time, and also focusing on the profitability. So on that part, there definitely a strong push. As for the other business, as you could see that in the gaming business, we are very confident that JX Online 3 now already account for 70% of our online game revenue, continue to our expectation to grow faster than the industry growth, to deliver a 20% plus growth for JX3. For the mobile game, 2015, we are yet to have any significant contribution both on the top line and bottom line from the mobile game. With the testing and launching of the JX3 major IP game, we will expect that there will be a significant contribution to the gaming business as well. For the cloud, we would expect that the cloud business will be continued to grow very strongly, definitely will expand above more than 100% growth, much more than that. Also, towards the growth in the top line, I believe that we also approaching the breakeven point to close it. So that will also be helping the overall operating margin. Got it. Understood. Thanks a lot. We have our next question from the line of Wendy Hong from Macquarie. Please ask your question. Thank you. Francis, my first question is to follow up on your comments about margin. Since cloud is going to become breakeven business next year, and also you expect the additional revenue from mobile game. Should we expect the 2016 OPM to certainly come at double digits versus single digits OPM guidance you provided for this year? Secondly, for cloud business, what percentage of the cloud revenue in Q3 was Xiaomi related? Are you still keeping your original comments regarding your customer base in the cloud and to reduce Xiaomi's contribution to less than 50% in two to three years' time? The third thing is, can you give us an update on the number of the cloud customers and WPS customers? Thank you. Let me answer the first question, and I defer the second question related to cloud to Dr. Zhang. In terms of the guidance for margin, in 2015, we actually are in an investment mode. With the bouncing back up, the contributions from the Kingsoft Mobile, the mobile game, yes, we expected that we will have a significant bounce back of operating margin in 2016. So go up to double digits. The cloud you ask about, the Xiaomi and non-Xiaomi space. Is that right? Just to echo what Francis said, so that means next year, improving the profit margin will be our focus. On the cloud side, your first question is that the total income of cloud, the Xiaomi's part is less than 50% as of yet. The growth of our new business has been quite fast. We already achieved that goal, which is good, and just so you know, Xiaomi's income also grew pretty rapidly. It's just that our new business expanded even faster. So that does impact the reduced percentages. We would like to see the improvement continue into 2016. One thing about the profitability of cloud, and although we are evidently looking into whether we are looking at improving margins, improving profitability to be profitable. But I want to stress that rest of this year will be important now, and also next year, the focus will still be on grabbing market share, expanding into new sectors and growing our income revenue instead of focusing too much on profitability in the cloud space. Hey, Dr., I'm not sure if I missed your answers to my question regarding the number of WPS customers and the number of cloud customers. If you can provide those two numbers, that would be great. I don't think we have the exact numbers of customers for WPS. Actually, if you think about it, WPS, the customer, you can divide them into two classes, enterprises versus individual consumers. Yeah, just for the enterprise customers because you are only actually having two products that are mainly targeting the enterprise customers. One is actually Cloud, the other is actually WPS. I just want to get a rough sense about the customer size, the number of the customers of each. I don't have those numbers, Wendy, I'm sorry. On the WPS side or on the Cloud side, I think the two entities still have numbers. The good news is it's continuing to increase, and increase rapidly. Okay, sure. Actually, I have Yeah. Similar data for WPS. The good news is that on the market share of new purchasers of office apps, you see we're reaching to 90% in the government sectors and in major enterprises, large SMEs close to that number, and also in the new purchases in the banking sectors. All those market share numbers is something we're looking into. Okay. Actually, I have one more question regarding your full Q, because I just saw the Cheetah Mobile's Q4 revenue guidance coming out, which actually suggests that Q4 year-over-year growth will be slower than the Q3's year-over-year growth. This is one thing, and also I think in Q3, both your WPS and game business actually had a strong quarter. Given all those things, should we expect the Q4 to be a more flattish quarter versus Q3? Wendy, could you please repeat your question again? Yeah. So basically, Qihoo 360 Mobile, the new Q4 revenue guidance just came out, suggests a slower year-over-year growth versus Q3. That's one thing. The second thing is your other business, the online game, and the WPS just had a strong rebound in Q3. If that's the case, should we expect a natural kind of low seasonality to reload in Q4? Taking all those things into consideration, should we expect a kind of flattish Q4 sequentially, or in other words, the low season in Q4 in terms of the revenue? I believe that Q4 continued to be a strong season because in a lot of the business, both in the game, in the WPS, Q4 typically is a good season. I would say that the Q4 will still be reporting a very healthy quarter-over-quarter growth and year-over-year growth. Okay. Thanks, Francis. Thank you. We have our next question from the line of Andrew Hong from China Merchants Securities. Please ask your question. Hi, this is Jeff Hong from China Merchants. Thank you for taking my question. I have actually three questions. The first is about your cloud business. Can Dr. Zhang give us the average daily upload data number for your storage business? My first question, and my second question is regarding Xiaomi, because we have seen that Xiaomi, both the mobile phone and other smart devices, shipment has been