BEIJING, Aug. 8, 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 second quarter ended June 30,
2018.
Second Quarter 2018 Financial Highlights
- Net revenues[1] were RMB16.3
billion (US$2.5 billion), an
increase of 21.7% compared with the second quarter of 2017.
- Online game services net
revenues were RMB10.1 billion
(US$1.5 billion), an increase of 6.7%
compared with the second quarter of 2017.
- E-commerce net revenues were RMB4.4
billion (US$659.7 million), an
increase of 75.2% compared with the second quarter of 2017.
- Advertising services net revenues were RMB634.1 million (US$95.8
million), an increase of 6.5% compared with the second
quarter of 2017.
- E-mail and others net revenues were RMB1.2
billion (US$184.9 million), an
increase of 42.5% compared with the second quarter of 2017.
- Gross profit was RMB7.2 billion
(US$1.1 billion), an increase of 7.5%
compared with the second quarter of 2017.
- Total operating expenses were RMB4.9
billion (US$742.2 million), an
increase of 47.4% compared with the second quarter of 2017.
- Net income attributable to the Company's shareholders was
RMB2.1 billion (US$318.3 million). Non-GAAP net income
attributable to the Company's shareholders was RMB2.7 billion (US$411.8
million).[2]
- Diluted earnings per ADS were US$2.44; non-GAAP diluted earnings per ADS were
US$3.15.
[1] The
Company adopted ASC 606 as of January 1, 2018 on a modified
retrospective basis. The adoption did not have a significant impact
on the Company's operating results for the second quarter of 2018
and comparable periods. See "Impact of the recently adopted major
accounting pronouncements" in this press release.
|
[2] As
used in this press release, non-GAAP net income attributable to the
Company's shareholders is defined to exclude share-based
compensation expenses. See "Unaudited Reconciliation of GAAP and
Non-GAAP Results" at the end of this press release.
|
Second Quarter 2018 and Recent Operational Highlights
- Introduced new, highly acclaimed PC-client game Justice
(formerly named Open Range) on June
29.
- Further diversified game portfolio with the launch of several
successful non-MMORPG mobile games including Shadowverse,
Identity V and QwQ.
- Strengthened global footprint with internationally acclaimed
titles including:
- Knives Out: Ranked No.1
on June's iOS top grossing chart in Japan.
- Identity V: Launched in Japan and became No.1 on the iOS and Google
Play download charts in early July.
- Maintained popularity for PC-client and mobile flagship titles
including Fantasy Westward Journey, Westward Journey
Online, New Ghost, Onmyoji and
Invincible.
- Expanded popularity of Minecraft in China reaching more than 100 million
registered users.
- Acquired a minority stake in Bungie to support the incubation
of new creative gameplay.
- Furthered pipeline expansion with advances in upcoming titles
including Ancient Nocturne and Night Falls:
Survival.
- Progressed growing e-commerce business and improved
quarter-over-quarter gross profit margins.
"We are pleased with the solid growth we achieved across all of
our business segments, including online games, e-commerce and
advertising services, and the strong improvement to our bottom
line," said Mr. William Ding, Chief
Executive Officer and Director of NetEase. "Our PC-client and
mobile games continue to serve as dual growth engines. At the end
of June, we launched the highly anticipated PC-client game
Justice. Featuring exciting new state-of-the-art technology
and graphics, Justice has become one of the most acclaimed
PC games launched in China in
recent years.
"On the mobile game side, our diversification strategy to expand
our games portfolio beyond the MMORPG genre is proving effective.
During the second quarter, we launched a number of highly
successful games in non-MMORPG categories, including
Shadowverse, Identity V and QwQ, each of which
climbed to the top of the charts in China. With a number of new titles suitable
for a global audience, we have quickly gained traction in overseas
markets, led by games such as Knives Out and Identity
V.
"Our e-commerce business also continues to thrive, and we are
seeing improved quarter-over-quarter gross profit margin as we
further optimize our product mix and procurement process.
"Innovation and craftsmanship continue to serve as the
cornerstone of each of our businesses. For more than two decades we
have maintained these principles, propelling our relevancy and
competitive edge. We believe these core values, our considerable
R&D capabilities, and strong business acumen will continue to
drive our future success," concluded Mr. Ding.
Second Quarter 2018 Financial Results
Net Revenues
Net revenues for the second quarter of 2018 were RMB16,283.9 million (US$2,460.9 million), compared to RMB14,173.0 million and RMB13,376.0 million for the preceding quarter and
the second quarter of 2017, respectively.
