Good day, and welcome to the NetEase Second Quarter 2019 Earnings Conference Call. The conference is being recorded. At this time, I would like to turn the conference over to Margaret Shi, the IR Director of NetEase. Please go ahead, ma'am.
Thank you, operator. Please Thank you, operator. Please note the discussion today will contain forward looking statements relating to future performance of the company and are intended to qualify for the Safe Harbor from liability as established by U. S. Private Securities Litigation Reform Act.
Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could cause NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20 F. The company does not undertake any obligation to update its forward looking information, except as required by law. During today's call, management will discuss certain non GAAP financial measures for comparison purposes only.
For a definition of non GAAP financial measures and a reconciliation of GAAP to non GAAP financial results, please see the 2019 Q2 financial results news release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on NetEase's corporate website atir.netease.com. Joining us today on the call from NetEase's senior management is Mr. William Ding, Chief Executive Officer Mr.
Charles Yang, Chief Financial Officer and Mr. Hilton Hui, Co President of NetEase Games. I will now turn the call over to Mr. Yang, who will read the prepared remarks on behalf of Mr. Ding.
Thank you, Margaret. And thank you, everyone, for participating in today's call. Before we begin, I would like to remind everyone that all percentages are based on renminbi. We are very pleased to report another quarter of financial and operational growth across our businesses with a 15% increase in revenue and 46% growth in our net income on a year over year basis. Online games remain the cornerstone of our business.
Despite a seasonally slower period in the second quarter, the steady performance of our game portfolio marked the 5th consecutive quarter that we have exceeded RMB10 1,000,000,000 in online game revenues. Our flagship titles continue to provide solid support to our online games business. Throughout the years, these titles have remained relevant to each generation of users as we diligently explore and create innovative new elements to our games, keeping our content fresh. Take Fantasy Westward Journey Online as an example. Over the course of the last 15 years since its initial launch, we have introduced close to 30 major expansion packs, averaging approximately 2 major expansion packs per year, which many smaller scale updates along the way.
For SWJ's mobile version, we have made even more frequent updates with nearly 40 major updates since its initial launch 4 years ago. Beyond substantial game overhauls and additions, we consistently look for various ways to keep our users engaged. During the quarter, we held a number of SWJ Esports tournaments, which helped boost our user stickiness and drive continued revenue contribution for future periods. The expertise we have gained from operating these flagship titles over the long term has been deployed in developing our newer games, providing us with more steady revenue streams in what is now a very diverse game portfolio. Invincible, Amiyogi and Identity V launched in 2015, 2016 and 2018, respectively, serve as good examples of our superior game longevity with different game genres.
InvinciBull continues to grow steadily in terms of revenue and number of active users, achieving new records in the 2nd quarter. ARMYOG topped the iOS growth in China twice in the second quarter as we launched a hit expansion pack in Q2 that featured a rich and captivating storyline. IDENTITY V is also growing steadily after more than a year of operation. During the quarter, we also launched an updated version of Chuluxiang and renamed this MMO sensation into All About Jianghu. The update came with a full fledged overhaul of the game, including improved graphics, new characters and new social systems.
As a groundbreaking game in the MMORPG genre, the original CLX impressed the market at its initial launch over a year ago with its best in class graphics and high degree of freedom for users to customize and design their own characters and storylines. The game quickly accumulated a large and loyal community of users, particularly among the younger generation. Now with the relaunch, we are thrilled to delight players even without the game's original IP. Our strong content and amazing team of designers captures the spirit of the game, while breathing new life into this market favorite. As a result, All About Jianghu is attracting a growing user base and generating increased revenue contribution quarter over quarter.
Our growing portfolio of games has generated a solid fan base. Our goal is to have an even larger and deeper impact on the vibrant community of game users. Onmyoji is the first of these younger IPs that we are cultivating. In order to expand the reach of Onmyoji's IP, we are currently working on 4 new Onmyoji games. These include a Japanese collectible card game called Onmyoji: The Card Game, a simulation game called, Omyouji Yokai Koya and 2 other spin off games.
In July, we also launched the Onmyoji Cafe and Shop in Guangzhou, featuring popular Onmyoji characters. This location has become a must see destination for many young fans. We are confident that these initiatives will further strengthen our increasingly valuable game IP and further enhance our recognition among younger generations. In terms of newer titles, we most recently launched Beautopia and Sky in China and a few other games overseas. Beautopia is a real time creative shooting game, topping the iOS download chart within a day of its launch.
