BEIJING, Feb. 7, 2018 /PRNewswire/ -- NetEase, Inc.
(NASDAQ: NTES) ("NetEase" or the "Company"), one of China's leading internet and online game
services providers, today announced its unaudited financial results
for the fourth quarter and fiscal year ended December 31, 2017.
Fourth Quarter 2017 Financial Highlights
- Net revenues were RMB14.6 billion
(US$2.2 billion), an increase of
20.7% compared with the fourth quarter of 2016.
-
- Online game services net revenues were RMB8.0 billion (US$1.2
billion), a decrease of 10.7% compared with the fourth
quarter of 2016.
- E-commerce net revenues were RMB4.7
billion (US$715.3 million), an
increase of 175.2% compared with the fourth quarter of 2016.
- Advertising services net revenues were RMB736.6 million (US$113.2
million), an increase of 10.8% compared with the fourth
quarter of 2016.
- E-mail and others net revenues were RMB1.2 billion (US$186.4
million), an increase of 54.8% compared with the fourth
quarter of 2016.
- Gross profit was RMB5.7 billion
(US$882.9 million), a decrease of
11.1% compared with the fourth quarter of 2016.
- Total operating expenses were RMB4.3
billion (US$663.6 million), an
increase of 66.3% compared with the fourth quarter of 2016.
- Net income attributable to the Company's shareholders was
RMB1.3 billion (US$197.6 million). Non-GAAP net income
attributable to the Company's shareholders was RMB1.9 billion (US$288.8
million). [1]
- Diluted earnings per ADS were US$1.49; non-GAAP diluted earnings per ADS were
US$2.18.
[1] As
used in this press release, non-GAAP net income attributable to the
Company's shareholders is defined to exclude share-based
compensation expenses and impairment on long-term investment of
available-for-sale securities. See "Unaudited Reconciliation of
GAAP and Non-GAAP Results" at the end of this press
release.
|
Fourth Quarter 2017 and Recent 2018 Operational
Highlights
- Strengthened leading mobile portfolio, launched new
self-developed hit mobile titles across global audiences
including:
-
- Knives Out: Accumulated over 100 million registered
users to date and has been recommended by Google Play Store in over
10 countries since its launch in November
2017.
- Terminator 2: Judgment Day: Accumulated over 80 million
registered users to date, and the global release of Rules of
Survival, has been ranked as one of the most popular games on
the iOS platform and Google Play Store across multiple countries,
including the U.S market, since its launch in November 2017.
- Popular games such as Japanese-themed RPG Forever 7
launched in November 2017 and
highly-anticipated MMORPG Chu Liuxiang launched in
January 2018.
- Successfully introduced Mojang's Minecraft in
China across all platforms with
early monetization progressing well.
- Invigorated the popularity of Onmyoji and expanded its
international reach with the release of a new content update,
successful launch in Thailand in
November 2017 and introduction of a
new MOBA version in January 2018,
which was well-received by players.
- Reinforced strength of flagship titles with stable performances
from self-developed games such as PC-client game Fantasy
Westward Journey Online and mobile game Invincible.
- Progressed pipeline diversification strategy with upcoming
games including asymmetrical battle arena game Identity V,
RPG Sky and 2.5D casual battle arena game Alive.
"2017 marked another year of progress with growth across each of
our core business segments year-over-year. Our total net revenues
for the year increased by 41.7% as we brought a number of new
blockbuster online games to audiences across the globe,
considerably scaled our e-commerce business and further grew our
landmark advertising services and e-mail and others business
lines," said Mr. William Ding, Chief
Executive Officer and Director of NetEase. "For the fourth quarter,
our total net revenues continued to grow year-over-year and
quarter-over-quarter. Although a few mobile titles such as
Onmyoji and the mobile version of New Ghost
experienced a decline, we have introduced new content for these
games to attract players. During the fourth quarter, we held
substantial promotions to support the successful launch of our new
battle arena games Knives Out, Terminator 2:
Judgment Day and Rules of Survival. We also made
additional investments to further scale our thriving e-commerce
businesses. We believe these strategic investments provide us with
extended reach and momentum to support our future long-term
growth.
"Our business remains strong and our 2018 initiatives to bring
exciting new titles to our robust and diverse portfolio of
self-developed games are well underway. To expand our reach, we
will also seek partnerships with other industry leaders to bring
mobile and PC-client games to audiences worldwide. Our e-commerce
businesses and advertising services are also thriving, with
e-commerce accounting for approximately 22% of our total net
revenues in 2017. We will continue to expand our Kaola.com
and Yanxuan e-commerce platforms in 2018 along with our
other business segments where we see opportunities to generate
value for our shareholders, as well as serve and grow our community
of users by providing best-in-class online content and services,"
Mr. Ding concluded.
Change in Segment Reporting
Effective as of December 31, 2017,
the Company changed its segment disclosure to separately report the
financial results of its e-commerce business in light of the
significant growth of the revenue contribution from e-commerce to
the Company's total consolidated net revenues in 2017. This segment
primarily reflects the results of NetEase's two e-commerce
platforms, Kaola.com and Yanxuan, which were
established in January 2015 and
April 2016, respectively. The Company
now reports four reporting segments: online game services,
e-commerce, advertising services, and e-mail and others. This
change in segment reporting aligns with the manner in which the
Company's operating decision maker ("CODM") currently receives and
uses financial information to allocate resources and evaluate the
performance of reporting segments. This change in segment
presentation does not affect consolidated balance sheets,
consolidated statements of income or consolidated statements of
cash flows. The Company retrospectively revised prior period
segment information to conform to current period presentation.
Fourth Quarter 2017 Financial Results
Net Revenues
Net revenues for the fourth quarter of 2017 were RMB14,607.6 million (US$2,245.2 million), compared to RMB12,477.8 million and RMB12,099.0 million for the preceding quarter and
the fourth quarter of 2016, respectively.
Net revenues from online games were RMB8,004.4 million (US$1,230.2 million) for the fourth quarter of
2017, compared to RMB8,111.7 million
and RMB8,959.1 million for the
preceding quarter and the fourth quarter of 2016, respectively.
Mobile games accounted for approximately 68.0% of net revenues from
online games for the fourth quarter of 2017, compared to 68.3% and
64.4% for the preceding quarter and the fourth quarter of 2016,
respectively.