Net revenues from online games were RMB10,060.8 million (US$1,520.4 million) for the second quarter of
2018, compared to RMB8,761.2 million
and RMB9,430.2 million for the
preceding quarter and the second quarter of 2017, respectively.
Mobile games accounted for approximately 74.7% of net revenues from
online games for the second quarter of 2018, compared to 71.8% and
72.4% for the preceding quarter and the second quarter of 2017,
respectively.
Net revenues from e-commerce were RMB4,365.5 million (US$659.7 million) for the second quarter of 2018,
compared to RMB3,732.5 million and
RMB2,492.0 million for the preceding
quarter and the second quarter of 2017, respectively.
Net revenues from advertising services were RMB634.1 million (US$95.8
million) for the second quarter of 2018, compared to
RMB462.0 million and RMB595.6 million for the preceding quarter and
the second quarter of 2017, respectively. The top performing
advertising verticals in the second quarter of 2018 were
automobile, internet services and real estate sectors.
Net revenues from e-mail and others were RMB1,223.5 million (US$184.9 million) for the second quarter of 2018,
compared to RMB1,217.3 million and
RMB858.3 million for the preceding
quarter and the second quarter of 2017, respectively.
Gross Profit/ (Loss)
Gross profit for the second quarter of 2018 was RMB7,245.1 million (US$1,094.9 million), compared to RMB5,953.6 million and RMB6,736.9 million for the preceding quarter and
the second quarter of 2017, respectively.
The year-over-year and quarter-over-quarter increases in online
game services gross profit were primarily due to increased revenue
contribution from self-developed mobile games such as
Chu Liu Xiang, Knives
Out and Identity V.
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 increase in advertising services gross profit
was primarily due to its enhanced monetization efforts. The
quarter-over-quarter increase in advertising services gross profit
was primarily due to seasonality.
The year-over-year increase in e-mail and others gross loss was
primarily due to decreased revenue contribution from certain online
platform businesses, which have relatively higher gross profit
margins, as well as higher recognized costs related to certain
licensed music content. The quarter-over-quarter decrease in e-mail
and others gross loss was primarily due to higher recognized costs
related to certain licensed music content in the preceding
quarter.
Gross Profit/ (Loss) Margin
Gross profit margin for online game services for the second
quarter of 2018 was 64.3%, compared to 62.1% and 63.1% for the
preceding quarter and the second quarter of 2017, respectively. The
year-over-year and quarter-over-quarter increases in gross profit
margin were mainly due to increased revenue, while certain costs
related to the Company's online games segment were fixed.
Gross profit margin for e-commerce for the second quarter of
2018 was 10.1%, compared to 9.5% and 12.6% for the preceding
quarter and the second quarter of 2017, respectively. The
year-over-year decrease in e-commerce gross profit margin was
primarily due to certain sales discounts in the second quarter of
2018 to support the rapid development of Kaola.com and
Yanxuan. The quarter-over-quarter increase in e-commerce
gross profit margin was primarily due to improved product mix and
procurement process.
Gross profit margin for advertising services for the second
quarter of 2018 was 67.0%, compared to 59.0% and 67.6% for the
preceding quarter and the second quarter of 2017, respectively. The
quarter-over-quarter increase in gross profit margin was mainly due
to seasonality.
Gross loss margin for e-mail and others for the second quarter
of 2018 was 7.3%, compared to gross loss margin of 9.9% and gross
profit margin of 7.7% for the preceding quarter and the second
quarter of 2017, respectively. The year-over-year decrease in gross
margin was primarily due to decreased revenue contribution from
certain online platform businesses, which have relatively higher
gross profit margins, as well as higher recognized costs related to
certain licensed music content in the second quarter of 2018. The
quarter-over-quarter improvement in e-mail and others gross margin
was primarily due to higher recognized costs related to certain
licensed music content in the preceding quarter.
Operating Expenses
Total operating expenses for the second quarter of 2018 were
RMB4,911.5 million (US$742.2 million), compared to RMB4,746.6 million and RMB3,331.5 million for the preceding quarter and
the second quarter of 2017, respectively. The year-over-year
increase in operating expenses was mainly due to increased
marketing expenditures, research and development investments and
shipping and handling costs, as well as higher staff-related costs.
The quarter-over-quarter increase in operating expenses was mainly
due to increased staff-related costs and research and development
investments, and partially offset by decreased marketing
expenditures related to online games. Shipping and handling costs
included in selling and marketing expenses for the second quarter
of 2018 were RMB386.6 million
(US$58.4 million), compared to
RMB325.8 million and RMB281.3 million for the preceding quarter and
the second quarter of 2017, respectively.