And Sky is an adventure game, bringing users a heartwarming experience and receiving multiple recommendations from the Apple Store. We also launched an updated version of Tom and Jerry, which proved instantly popular among younger players, taking the game to the top of the iOS download chart shortly after its launch and continues to trend well with a growing user base. Globally, we continue to advance our games and make inroads that expand our reach. Knives Out remains popular in Japan and topped the country's highest grossing games chart multiple times in May June. Additionally, Identity V was ranked for the first time on Japan's iOS Top 3 Growth in Chart in July, following our collaboration with famous Japanese Comics.
The success of these games has helped us to gain a much better understanding of Japanese users and their preferences, allowing us to better tailor our games for the Japanese market. Some of the titles we recently introduced in Japan also show promising signs of popularity. We now have 3 more titles in Japan, which are live after previously known as Night Falls: Survival, Cyber Hunter, as well as Super Mecha Champions, a mecha anime shooting game, which we just released in July. All three of these games topped Japan's iOS download chart shortly after their launches. In the Q2, our overseas games revenue accounted for more than 10% of our total games net revenue.
Having the right product is the key to global expansion, and we will continue to invest in game content that will resonate with global players. In terms of R and D, we are looking for talent and teams that complement our R and D skills on a global scale. In July, we announced our minority investment in Behavior Interactive, an online games pioneer in Canada and a leader of the asymmetrical Battle Arena genre. In addition, we also launched a new video game studio in Montreal, Quebec in Canada with an aim to hire local and international resources to broaden our R and D capabilities in North America. Our extensive pipeline also holds a number of exciting new titles for the upcoming quarters.
These include: Fantasy Westward Journey 3 d, Shen Yuan SWAT, Dragon Upon the Cloud, Pokemon Quest and Bloom and Blade. Moving on to our e commerce business. During the Q2, we made additional progress to improve our operating efficiency. We further optimized our internal structure, enhanced our warehouse and logistics operations and upgraded our supply chain management. For Kaola, our self built bonded warehouse in Ningbo began trial operation in June.
This warehouse is capable of handling millions of orders every year, which we believe will help us to improve operating efficiencies even further. During the quarter, we also signed strategic partnerships agreement with additional international brands such as L'Oreal and Maybelline, enabling our customers to more conveniently access these world renowned beauty brands. For Yanxuan, we continue to promote supply chain upgrades by helping manufacturers improve their design, reduce production costs and enhance efficiencies. We are further deepening our collaborations with top performing partners, which will allow us to renegotiate better commercial terms, implement better controls over quality and optimize product creativity. On the product side, we are even more selective with new product offerings, enabling us to focus on and dedicate our resources to top product with the highest repurchase rate and customer satisfaction rating.
By offering customers greater value for their money with better product quality and pricing, we hope to further improve customer satisfaction. Turning on to our online music business. We continue to innovate and create a highly differentiated product with an unparalleled social experience on our NetEase Cloud Music app. At the end of July, we added a new highly popular community module known as the Cloud Village. This is a music community that fosters discussion, creation and sharing and personalized expression around music.
It is presented in the format of Waterfall containing music video blog, music micro blog and many other exciting features that allow music lovers to follow and express themselves interactively. This brand new module changes the way that users experience music from just listening to also watching and interacting. At this moment, we have over 800,000,000 users on our music app, which is 50% up year over year. Subscriber numbers are also growing very strongly at 135% year over year increase. For online education, Youdao continues to deliver solid growth and we see significant opportunities in the online learning industry.
Over the course of the last 13 years, Youdao has built a robust suite of technology driven learning products and services. With its leading AI technology, strong content and predictive development capabilities, Youdao has steadily built a large, engaged and diverse user base with over 100,000,000 average total MAUs in the Q2 of 2019. We do not take the responsibility of education lightly and we encourage innovation within each content studio at Youdao. Our courses are regularly evaluated and their success is measured by user satisfaction ratings, which we believe is pivotal to the long term sustainable growth of any online learning company. Youdao most recently hosted its annual product launch conference in Beijing.