Net revenues from e-commerce were RMB4,653.7 million (US$715.3 million) for the fourth quarter of 2017,
compared to RMB2,667.5 million and
RMB1,691.2 million for the preceding
quarter and the fourth quarter of 2016, respectively.
Net revenues from advertising services were RMB736.6 million (US$113.2
million) for the fourth quarter of 2017, compared to
RMB631.4 million and RMB664.8 million for the preceding quarter and
the fourth quarter of 2016, respectively. The top performing
advertising verticals in the fourth quarter of 2017 were
automobile, internet services and real estate sectors.
Net revenues from e-mail and others were RMB1,213.0 million (US$186.4 million) for the fourth quarter of 2017,
compared to RMB1,067.2 million and
RMB783.8 million for the preceding
quarter and the fourth quarter of 2016, respectively.
Gross Profit/ (Loss)
Gross profit for the fourth quarter of 2017 was RMB5,744.6 million (US$882.9 million), compared to RMB5,947.6 million and RMB6,463.3 million for the preceding quarter and
the fourth quarter of 2016, respectively.
The year-over-year and quarter-over-quarter decreases in online
game services gross profit were primarily due to decreased revenue
contribution from self-developed mobile games such as
Onmyoji.
The year-over-year and quarter-over-quarter increases in
e-commerce gross profit were primarily due to the rapid development
of Kaola.com and Yanxuan.
The year-over-year and quarter-over-quarter increases in
advertising services gross profit were primarily due to NetEase's
enhanced monetization efforts and better economies of scale.
The year-over-year and quarter-over-quarter decreases in e-mail
and others gross profit were primarily due to decreased revenue
contribution from certain online platform businesses, which have
relatively higher margins, as well as the one-off recognition of
expense related to certain copyrights in the fourth quarter of
2017.
Gross Profit/ (Loss) Margin
Gross profit margin for online game services for the fourth
quarter of 2017 was 61.4%, compared to 62.5% and 60.7% for the
preceding quarter and the fourth quarter of 2016, respectively. The
year-over-year increase in gross profit margin was mainly due to
the one-off recognition of certain royalty expenses related to
licensed games in the fourth quarter of 2016, which was partially
offset by increased staff-related costs. The quarter-over-quarter
decrease in gross profit margins was mainly due to increased
staff-related costs.
Gross profit margin for e-commerce for the fourth quarter of
2017 was 7.4%, compared to 11.5% and 12.5% for the preceding
quarter and the fourth quarter of 2016, respectively. The
year-over-year and quarter-over-quarter decreases in e-commerce
gross profit margin were primarily due to the larger-scale
promotions and certain sales discounts in the fourth quarter of
2017, such as Singles Day on November 11,
2017.
Gross profit margin for advertising services for the fourth
quarter of 2017 was 71.2%, compared to 68.0% and 66.5% for the
preceding quarter and the fourth quarter of 2016, respectively. The
year-over-year and quarter-over-quarter increases in gross profit
margin were mainly due to NetEase's enhanced monetization efforts
and better economies of scale.
Gross loss margin for e-mail and others for the fourth quarter
of 2017 was 3.3%, compared to gross profit margin of 13.1% and
46.9% for the preceding quarter and the fourth quarter of 2016,
respectively. The year-over-year and quarter-over-quarter decreases
in gross margin were primarily due to the decreased revenue
contribution from certain online platform businesses, which have
relatively higher gross profit margins, as well as the one-off
recognition of expense related to certain copyrights in the fourth
quarter of 2017.
Operating Expenses
Total operating expenses for the fourth quarter of 2017 were
RMB4,317.8 million (US$663.6 million), compared to RMB3,397.9 million and RMB2,596.6 million for the preceding quarter and
the fourth quarter of 2016, respectively. The year-over-year and
quarter-over-quarter increases in operating expenses were mainly
due to increased selling and marketing expenses and research and
development investments, and higher staff-related costs, as well as
increased operating expenses related to NetEase's e-commerce
businesses. Shipping and handling costs included in selling and
marketing expenses for the fourth quarter of 2017 were RMB393.3 million (US$60.4
million), compared to RMB294.8
million and RMB177.2 million
for the preceding quarter and the fourth quarter of 2016,
respectively.
Income Taxes
The Company recorded a net income tax charge of RMB290.4 million (US$44.6
million) for the fourth quarter of 2017, compared to
RMB225.5 million and RMB882.0 million for the preceding quarter and
the fourth quarter of 2016, respectively. The effective tax rate
for the fourth quarter of 2017 was 18.2%, compared to 8.1% and
19.2% for the preceding quarter and the fourth quarter of 2016,
respectively. The changes in the effective tax rate were mainly due
to the fact that certain subsidiaries of the Company were
recognized as Key Software Enterprises in the third quarter and
fourth quarter of 2017, and subject to a preferential tax rate of
10% for 2016. The Company recognized related tax credits in the
third quarter and fourth quarter of 2017 accordingly.
Net Income After Tax
Net income attributable to the Company's shareholders for the
fourth quarter of 2017 totaled RMB1.3
billion (US$197.6 million),
compared to RMB2.5 billion and
RMB3.7 billion for the preceding
quarter and the fourth quarter of 2016, respectively. Non-GAAP net
income attributable to the Company's shareholders for the fourth
quarter of 2017 totaled RMB1.9
billion (US$288.8 million),
compared to RMB3.0 billion and
RMB4.0 billion for the preceding
quarter and the fourth quarter of 2016, respectively.
During the fourth quarter of 2017, the Company had a net foreign
exchange loss of RMB159.1 million
(US$24.5 million), compared to a net
foreign exchange loss of RMB109.9
million and a net foreign exchange gain of RMB90.5 million for the preceding quarter and the
fourth quarter of 2016, respectively. The year-over-year and
quarter-over-quarter changes in foreign exchange gains and losses
were mainly due to unrealized exchange gains and losses arising
from the Company's U.S. dollar-denominated bank deposits and
short-term loan balances as the exchange rate of the U.S. dollar
against the RMB fluctuated over the periods.
NetEase reported basic and diluted earnings per ADS of
US$1.50 and US$1.49, respectively, for the fourth quarter of
2017. The Company reported basic and diluted earnings per ADS of
US$2.95 and US$2.93, respectively, for the preceding quarter,
and basic and diluted earnings per ADS of US$4.31 and US$4.28, respectively, for the fourth quarter of
2016. Non-GAAP basic and diluted earnings per ADS were US$2.20 and US$2.18, respectively, for the fourth quarter of
2017, compared to non-GAAP basic and diluted earnings per ADS of
US$3.53 and US$3.50, respectively, for the preceding quarter,
and non-GAAP basic and diluted earnings per ADS of US$4.63 and US$4.59, respectively, for the fourth quarter of
2016.