slowing down this year, and probably the trend will be continuing for next year. Is it a reason concern to you on your cloud business perspective? My last question is on the WPS. Can we expect any new catalyst on the top-line growth for WPS, such as probably monetization for the mobile side or other corporate side or government side? Thank you. Thank you for the question. Let me take the first one, and Francis will answer the second one on WPS. The daily new data uploads into our storage services remains high. It is still over 300 terabytes, so there is no material change there. The good news is other products of Xiaomi's business are using more and more Kingsoft Cloud computing platform, both in terms of the cloud servers and also databases, as well as others. Also another increase comes from Xiaomi's ecosystem and Xiaomi's training center. They bring in more customers from the companies they invested in, including those intelligent hardware companies, as well as the gaming companies that leverage Xiaomi's gaming ecosystem and a lot use Xiaomi's mobile classic. Overall, Xiaomi's business continued to impact Kingsoft Cloud favorably, so we don't feel there is anything we need to be concerned about there. Heading into 2016, as I mentioned earlier, we will continue executing on our internet cloud, internet mobile video cloud, as well as the enterprise and the government cloud. So we are not concerned about the impact. Let me take the second question on the catalyst for WPS growth going forward. On one hand, as you hear from Dr. Zhang disclosing that we have a very strong market share in the government procurement for office software. So on that side, it will be a very healthy software sales growth. On the other hand, Jeff, actually, you are very spot on that we might have a new catalyst on the monetization on a mobile product. That having said that, our priority is still to improve the mobile product experience. But at the same time, after over a year's time in developing in that area, the company considered that we could start the process of starting monetization of our mobile application in the very near term. So with that, we expected that the growth for WPS will accelerate a bit from its normal healthy growth contributed from its enterprise sales. Thank you. Thanks. Thank you. We have the next question from the line of Yang Lu from Deutsche Bank. Please ask your question. Hi, good evening, management. Thank you for taking my questions. I have two. The first one is regarding the growth rate of the cloud business. If I am not wrong, I think Dr. Zhang mentioned it is something more than 200%, but is it a year-over-year number or quarter-over-quarter number? That is the first question. It is on a year-over-year. Okay. Year-over-year. The second question is regarding the mobile game, because I think looking through all of your business segments, the mobile game is the only one that is kind of progressing slower than expected. Can you elaborate a bit, what are the main challenges for the mobile game segment currently? Thank you. For the mobile game, we are actually into that transformation for more than two years now. The progress are a little bit slower than expected, that's a fact. But the team actually think that the most important thing is not to launch a social game. Instead, the team are very focusing to develop a good and big mobile game with a relatively more sustained life cycle. They have been very cautious about launching their new game, in particular using the important IP for Kingsoft. Let me add on the mobile game side. I think President mentioned that the progress was a little bit slower than our expectation. On the other hand, we have come to a learning period, and if you look at 2015, the entire mobile game market, there are very few blockbuster games, what we call level A or level S games. The entire mobile game industry now comes to realize that a small team of 30 or 50 people can come together in three months and try to come out with a great game is not far from the thing than it's been in the past. You see a lot of games come out, very few games take off. This is actually what we realized, and also from the cloud business, we have so many customers that put their games on our cloud platforms, and they're realizing two months after they launched, or even before they launched, it was way below their expectations. Realizing that, we started a new strategy later last year and early this year, focusing more on our major mobile IP, the mobile games, the JX3 games, the mobile version of JX series, and focusing on making the best of the best. That's our strategy change, and hopefully, during next year, you will see those games come to the market and impress the market. Thank you for the explanation. However, as you just mentioned, the whole mobile game sector is kind of changing quite rapidly, and there haven't been too many blockbuster games from the competitor side as well. I think in this case, some investors will come naturally with a question in mind, if the mobile game remains a very good industry or good product to be, are you still confident in committing capital investments in this mobile game industry? While I think your other business segments are doing pretty well, but this is kind of, not necessarily your team is underperforming, I think it's probably just the industry problem. So what's your longer-term view on this? Yeah. Thanks for continuing with the question. What I would like to say is that we have given it our best with the mobile game, and like every industry, it comes, climbs, and falls. In 2014, you see a very rapid growth in the mobile game sector, and this year, you still see a few blockbuster games and a very few outside of Tencent and NetEase. But we are very hopeful the title will come out based on our JX IP, and hopefully, we can tell you more when our news is ready. Okay. Thank you. Thank you, sir. As of now, we don't have any more questions from the line. I would like to turn back the call to Mr. Francis Lu. Please go ahead. Thank you. Thank you. Francis Lu. Thanks, Dr. Zhang, for the complete 2015 third quarter earnings call. Thank you all for attending. Have a good night. Ladies and gentlemen, that does conclude our conference for today. Thank you all for-