At the event, we announced 5 different products for children, including Youdao Children's English Mobile App, Youdao Mathematics online course and Youdao Chinese Reading online course, all designed to improve children's learning habits as well as Youdao Xiaoduling and Kata, 2 online courses teaching coding to children between the age of 3 to 18. Additionally, we also announced our 2nd generation Youdao dictionary pen supported by more advanced optical character recognition technology, allowing more accurate and effective scanning translation. In an evolving Internet market, content is king, and NetEase is best known for our content creation capabilities. This rings true across our different business segments. We continue to emphasize product enhancement, craftsmanship and innovation and better user experiences to thrill our ever growing user community of different segments.
Through our industry knowledge, deep IP, diversification strategy within our core competencies and our international growth initiatives, we believe we can continue to bring relevant exciting new products and services to NetEase players, fans and users around the world. As we continue to grow and evolve, we are always very appreciative of the long term support from our shareholders. With that in mind, our Board of Directors have approved a dividend payout ratio of 30% this quarter. We are delighted to be returning value to our investors as our business continues to boast healthy and growing profits. This concludes William's comments.
I will now provide a very brief overview of our financial results. Given the limited time on the call, I will be presenting some abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details. For the Q2, our total net revenue were RMB18.8 billion or US2.7 billion dollars representing approximately 15% increase year over year. Net revenues from online game services were RMB11.4 billion, down 4% quarter over quarter, but up 14% year over year.
The sequential decrease was due to the 2nd quarter typically being a slower quarter seasonally. The year over year increase was primarily driven by increased revenue contribution from flagship titles such as FWJ and new games such as Justice and LifeAfter. Mobile games accounted for approximately 72% of net revenue from our online games in the Q2. Net revenue from e commerce were rmb5.2 billion and net revenues from advertising services were RMB582 1,000,000. Net revenues from our innovative businesses and others were RMB1.5 billion, up 18% quarter over quarter and 23% year over year, both due to increased contribution from cloud music, CC live streaming and Youdao.
Our overall gross margin was 43.3 percent in the 2nd quarter compared with 44.1% in the preceding quarter and 44.5% for the prior year's period. Gross margin for our online game services for the 2nd quarter was 63.1%. By and large, our gross margin for games is generally stable, fluctuating quarter to quarter within a narrow bandwidth based on the revenue mix of mobile, PC, self developed and licensed games. For e commerce, our gross margin was 10.9% in the 2nd quarter. We achieved a positive gross margin for our Innovative Businesses and Others Business of 1.4% in the 2nd quarter versus losses of 13.1% and 7.3% in the prior quarter and Q2 of last year, respectively.
The significant improvements came from increased revenue contribution from some of our business lines within this segment, as mentioned a moment ago, as well as better cost controls. For the Q2, total operating expenses were RMB 4 point 6,000,000,000. Our selling and marketing expenses as a percentage of net revenue were 9.4% in the second quarter, largely stable from the previous quarter. We continue to see operating leverage as we benefit from economies of scale and improve operational efficiency. E commerce related shipping and handling expenses included in selling and marketing expenses as a percentage of e commerce revenue were 7.4% in the 2nd quarter, significantly improved from 8.4% in the previous quarter.
R and D expenses were maintained at around $2,000,000,000 level, reflecting our commitment to investing in content creation and product development, which is what defines us as a technology company. Operating income for the Q2 of 2019 increased by 2% quarter over quarter and 50% year over year to rmb3.5 billion. The effective tax rate for the 2nd quarter was 18%. The lower effective tax rate in the 2nd quarter was mainly due to reduced losses from certain subsidiaries as well as certain tax credits being recognized for certain subsidiaries of the company during the quarter. Non GAAP net income attributable to our shareholders for the Q2 totaled RMB4 1,000,000,000 or 531,000,000 representing an increase of 21% quarter over quarter and 34% year over year.
Our non GAAP diluted earnings per ADS were RMB28.06 or US4.09 dollars for the Q2 of 2019. Our cash position remains strong. As of June 30, 2019, our total cash and cash equivalents, current and non current time deposits and short term investment balance totaled RMB55.6 billion compared with RMB50.1 billion dollars as of year end last year. For the Q2, we are pleased to report that our Board has approved a dividend of US1.04 dollars per ADS, representing a 30% dividend payout ratio. As we mentioned earlier in William's remarks, we are thankful for the long term support from our shareholders, and we are always looking for ways to return value to our shareholders.
As a result, this quarter's higher dividend payout ratio reflects this commitment as we continue to both healthy and growing profits. Thank you for everyone's attention. We would like now to open the call to your questions. Operator, please go to Q and A.
Thank you. We will take our first question from Hillman Chan from Citi.