Fiscal Year 2017 Financial Results
Net Revenues
Total net revenues for fiscal year 2017 were RMB54.1 billion (US$8.3
billion), compared to RMB38.2
billion for the preceding fiscal year.
Net revenues from online games were RMB36.3 billion (US$5.6
billion) for fiscal year 2017, compared to RMB28.0 billion for the preceding fiscal year.
Mobile games accounted for approximately 70.8% of net revenues from
online games for fiscal year 2017, compared to 61.9% for the
preceding fiscal year.
Net revenues from e-commerce were RMB11.7
billion (US$1.8 billion) for
fiscal year 2017, compared to RMB4.5
billion for the preceding fiscal year.
Net revenues from advertising services were RMB2.4 billion (US$370.2
million) for fiscal year 2017, compared to RMB2.2 billion for the preceding fiscal year. The
top performing advertising verticals in 2017 were automobile,
internet services and real estate sectors.
Net revenues from e-mail and others were RMB3.7 billion (US$575.0
million) for fiscal year 2017, compared to RMB3.5 billion for the preceding fiscal year.
Gross Profit
Gross profit for fiscal year 2017 was RMB25.9 billion (US$4.0
billion), compared to RMB21.7
billion for the preceding fiscal year.
The increase in online game services gross profit in 2017 was
primarily attributable to increased revenue contribution from the
Company's self-developed mobile games such as Onmyoji and
the mobile version of New Ghost.
The increase in e-commerce gross profit in 2017 was primarily
due to business development of Kaola.com and
Yanxuan.
The increase in advertising services gross profit in 2017 was
due to NetEase's enhanced monetization efforts and better economies
of scale.
The decrease in e-mail and others gross profit in 2017 was
primarily due to the decreased revenue contribution from certain
online platform businesses, which have relatively higher margins,
as well as the one-off recognition of expense related to certain
copyrights in the fourth quarter of 2017.
Operating Expenses
Total operating expenses for fiscal year 2017 were RMB13.8 billion (US$2.1
billion), compared to RMB9.0
billion for the preceding fiscal year. The increase in
operating expenses in 2017 was primarily due to increased selling
and marketing expenses and research and development investments,
and higher staff-related costs, as well as increased operating
expenses related to NetEase's e-commerce businesses. Shipping and
handling costs included in selling and marketing expenses for
fiscal year 2017 were RMB1,182.7
million (US$181.8 million),
compared to RMB503.0 million for the
preceding fiscal year.
Income Taxes
The Company recorded a net income tax charge of RMB2.2 billion (US$332.3
million) and RMB2.1 billion
for fiscal years 2017 and 2016, respectively. The effective tax
rate was 16.6% for fiscal year 2017, compared to 15.1% for fiscal
year 2016. The changes in the effective tax rate were mainly due to
the higher withholding tax recorded for fiscal year 2017.
Net Income After Tax
Net income attributable to the Company's shareholders for fiscal
year 2017 totaled RMB10.7 billion
(US$1.6 billion), compared to
RMB11.6 billion for the preceding
fiscal year. Non-GAAP net income attributable to the Company's
shareholders for fiscal year 2017 totaled RMB12.7 billion (US$2.0
billion), compared to RMB12.9
billion for fiscal year 2016.
For fiscal year 2017, the Company reported a net foreign
exchange loss of RMB448.8 million
(US$69.0 million), compared to a net
foreign exchange gain of RMB146.5
million for the preceding fiscal year. The changes in
foreign exchange gains and losses were mainly due to unrealized
exchange gains and losses arising from the Company's U.S.
dollar-denominated bank deposits and short-term loan balances as
the exchange rate of the U.S. dollar against the RMB fluctuated
over these periods.
NetEase reported basic and diluted earnings per ADS of
US$12.50 and US$12.41, respectively, for fiscal year 2017, and
basic and diluted earnings per ADS of US$13.59 and US$13.48, respectively, for fiscal year 2016.
Non-GAAP basic and diluted earnings per ADS were US$14.85 and US$14.73, respectively, for fiscal year 2017,
compared to non-GAAP basic and diluted earnings per ADS of
US$15.06 and US$14.94, respectively, for fiscal year 2016.
Quarterly Dividend
The board of directors has approved a dividend of US$0.38 per ADS for the fourth quarter of 2017,
which is expected to be paid on March 2,
2018 to shareholders of record as of the close of business
on February 23, 2018.
NetEase paid dividends of US$1.08
per ADS for the first quarter of 2017 on June 2, 2017, US$0.83 per ADS for the second quarter of 2017 on
September 1, 2017 and US$0.72 per ADS for the third quarter of 2017 on
December 8, 2017, respectively.
Under the Company's quarterly dividend policy announced on
May 13, 2014, quarterly dividends
will be set at an amount equivalent to approximately 25% of the
Company's anticipated net income after tax in each fiscal quarter.
The determination to make dividend distributions and the amount of
such distributions in any particular quarter will be made at the
discretion of the board of directors and will be based upon the
Company's operations and earnings, cash flow, financial condition
and other relevant factors.
Other Information
As of December 31, 2017, the
Company's total cash and cash equivalents, current and non-current
time deposits and short-term investments balance totaled
RMB43.2 billion (US$6.6 billion), compared to RMB36.9 billion as of December 31, 2016. Cash flow generated from
operating activities was RMB11.9
billion (US$1.8 billion) for
fiscal year 2017, compared to RMB15.5
billion for the preceding fiscal year.
Share Repurchase Program
On November 15, 2016, the Company
announced that its board of directors approved a share repurchase
program of up to US$1.0 billion of
the Company's outstanding ADSs for a period not to exceed 12
months. As of November 14, 2017, the
last day of such program, the Company had repurchased approximately
1.1 million ADSs for approximately US$306.1
million under this program.
On November 15, 2017, the Company
announced that its board of directors has approved a new share
repurchase program of up to US$1.0
billion of the Company's outstanding ADSs for a period not
to exceed 12 months beginning on November
16, 2017. As of December 31,
2017, no ADS were repurchased under this program.