Hi, good morning management. Hi, good morning management. Thank you for taking my question. I have a question regarding the overseas expansion strategy for our games. So as we noticed, we recently launched new game studio Montreal and acquired a stake in Behavior Interactive and our games are doing well in Japan and some overseas market.
So going forward in the future, could management share more on the strategies, in particular, what are the key focus markets by geography, the target game genres and the steps it will take to achieve the overseas growth, either from organic growth or M and A? And also some of the updates on the latest partnership with industry with this overseas studio would be helpful. Thank you.
Thank you, Qiuomei. I will provide a brief translation of William's comments for everyone's benefit. So as you can see that have been very active and open minded for deeper collaboration with global premium game studios. Is because for ourselves NetEase, we have been cultivating in game content development, R and D with almost 2 decades of expertise and experiences. So we are very, very open minded and we'll continue to explore deeper collaboration with peers, best in class studios globally.
In terms of the overseas expansion strategy, William has summarized from a few different aspects. First is about our games, launch NetEase games into global stage. Currently, we have achieved certain milestones in Japan, and we are hopeful and we are working hard to make also our popular content, popular games into a popular hit into mainstream Western market in North America and Europe. In terms of collaboration with global peers, we've always been focusing on joint R and D development as a priority because that is our know how and that is where we see a lot of supplementary capabilities that we can provide to each other. The goal is to jointly develop by leveraging each other's competitive strengths to develop premium content for global gamers.
As to the genres, there's no fixed rigid framework. We are very open minded to be more explorative in nature, because as everyone can witness in the most recent years, game genre has been evolving very fast, and we are very glad that NetEase is always a pioneer in the forefront of keeping innovation in terms of gameplays and genre.
We will take from our next question from Alex Poon from Morgan Stanley. Your line is open. Please go ahead.
Hi, good morning. Thank you for taking my question. I have a question regarding the music business. It's very glad to see the new module Cloud Village launched recently. Can you also talk about in the second half how your monetization strategy will change?
And I also have seen some news regarding the timetable of profitability. Can you also share with us how are you going to control the costs and achieve the profitability?
Okay. Alex, so for everyone's benefit, let me quickly translate William's remarks. So we are glad to see that you've noticed in our most recent version update of Cloud Music, there is a prominent music community feature called Cloud Village. So everyone, a true music lover is now official villager of our app. As we've mentioned previously, a key focus of Cloud Music is to dedicate our platform and our user outreach to promote independent musicians and independent music here in China.
And with this community features, I think this is more productive in us achieving this mission. In terms of your question on monetization, by and large, I think it can be categorized into 1 being the user subscription, which we're now seeing a very robust growth in both the overall users as well as subscriber growth more than 135% year over year. 2nd is from advertising, which again can grow hand in hand as we're growing our user base and popularity amongst the users. The third is broadcasting, which is not only in the format of video live streaming, but also audio broadcasting. 4th, now with the establishment of a community feature, we will also be more innovative and exploring deeper monetization opportunities around these community interactive features.
In terms of your question on profitability, we've never officially commented on any timetable, but rest assured, we feel very, very confident about the growth upside of China's online music industry as a whole. And NetEase, as you can now witness for the past few records, we are very disciplined in controlling cost at a reasonable level as well as be focusing on the return on the various investments, whether it's selling marketing or R and D into our different business segments. So profitability is ultimately our target.
We will take our next question from Ed Yong from CIC. Your line is open. Please go ahead.
Hi, good morning. Thanks for taking my question. I actually have 2 here. First one is regarding the Cloud Music as well. You just mentioned about the you mentioned the Cloud Village module.
Actually, I tried that module and it's very innovative and interesting. Just wondering, can management share with us some further operating metrics regarding the user engagement recently for the Cloud Music? I just want to get a sense of how that new function has improved the user engagement, say, the daily active user or the daily time spent as something related with that? And secondly, about the mobile IP, just wondering how should we anticipate the use of mobile IP? Will there be some new brand some brand new games or genres launching under these IPs or just new updates with these new features embedded in our existing games?
Thanks.
Thank you, Natalie. I will answer your first question on operating metrics and then William will further comment on the Mavo IP. Well, as you know, we've only launched this new updated version almost, I think it's 29th July towards the very end of July. So it's about 10 days. So there's really not a lot of operating metrics that I can specifically share.
But we've seen very, very encouraging signs of strong growth in both DAU and MAU since we launched the most updated version. And these data is exactly why we are confident that our innovation in bringing in this new interactive community feature will eventually be very well rewarded, because it is not only a way of changing people's habit of experiencing music, but hand in hand as this new feature is now not only encouraging users to listen, but also to watch and interacting with other music lovers, it also creates possible opportunities for us to explore monetization potential. And I'll leave the second question to William. For the Marvel IP, Natalie, it's a big area for a deep rooted collaboration is that we will buy we will leverage Marvel's global popularity of the IPs to develop games. And it's not only one, it's actually several games across different genres that we have different schedule and timetable to collaboratively develop with Marvel.
And the partnership also goes beyond games. For all those details, it will be gradually announced as we further progress along this long term strategic partnership.
Got it. Thank you. Looking forward to that.
We will take our next question from Thomas Chong from Jefferies.
Your line is open. Hi,
good morning, William, Charles and Margaret. Thanks for taking my questions. Congratulations on solid cost control for this quarter. And my question is mainly focusing on the cost side. I think for the GP margin, the innovation and others achieved the 1st positive gross profit in the past 12 months.
Can we basically assume that our cost control is very solid and we should expect innovation and others to maintain GP margin to be positive going forward? As well as for e commerce, do we need to stay stable GP margin for e commerce in 2019? And my second part of the question is about the OpEx. Can management comments about the headcount that we have in Q2 versus Q1? And how should we think about 2019?
In particular, for R and D expenses, is there any reason why we see a sequential decline? Should we expect the trend to go to be continued in the following quarters? Thank you.
Thank you, Thomas. I'll take your questions. On the cost side, let me first begin by saying that NetEase has been listed since 2000 for 19 years, and we have gone through various cycles over the last 19 years of Journey being a listed company. So we've always been very, very disciplined in terms of making adaptive measures to in corresponding to different macro environment. For 2019, as we commented in the previous quarter's earnings call, one key focus is a more disciplined balance between growth and margin.
So we are very happy that at least for the last two quarters, we've been delivering what we have promised to the market, being very disciplined. Having said that, it doesn't mean a scale back in terms of headcount by the end of the second quarter. The overall headcount is, by and large, stable versus a quarter ago or end of last year. So a lot of market rumors commenting on massive layoffs and all that, those are actually just not fact. So relating to your other questions, R and D, yes, we are a technology company.
So R and D is an engine for our continued sustainable growth for the longer term. I do not see any reason why we should scale back or cut down R and D costs significantly. Quarter to quarter, small fluctuations that can it's difficult to explain. Sometimes it relates to some one off event. Sometimes it's the provisions and all that.
But I think a general trend is that we are going to dedicate a considerable amount of our net revenue into R and D. But again, like I commented earlier on, whatever format of investment, whether it's R and D or selling marketing, we focus internally on the return on these investments. In terms of margin, the reason why we have grouped some business segments into innovative businesses and others is exactly because they are in a relatively early stage. So as they continue to grow their top line, their user base, the economies of scale will help us to improve their margin trajectory. It is too early to predict whether all those relatively young business segments will then starting from this quarter always have positive GP margin, but I do not see any indication of margin materially decline.
So going forward, as long as my music business, my Youdao are growing healthily, I think earlier on, Natalie also I think Alex also asked that question. Profitability, making positive profit and then returning value to our shareholders always remains as a priority to NetEase.
Thank you, Charles, and congratulations again.
Thank you. We will take our next question from Bill Liu, Goldman Sachs. Your line is open. Please go ahead.
Thank you. Good morning and thank you for taking my question. I have a follow-up question on costs, mainly about the sales and marketing line. I noticed that for this quarter, it's almost flattish quarter on quarter, but a reduction from a year on year perspective. So I wonder for the sales and marketing expense, how should we think about this line for rest of the year given that on one side we have a deceleration in e commerce growth.
And on the other hand, the new the number of new Pros has been rather limited comparing to previous expectation? Thank you.
Thanks, Bill. I'll again take that question since it relates mostly to financials. For selling and marketing, majority of the selling and marketing is allocated to games. And as you mentioned, relatively speaking, there's fewer new games that is being launched in the first half of this year. That explains why the selling and marketing on games is relatively lower amount comparing to periods where we have major titles that we need to promote.