Under the terms of the current approved program, NetEase may
repurchase its issued and outstanding ADSs in open-market
transactions on the NASDAQ Global Select Market. The timing and
dollar amount of repurchase transactions will be subject to the
Securities and Exchange Commission (SEC) Rule 10b-18 requirements. It is also expected that
such repurchases will be effected pursuant to a plan in conformity
with SEC Rule 10b5-1. The extent to which NetEase repurchases
its ADSs will depend upon a variety of factors, including market
conditions, regulatory requirements and other corporate
considerations, as determined by NetEase's management team. The
repurchase program may be suspended or discontinued at any
time.
** The United States dollar
(US$) amounts disclosed in this press release are presented solely
for the convenience of the reader. Translations of amounts from RMB
into United States dollars for the
convenience of the reader were calculated at the noon buying rate
of US$1.00 = RMB6.5063 on December 29,
2017 as set forth in the H.10 statistical release of the
U.S. Federal Reserve Board. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at that
rate on December 29, 2017, or at any
other certain date. The percentages stated are calculated based on
RMB.
Notes to Unaudited Financial Information
The unaudited financial information disclosed in this press
release is preliminary. The audit of the financial statements and
related notes to be included in the Company's annual report on Form
20-F for the year ended December 31,
2017 is still in progress. In addition, because an audit of
the Company's internal controls over financial reporting in
connection with section 404 of the Sarbanes-Oxley Act of 2002 has
not yet been completed, the Company makes no representation as to
the effectiveness of those internal controls as of the end of
fiscal year 2017.
Adjustments to the financial statements may be identified when
the audit work is completed, which could result in significant
differences between the Company's audited financial statements and
this preliminary unaudited financial information.
Conference Call
NetEase's management team will host a teleconference call with
simultaneous webcast at 8:00 p.m. Eastern
Time on Wednesday, February 7, 2018 (Beijing/Hong Kong Time: 9:00 a.m., Thursday,
February 8, 2018). NetEase's management will be on the call
to discuss the quarterly results and answer questions.
Interested parties may participate in the conference call by
dialing 1-800-281-7973 (international: 1-323-794-2093), 10-15
minutes prior to the initiation of the call. A replay of the call
will be available by dialing 1-888-203-1112 (international:
1-719-457-0820), and entering passcode 3213566#. The replay will be
available through February 21,
2018.
This call will be webcast live and the replay will be available
for 12 months. Both will be available on NetEase's Investor
Relations website at http://ir.netease.com.
About NetEase, Inc.
NetEase, Inc. (NASDAQ: NTES) is a leading internet technology
company in China. Dedicated to
providing online services centered around content, community,
communication and commerce, NetEase develops and operates some of
China's most popular PC-client and
mobile games, e-commerce businesses, advertising services and
e-mail services. In partnership with Blizzard Entertainment, Mojang
AB (a Microsoft subsidiary) and other global game developers,
NetEase also operates some of the most popular international online
games in China. For more
information, please visit: http://ir.netease.com/.
Forward Looking Statements
This press release contains statements of a forward-looking
nature. These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform Act of
1995. You can identify these forward-looking statements by
terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates" and similar statements.
The accuracy of these statements may be impacted by a number of
business risks and uncertainties that could cause actual results to
differ materially from those projected or anticipated, including
risks related to: the risk that the online game market will not
continue to grow or that NetEase will not be able to maintain its
leading position in that market, which could occur if, for example,
its new online games or expansion packs and other improvements to
its existing games do not become as popular as management
anticipates; the ability of NetEase to successfully expand its
mobile internet offerings; the ability of NetEase to effectively
market its games and other services and achieve a positive return
on its marketing expenditures; the risk that NetEase's affiliates
will not be able to continue operating Minecraft, World
of Warcraft®, StarCraft® II,
Hearthstone®, Diablo® III: Reaper of
Souls™, Heroes of the Storm®,
Overwatch® or other games licensed by
it for a period of time or permanently due to possible governmental
actions or the risk that such games will not be popular with game
players in China; the risk that
changes in Chinese government regulation of the online game market
and the market for NetEase's e-commerce businesses may limit future
growth of NetEase's revenues or cause revenues to decline;
competition in the online advertising business and the risk that
investments by NetEase in its content and services may not increase
the appeal of the NetEase websites among internet users or result
in increased advertising revenues; the risk that NetEase may not be
able to continuously develop new and creative online services,
including its ability to maintain and enhance the popularity of its
e-mail, mobile and e-commerce businesses and develop attractive
mobile games; the risk that NetEase will not be able to control its
expenses in future periods; competition in NetEase's existing and
potential markets; governmental uncertainties (including possible
changes in the effective tax rates applicable to NetEase and its
subsidiaries and affiliates and the ability of NetEase to receive
and maintain approvals of the preferential tax treatments and
general competition and price pressures in the marketplace); the
risk that fluctuations in the value of the Renminbi with respect to
other currencies could adversely affect NetEase's business and
financial results; and other risks outlined in NetEase's filings
with the Securities and Exchange Commission. NetEase does not
undertake any obligation to update this forward-looking
information, except as required under the applicable law.
Non-GAAP Financial Measures
NetEase considers and uses non-GAAP financial measures, such as
non-GAAP net income attributable to the Company's shareholders and
non-GAAP basic and diluted earnings per ADS, as supplemental
metrics in reviewing and assessing its operating performance and
formulating its business plan. The presentation of non-GAAP
financial measures is not intended to be considered in isolation or
as a substitute for the financial information prepared and
presented in accordance with accounting principles generally
accepted in the United States of
America ("U.S. GAAP").
NetEase defines non-GAAP net income attributable to the
Company's shareholders as net income attributable to the Company's
shareholders excluding share-based compensation expenses and
impairment on long-term investment of available-for-sale
securities. Non-GAAP net income attributable to the Company's
shareholders enables NetEase's management to assess its operating
results without considering the impact of share-based compensation
expenses and impairment on long-term investment of
available-for-sale securities, which are non-cash charges. NetEase
believes that these non-GAAP financial measures provide useful
information to investors in understanding and evaluating the
Company's current operating performance and future prospects in the
same manner as management does, if they so choose. NetEase also
believes that the use of this non-GAAP financial measure
facilitates investors' assessment of its operating performance.