Now on e commerce, as I mentioned for now at least 2, 3 quarters, it's always a balanced approach between how fast we want to grow the top line as well as the profit profile of myecommerce segment. And I think coming into 2019, we are more disciplined in keeping that balance in a sense that we will not it's just never our philosophy that we are to pursue a faster top line growth at the expense of a bigger loss. So that is not our intention and it's never in our corporate DNA. So these two factors accounts for mostly why in the first half for the past two quarters, selling and marketing expense has been maintained at a very cautious and disciplined level. Well, that does not mean that we face resource constraint.
In the second half, if there are new games that's ready for marketing and promotion, we will do so. And if there are opportunities for us to see reacceleration of my e commerce or other business segments top line growth, we will not hesitate to spend marketing dollars. But whatever marketing dollars we spend, it will be a very calculated investment, focusing on returns and focusing on the results of my marketing dollar expenditure.
Okay. Thank you.
Thank you. We will take our next question from Eddie Leung, Bank of America Merrill Lynch.
Hey, good morning guys. Good morning. Thank you for taking my questions. I have two quick questions. The first one is about these boats.
It seems like there is a plan to invest in a stadium in Shanghai. So wondering how would that affect our capital expenditure going forward? And then secondly, just any update on game regulation? Anything related to the young users' time restriction? Anything along that line would be helpful.
So Eddie, I'll translate the first question. I think you noticed the recent news we made at ChinaJoy. Yes, we are going to invest in Shanghai on e sports related. Shanghai is very supportive of Esports and overall new economy as a whole. As you may notice that our Team Dragon, which most recently won a championship in the Overwatch League, is a team that is based in Shanghai.
And we've also had plan to invest. It's not solely just for Esports Stadium, but it's Esports and as well as R and D center that is more tilted towards developing Esports relevant game content. So that's a longer term strategic plan. And in terms of CapEx, because it's going to be spent across next 3, 5 years or even longer. So from a financial statement, from a cash flow perspective, these are well within our resource capability and control.
It is not going to impact our financial results materially at all. On your second question, game regulation, we don't have any further update on how the regulation is progressing.
Thank you. We'll take our next question from Jialong Shi from Nomura. Your line is open.
Hi, good morning. Hi, good morning, management. Thanks for taking my call. I have two questions. First question is about your dividend payout.
And as Charles mentioned in the prepared remarks, you revised your dividend payout from a fixed 25% to the range of 20% to 30% going forward. So I still I just wonder the rationale to make this change. Is it fair to think going forward you will be able to pay higher than previous 25% in dividends since your earnings outlook is getting better? And my second question is about Fantasy Westway Journey 3 d and this game will based on the game's website, this game will start a new round of testing today. So can you give us some colors on its revenue potential based on the performance during the past rounds of testing?
And is there any potential cannibalization risk between the upcoming FWAJ3d and your existing 2 d FWAJ game? And finally, how long do you expect this latest run how long this latest run of testing may last? And when you expect to monetize this new game?
So to just translate for everyone's benefits, for FWJ3d, yes, we started we will start close beta testing on Android today. As to the official launch and monetization time line, that will be subject to, 1st of all, obviously, the approval when we can get the license. Secondly, also based on the testing results of this closed beta testing round, Your concerns on internal cannibalization as this FWJ3d and the current FWJ PC version and the FWJ mobile version, they are targeting different user appeals. So we see very, very little concern, if any at all, in terms of user internal cannibalization. We are very, very confident and positive about the future outlook of FWAJ3D upon its official launch.
For your first part of the question on the dividend payout ratio, let me comment saying that NetEase is in fact one of the very, very few technology companies globally that has been consistently paying a dividend, returning dividend to our shareholders on a quarterly basis. Every quarter, the exact dividend payout ratio is obviously subject to the Board approval. So now the Board has authorized management instead of a fixed 25% point to a 20% to 30% range. And that's not mean that we are bound by this range. So every quarter, the exact dividend payout ratio will be dependent on the financial and operational performance of the company and ultimately subject to the Board's re approval.
So it does not indicate that in the future, we will always be paying 30%, But we are still pleased that this quarter, we are paying more because we are confident about our sustainable profitability profile down the road. For the future quarters, it all depends on how the macro economy and our outlook of the company's performance change.
Thank you.
You, this concludes today's question and answer session. Margaret, at this time, I will turn the conference back to you for any additional or closing remarks.
Thank you again for joining us today. If you have any further questions, please feel free to contact us or TPG Investor Relations. Have a great day.