Non-GAAP financial measures are not defined under U.S. GAAP and
are not presented in accordance with U.S. GAAP. Non-GAAP financial
measures have limitations as analytical tools. One of the key
limitations of using non-GAAP net income attributable to the
Company's shareholders is that it does not reflect all items of
expense that affect our operations. Share-based compensation
expenses and impairment on long-term investment of
available-for-sale securities have been and may continue to be
incurred in our business and are not reflected in the presentation
of non-GAAP net income attributable to the Company's shareholders.
In addition, the non-GAAP financial measures NetEase uses may
differ from the non-GAAP measures used by other companies,
including peer companies, and therefore their comparability may be
limited.
NetEase compensates for these limitations by reconciling
non-GAAP net income attributable to the Company's shareholders to
the nearest U.S. GAAP performance measure, all of which should be
considered when evaluating the Company's performance. See
"Reconciliation of GAAP and Non-GAAP Results" at the end of this
press release. NetEase encourages you to review its financial
information in its entirety and not rely on a single financial
measure.
Contact for Media and Investors:
Margaret Shi
NetEase, Inc.
ir@service.netease.com
Tel: (+86) 571-8985-5201
Brandi Piacente
Investor Relations
brandi@corp.netease.com
Tel: (+1) 212-481-2050
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(RMB and USD in
thousands)
|
|
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
5,439,499
|
|
2,764,140
|
|
424,841
|
Time
deposits
|
|
19,361,098
|
|
30,603,369
|
|
4,703,652
|
Restricted cash
|
|
3,473,273
|
|
5,926,906
|
|
910,949
|
Accounts
receivable, net
|
|
4,251,297
|
|
3,619,725
|
|
556,342
|
Inventories,net
|
|
1,578,130
|
|
5,474,929
|
|
841,481
|
Prepayments and other current assets
|
|
3,697,952
|
|
3,816,028
|
|
586,514
|
Short-term investments
|
|
11,582,116
|
|
9,742,663
|
|
1,497,420
|
Total current
assets
|
|
49,383,365
|
|
61,947,760
|
|
9,521,199
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
Property, equipment and software, net
|
|
2,419,510
|
|
3,769,326
|
|
579,335
|
Land use
right, net
|
|
588,887
|
|
593,279
|
|
91,185
|
Deferred
tax assets *
|
|
560,323
|
|
823,495
|
|
126,569
|
Time
deposits
|
|
550,000
|
|
100,000
|
|
15,370
|
Restricted cash
|
|
2,060,000
|
|
200
|
|
31
|
Other
long-term assets
|
|
2,469,775
|
|
3,797,355
|
|
583,641
|
Total non-current
assets
|
|
8,648,495
|
|
9,083,655
|
|
1,396,131
|
Total
assets
|
|
58,031,860
|
|
71,031,415
|
|
10,917,330
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
1,396,187
|
|
2,442,531
|
|
375,410
|
Salary
and welfare payables
|
|
1,491,448
|
|
2,189,110
|
|
336,460
|
Taxes
payable
|
|
1,722,501
|
|
1,564,692
|
|
240,489
|
Short-term loans
|
|
3,815,691
|
|
6,623,502
|
|
1,018,014
|
Deferred
revenue
|
|
7,531,238
|
|
6,237,969
|
|
958,758
|
Accrued
liabilities and other payables
|
|
3,219,419
|
|
4,692,310
|
|
721,195
|
Total current
liabilities
|
|
19,176,484
|
|
23,750,114
|
|
3,650,326
|
|
|
|
|
|
|
|
Long-term
payable:
|
|
|
|
|
|
|
Deferred
tax liabilities *
|
|
392,235
|
|
213,215
|
|
32,771
|
Other
long-term payable
|
|
200
|
|
18,250
|
|
2,805
|
Total
liabilities
|
|
19,568,919
|
|
23,981,579
|
|
3,685,902
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
-
|
|
614,696
|
|
94,477
|
|
|
|
|
|
|
|
Total NetEase, Inc.'s
equity
|
|
38,191,081
|
|
45,732,007
|
|
7,028,881
|
Noncontrolling
interests
|
|
271,860
|
|
703,133
|
|
108,070
|
Total shareholders'
equity
|
|
38,462,941
|
|
46,435,140
|
|
7,136,951
|
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interests and
shareholders'
equity
|
|
58,031,860
|
|
71,031,415
|
|
10,917,330
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
*In 2017, the
Company adopted the guidance of ASU 2015-17 issued by FASB in
November 2015, which requires entities to
present deferred tax assets ("DTA") and deferred tax liabilities
("DTL") as non-current in the balance sheets. Pursuant to
the
guidance, the Company retrospectively reclassified current DTA and
current DTL to non-current assets and to non-current
liabilities, respectively, in the consolidated balance sheet as of
December 31, 2016.
|
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
(RMB and USD in
thousands, except per share data)
|
|
|
|
Quarter
Ended
|
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
|
2016
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
12,099,020
|
|
12,477,789
|
|
14,607,636
|
|
2,245,152
|
|
|
38,178,844
|
|
54,102,019
|
|
8,315,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
(5,635,741)
|
|
(6,530,214)
|
|
(8,863,025)
|
|
(1,362,223)
|
|
|
(16,515,032)
|
|
(28,189,326)
|
|
(4,332,620)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
6,463,279
|
|
5,947,575
|
|
5,744,611
|
|
882,929
|
|
|
21,663,812
|
|
25,912,693
|
|
3,982,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(1,255,331)
|
|
(1,645,829)
|
|
(2,397,214)
|
|
(368,444)
|
|
|
(4,481,815)
|
|
(6,957,596)
|
|
(1,069,362)
|
General and
administrative expenses
|
|
(464,149)
|
|
(599,116)
|
|
(678,370)
|
|
(104,264)
|
|
|
(1,506,154)
|
|
(2,429,858)
|
|
(373,462)
|
Research and
development expenses
|
|
(877,119)
|
|
(1,152,941)
|
|
(1,242,213)
|
|
(190,925)
|
|
|
(3,046,979)
|
|
(4,371,428)
|
|
(671,876)
|
Total operating
expenses
|
|
(2,596,599)
|
|
(3,397,886)
|
|
(4,317,797)
|
|
(663,633)
|
|
|
(9,034,948)
|
|
(13,758,882)
|
|
(2,114,700)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
3,866,680
|
|
2,549,689
|
|
1,426,814
|
|
219,296
|
|
|
12,628,864
|
|
12,153,811
|
|
1,868,008
|
Other
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income,
net
|
|
291,960
|
|
117,746
|
|
96,030
|
|
14,760
|
|
|
200,333
|
|
362,113
|
|
55,656
|
Interest income,
net
|
|
125,335
|
|
164,684
|
|
190,733
|
|
29,315
|
|
|
541,969
|
|
667,323
|
|
102,566
|
Exchange gains/
(losses), net
|
|
90,461
|
|
(109,891)
|
|
(159,106)
|
|
(24,454)
|
|
|
146,510
|
|
(448,827)
|
|
(68,983)
|
Other, net
|
|
219,188
|
|
44,876
|
|
37,814
|
|
5,812
|
|
|
377,685
|
|
277,080
|
|
42,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income before
tax
|
|
4,593,624
|
|
2,767,104
|
|
1,592,285
|
|
244,729
|
|
|
13,895,361
|
|
13,011,500
|
|
1,999,833
|
Income tax
|
|
(882,018)
|
|
(225,494)
|
|
(290,372)
|
|
(44,629)
|
|
|
(2,102,498)
|
|
(2,162,363)
|
|
(332,349)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income after
tax
|
|
3,711,606
|
|
2,541,610
|
|
1,301,913
|
|
200,100
|
|
|
11,792,863
|
|
10,849,137
|
|
1,667,484
|
Net income
attributable to noncontrolling interests
and redeemable noncontrolling
interests
|
|
(28,506)
|
|
(14,161)
|
|
(16,300)
|
|
(2,505)
|
|
|
(188,343)
|
|
(141,198)
|
|
(21,702)
|
Net income
attributable to
the Company's shareholders
|
|
3,683,100
|
|
2,527,449
|
|
1,285,613
|
|
197,595
|
|
|
11,604,520
|
|
10,707,939
|
|
1,645,782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
1.12
|
|
0.77
|
|
0.39
|
|
0.06
|
|
|
3.54
|
|
3.25
|
|
0.50
|
Basic earnings per
ADS
|
|
28.06
|
|
19.18
|
|
9.79
|
|
1.50
|
|
|
88.40
|
|
81.36
|
|
12.50
|
Diluted earnings per
share
|
|
1.11
|
|
0.76
|
|
0.39
|
|
0.06
|
|
|
3.51
|
|
3.23
|
|
0.50
|
Diluted earnings per
ADS
|
|
27.82
|
|
19.05
|
|
9.71
|
|
1.49
|
|
|
87.72
|
|
80.74
|
|
12.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of
ordinary shares outstanding, basic
|
|
3,281,411
|
|
3,294,167
|
|
3,284,028
|
|
3,284,028
|
|
|
3,281,729
|
|
3,290,312
|
|
3,290,312
|
Weighted average
number of
ADS outstanding, basic
|
|
131,256
|
|
131,767
|
|
131,361
|
|
131,361
|
|
|
131,269
|
|
131,612
|
|
131,612
|
Weighted average
number of
ordinary shares outstanding, diluted
|
|
3,310,275
|
|
3,317,373
|
|
3,310,586
|
|
3,310,586
|
|
|
3,307,109
|
|
3,315,478
|
|
3,315,478
|
Weighted average
number of
ADS outstanding, diluted
|
|
132,411
|
|
132,695
|
|
132,423
|
|
132,423
|
|
|
132,284
|
|
132,619
|
|
132,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(RMB and USD in
thousands)
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
3,711,606
|
|
2,541,610
|
|
1,301,913
|
|
200,100
|
|
11,792,863
|
|
10,849,137
|
|
1,667,484
|
Adjustments to reconcile net
income to net
cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
96,653
|
|
210,791
|
|
274,298
|
|
42,159
|
|
327,515
|
|
801,804
|
|
123,235
|
Impairment loss for
investments
|
|
12,247
|
|
18,337
|
|
14,000
|
|
2,152
|
|
278,906
|
|
58,537
|
|
8,997
|
Share-based compensation
cost
|
|
273,975
|
|
497,460
|
|
593,301
|
|
91,188
|
|
990,131
|
|
2,004,263
|
|
308,050
|
(Reversal of)/ allowance for provision for doubtful
debts
|
|
(2,398)
|
|
17,784
|
|
28,914
|
|
4,444
|
|
9,952
|
|
60,826
|
|
9,349
|
Losses/ (gains) on disposal
of property,
equipment and
software
|
|
46
|
|
(174)
|
|
5,118
|
|
787
|
|
1,276
|
|
5,072
|
|
780
|
Unrealized exchange (gains)/
losses
|
|
(77,989)
|
|
118,646
|
|
155,511
|
|
23,902
|
|
(166,638)
|
|
437,868
|
|
67,299
|
Gain on disposal of
long-term investments
|
|
(234,050)
|
|
-
|
|
-
|
|
-
|
|
(234,050)
|
|
(9,595)
|
|
(1,475)
|
Deferred income
taxes
|
|
(14,874)
|
|
(180,849)
|
|
(83,865)
|
|
(12,890)
|
|
66,676
|
|
(438,043)
|
|
(67,326)
|
Net equity share of loss/
(gains) from associated companies
|
|
36,050
|
|
(2,180)
|
|
(20,849)
|
|
(3,204)
|
|
85,813
|
|
12,232
|
|
1,880
|
Fair value changes of
short-term investments
|
|
(95,697)
|
|
(112,996)
|
|
(81,546)
|
|
(12,533)
|
|
(304,605)
|
|
(389,793)
|
|
(59,910)
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(1,586,524)
|
|
125,160
|
|
(391,603)
|
|
(60,188)
|
|
(1,646,885)
|
|
565,228
|
|
86,874
|
Prepayments and other current assets
|
|
(968,609)
|
|
(1,141,181)
|
|
(655,332)
|
|
(100,723)
|
|
(1,824,362)
|
|
(4,013,039)
|
|
(616,793)
|
Accounts payable
|
|
517,861
|
|
191,847
|
|
403,973
|
|
62,090
|
|
604,089
|
|
1,100,787
|
|
169,188
|
Salary and welfare payables
|
|
704,875
|
|
(177,525)
|
|
805,435
|
|
123,793
|
|
570,466
|
|
700,479
|
|
107,662
|
Taxes payable
|
|
667,002
|
|
(577,588)
|
|
594,408
|
|
91,359
|
|
986,390
|
|
(155,904)
|
|
(23,962)
|
Deferred revenue
|
|
2,004,605
|
|
53,034
|
|
73,352
|
|
11,274
|
|
2,879,489
|
|
(1,291,890)
|
|
(198,560)
|
Accrued liabilities and other payables
|
|
333,967
|
|
73,080
|
|
864,426
|
|
132,860
|
|
1,071,240
|
|
1,591,269
|
|
244,574
|
Net cash provided by operating activities
|
|
5,378,746
|
|
1,655,256
|
|
3,881,454
|
|
596,570
|
|
15,488,266
|
|
11,889,238
|
|
1,827,346
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
equipment and software
|
|
(463,794)
|
|
(512,359)
|
|
(572,115)
|
|
(87,932)
|
|
(1,135,533)
|
|
(1,842,933)
|
|
(283,254)
|
Proceeds from sale of
property, equipment and software
|
|
83
|
|
465
|
|
1,187
|
|
182
|
|
2,064
|
|
4,425
|
|
680
|
Purchase of other intangible
assets
|
|
(2,005)
|
|
-
|
|
-
|
|
-
|
|
(4,434)
|
|
(25)
|
|
(4)
|
Purchase of land use
right
|
|
-
|
|
(6,488)
|
|
-
|
|
-
|
|
(60)
|
|
(6,488)
|
|
(997)
|
Net change in short-term
investments
with terms of
three months or less
|
|
(2,661,702)
|
|
1,943,208
|
|
(3,119,511)
|
|
(479,460)
|
|
(3,704,332)
|
|
(895,298)
|
|
(137,605)
|
Purchase of short-term
investments
|
|
(2,000,000)
|
|
(1,865,000)
|
|
(1,235,000)
|
|
(189,816)
|
|
(12,439,000)
|
|
(12,491,000)
|
|
(1,919,832)
|
Proceeds from maturities of
short-term investments
|
|
3,890,560
|
|
4,851,772
|
|
2,656,842
|
|
408,349
|
|
9,879,319
|
|
15,615,544
|
|
2,400,065
|
Investment in associated
companies
|
|
(900)
|
|
(81,293)
|
|
(154,476)
|
|
(23,743)
|
|
(364,486)
|
|
(235,769)
|
|
(36,237)
|
Proceeds from disposal of
investment in associated company
and long-term
investments
|
|
249,569
|
|
340,435
|
|
-
|
|
-
|
|
249,569
|
|
350,418
|
|
53,858
|
Transfer (to)/ from
restricted cash
|
|
(713,162)
|
|
(22,341)
|
|
359,997
|
|
55,331
|
|
(2,140,421)
|
|
(394,021)
|
|
(60,560)
|
Placement/rollover of
matured time deposits
|
|
(6,818,322)
|
|
(13,084,711)
|
|
(8,183,371)
|
|
(1,257,761)
|
|
(20,367,430)
|
|
(33,984,148)
|
|
(5,223,268)
|
Proceeds from maturities of
time deposits
|
|
3,911,939
|
|
8,035,982
|
|
7,409,214
|
|
1,138,775
|
|
16,377,449
|
|
22,429,597
|
|
3,447,366
|
Net change in other
assets
|
|
515
|
|
(566,205)
|
|
(797,504)
|
|
(122,574)
|
|
(354,519)
|
|
(1,799,593)
|
|
(276,594)
|
Net cash used in investing activities
|
|
(4,607,219)
|
|
(966,535)
|
|
(3,634,737)
|
|
(558,649)
|
|
(14,001,814)
|
|
(13,249,291)
|
|
(2,036,382)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
|
(RMB and USD in
thousands)
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds of short-term bank
loans
|
|
3,815,678
|
|
16,590,069
|
|
18,172,348
|
|
2,793,039
|
|
11,354,866
|
|
61,333,209
|
|
9,426,742
|
Payment of short-term bank
loans
|
|
(3,005,010)
|
|
(16,133,060)
|
|
(17,197,778)
|
|
(2,643,250)
|
|
(9,860,110)
|
|
(58,228,239)
|
|
(8,949,516)
|
Capital contribution from
noncontrolling interests and
redeemable
noncontrolling interests shareholders
|
|
-
|
|
60,000
|
|
40,000
|
|
6,148
|
|
4
|
|
911,500
|
|
140,095
|
Repurchase of
shares
|
|
-
|
|
(933,861)
|
|
(436,630)
|
|
(67,109)
|
|
(1,199,102)
|
|
(2,061,591)
|
|
(316,862)
|
Dividends paid to
shareholders
|
|
(692,524)
|
|
(735,611)
|
|
(624,395)
|
|
(95,968)
|
|
(2,546,165)
|
|
(3,257,607)
|
|
(500,685)
|
Net cash provided by /(used in) financing
activities
|
|
118,144
|
|
(1,152,463)
|
|
(46,455)
|
|
(7,140)
|
|
(2,250,507)
|
|
(1,302,728)
|
|
(200,226)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
held in foreign currencies
|
|
68,025
|
|
26,764
|
|
(11,644)
|
|
(1,790)
|
|
132,067
|
|
(12,578)
|
|
(1,933)
|
Net increase/ (decrease) in cash and cash
equivalents
|
|
957,696
|
|
(436,978)
|
|
188,618
|
|
28,991
|
|
(631,988)
|
|
(2,675,359)
|
|
(411,195)
|
Cash and cash
equivalents, beginning of the period
|
|
4,481,803
|
|
3,012,500
|
|
2,575,522
|
|
395,850
|
|
6,071,487
|
|
5,439,499
|
|
836,036
|
Cash and cash
equivalents, end of the period
|
|
5,439,499
|
|
2,575,522
|
|
2,764,140
|
|
424,841
|
|
5,439,499
|
|
2,764,140
|
|
424,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income tax,
net of tax refund
|
|
119,585
|
|
1,212,178
|
|
(238,447)
|
|
(36,649)
|
|
1,097,178
|
|
2,712,875
|
|
416,961
|
Supplemental
schedule of non-cash investing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset purchases
financed by
accounts payable
and accrued liabilities
|
|
260,277
|
|
259,593
|
|
293,194
|
|
45,063
|
|
260,277
|
|
293,194
|
|
45,063
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
UNAUDITED SEGMENT
INFORMATION
|
(RMB and USD in
thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game
services
|
|
8,959,140
|
|
8,111,652
|
|
8,004,352
|
|
1,230,246
|
|
27,980,491
|
|
36,281,642
|
|
5,576,386
|
E-commerce
|
|
1,691,235
|
|
2,667,450
|
|
4,653,652
|
|
715,253
|
|
4,541,744
|
|
11,670,416
|
|
1,793,710
|
Advertising
services
|
|
664,815
|
|
631,446
|
|
736,597
|
|
113,213
|
|
2,152,379
|
|
2,408,823
|
|
370,230
|
E-mail and
others
|
|
783,830
|
|
1,067,241
|
|
1,213,035
|
|
186,440
|
|
3,504,230
|
|
3,741,138
|
|
575,002
|
Total net
revenues
|
|
12,099,020
|
|
12,477,789
|
|
14,607,636
|
|
2,245,152
|
|
38,178,844
|
|
54,102,019
|
|
8,315,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game
services
|
|
(3,516,965)
|
|
(3,039,004)
|
|
(3,087,192)
|
|
(474,493)
|
|
(9,974,146)
|
|
(13,473,339)
|
|
(2,070,814)
|
E-commerce
|
|
(1,479,283)
|
|
(2,361,429)
|
|
(4,310,338)
|
|
(662,487)
|
|
(3,986,871)
|
|
(10,464,714)
|
|
(1,608,397)
|
Advertising
services
|
|
(223,018)
|
|
(202,208)
|
|
(212,488)
|
|
(32,659)
|
|
(749,652)
|
|
(797,892)
|
|
(122,634)
|
E-mail and
others
|
|
(416,475)
|
|
(927,573)
|
|
(1,253,007)
|
|
(192,584)
|
|
(1,804,363)
|
|
(3,453,381)
|
|
(530,775)
|
Total cost of
revenues
|
|
(5,635,741)
|
|
(6,530,214)
|
|
(8,863,025)
|
|
(1,362,223)
|
|
(16,515,032)
|
|
(28,189,326)
|
|
(4,332,620)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game
services
|
|
5,442,175
|
|
5,072,648
|
|
4,917,160
|
|
755,753
|
|
18,006,345
|
|
22,808,303
|
|
3,505,572
|
E-commerce
|
|
211,952
|
|
306,021
|
|
343,314
|
|
52,766
|
|
554,873
|
|
1,205,702
|
|
185,313
|
Advertising
services
|
|
441,797
|
|
429,238
|
|
524,109
|
|
80,554
|
|
1,402,727
|
|
1,610,931
|
|
247,596
|
E-mail and
others
|
|
367,355
|
|
139,668
|
|
(39,972)
|
|
(6,144)
|
|
1,699,867
|
|
287,757
|
|
44,227
|
Total gross
profit
|
|
6,463,279
|
|
5,947,575
|
|
5,744,611
|
|
882,929
|
|
21,663,812
|
|
25,912,693
|
|
3,982,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss) margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game
services
|
|
60.7%
|
|
62.5%
|
|
61.4%
|
|
61.4%
|
|
64.4%
|
|
62.9%
|
|
62.9%
|
E-commerce
|
|
12.5%
|
|
11.5%
|
|
7.4%
|
|
7.4%
|
|
12.2%
|
|
10.3%
|
|
10.3%
|
Advertising
services
|
|
66.5%
|
|
68.0%
|
|
71.2%
|
|
71.2%
|
|
65.2%
|
|
66.9%
|
|
66.9%
|
E-mail and
others
|
|
46.9%
|
|
13.1%
|
|
(3.3%)
|
|
(3.3%)
|
|
48.5%
|
|
7.7%
|
|
7.7%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
NOTES TO
UNAUDITED FINANCIAL INFORMATION
|
|
Note 1: The
conversion of Renminbi (RMB) into United States dollars (USD) is
based on the noon buying rate
of
USD1.00 = RMB6.5063 on the last trading day of December 2017
(December 29, 2017) as set
forth
in the H.10 statistical release of the U.S. Federal Reserve
Board.
|
Note 2: Share-based
compensation cost reported in the Company's unaudited condensed
consolidated
statements
of comprehensive income is set out as follows in RMB and USD (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Share-based
compensation cost included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
114,539
|
|
202,887
|
|
248,433
|
|
38,183
|
|
444,187
|
|
820,281
|
|
126,075
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Selling and
marketing expenses
|
|
14,724
|
|
22,949
|
|
29,925
|
|
4,599
|
|
52,689
|
|
95,382
|
|
14,660
|
- General and
administrative expenses
|
|
71,201
|
|
147,037
|
|
165,827
|
|
25,487
|
|
238,750
|
|
581,337
|
|
89,350
|
- Research and
development expenses
|
|
73,511
|
|
124,587
|
|
149,116
|
|
22,919
|
|
254,505
|
|
507,263
|
|
77,965
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
UNAUDITED
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
|
(RMB and USD in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net income
attributable to the Company's shareholders
|
|
3,683,100
|
|
2,527,449
|
|
1,285,613
|
|
197,595
|
|
11,604,520
|
|
10,707,939
|
|
1,645,782
|
Add: Share-based
compensation
|
|
273,975
|
|
497,460
|
|
593,301
|
|
91,188
|
|
990,131
|
|
2,004,263
|
|
308,050
|
Impairment on investment
|
|
-
|
|
-
|
|
-
|
|
-
|
|
266,659
|
|
-
|
|
-
|
Non-GAAP net income
attributable to
the Company's shareholders
|
|
3,957,075
|
|
3,024,909
|
|
1,878,914
|
|
288,783
|
|
12,861,310
|
|
12,712,202
|
|
1,953,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP basic
earnings per share
|
|
1.21
|
|
0.92
|
|
0.57
|
|
0.09
|
|
3.92
|
|
3.86
|
|
0.59
|
Non-GAAP basic
earnings per ADS
|
|
30.15
|
|
22.96
|
|
14.30
|
|
2.20
|
|
97.98
|
|
96.59
|
|
14.85
|
Non-GAAP diluted
earnings per share
|
|
1.20
|
|
0.91
|
|
0.57
|
|
0.09
|
|
3.89
|
|
3.83
|
|
0.59
|
Non-GAAP diluted
earnings per ADS
|
|
29.88
|
|
22.80
|
|
14.19
|
|
2.18
|
|
97.22
|
|
95.86
|
|
14.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
View original
content:http://www.prnewswire.com/news-releases/netease-reports-fourth-quarter-and-fiscal-year-2017-unaudited-financial-results-300595056.html
SOURCE NetEase, Inc.