Income Taxes
The Company recorded a net income tax charge of RMB420.5 million (US$63.6
million) for the second quarter of 2018, compared to
RMB282.7 million and RMB703.5 million for the preceding quarter and
the second quarter of 2017, respectively. The effective tax rate
for the second quarter of 2018 was 15.7%, compared to 26.0% and
19.0% for the preceding quarter and the second quarter of 2017,
respectively. The year-over-year and quarter-over-quarter 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 second quarter of 2018, and therefore subject to
a preferential tax rate of 10% for 2017. The Company recognized
related tax credits in the second quarter of 2018 accordingly. The
effective tax rate represents certain estimates by the Company as
to the tax obligations and benefits applicable to it in each
quarter.
Net Income After Tax
Net income attributable to the Company's shareholders for the
second quarter of 2018 totaled RMB2.1
billion (US$318.3 million),
compared to RMB751.9 million and
RMB3.0 billion for the preceding
quarter and the second quarter of 2017, respectively. Non-GAAP net
income attributable to the Company's shareholders for the second
quarter of 2018 totaled RMB2.7
billion (US$411.8 million),
compared to RMB1.3 billion and
RMB3.5 billion for the preceding
quarter and the second quarter of 2017, respectively.
During the second quarter of 2018, the Company had a net foreign
exchange gain of RMB232.8 million
(US$35.2 million), compared to net
foreign exchange losses of RMB375.1
million and RMB131.3 million
for the preceding quarter and the second quarter of 2017,
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$2.45 and US$2.44, respectively, for the second quarter of
2018. The Company reported basic and diluted earnings per ADS of
US$0.87 and US$0.86, respectively, for the preceding quarter,
and basic and diluted earnings per ADS of US$3.41 and US$3.39, respectively, for the second quarter of
2017. Non-GAAP basic and diluted earnings per ADS were US$3.17 and US$3.15, respectively, for the second quarter of
2018, compared to non-GAAP basic and diluted earnings per ADS of
US$1.54 and US$1.53, respectively, for the preceding quarter,
and non-GAAP basic and diluted earnings per ADS of US$3.98 and US$3.96, respectively, for the second quarter of
2017.
Quarterly Dividend
The board of directors has approved a dividend of US$0.61 per ADS for the second quarter of 2018,
which is expected to be paid on August 31,
2018 to shareholders of record as of the close of business
on August 24, 2018.
NetEase paid a dividend of US$0.38
per ADS for the fourth quarter of 2017 on March 2, 2018 and paid a dividend of US$0.23 per ADS for the first quarter of 2018 on
June 8, 2018.
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 June 30, 2018, the Company's
total cash and cash equivalents, current and non-current time
deposits and short-term investments balance totaled RMB44.3 billion (US$6.7
billion), compared to RMB43.2
billion as of December 31,
2017. Cash flow generated from operating activities was
RMB2.0 billion (US$295.9 million) for the second quarter of 2018,
compared to RMB1.9 billion and
RMB2.3 billion for the preceding
quarter and the second quarter of 2017, respectively.
Share Repurchase Program
On November 15, 2017, the Company
announced that its board of directors had 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. On June 11, 2018,
the Company announced that its board of directors approved an
amendment to its share repurchase program, authorizing the
repurchase of up to an additional US$1.0
billion of the Company's outstanding ADSs. This expands the
US$1.0 billion repurchase program
that was approved on November 15,
2017 for a period not to exceed 12 months, bringing the
total authorized repurchase amount to US$2.0
billion.
As of June 30, 2018, the Company
had repurchased approximately 3.4 million ADSs for approximately
US$912.0 million under this
program.
Under the terms of the current approved program, NetEase may
repurchase its issued and outstanding ADSs in open-market
transactions on the NASDAQ Global Select Market. The timing and
dollar amount of repurchase transactions will be subject to the
Securities and Exchange Commission (SEC) Rule 10b-18 requirements. It is also expected that
such repurchases will be effected pursuant to a plan in conformity
with SEC Rule 10b5-1. The extent to which NetEase repurchases
its ADSs will depend upon a variety of factors, including market
conditions, regulatory requirements and other corporate
considerations, as determined by NetEase's management team. The
repurchase program may be suspended or discontinued at any
time.
** The United States dollar
(US$) 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$1.00 = RMB6.6171 on June 29,
2018 as set forth in the H.10 statistical release of the
U.S. Federal Reserve Board. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at that
rate on June 29, 2018, or at any
other certain date. The percentages stated are calculated based on
RMB.
Change in Segment Reporting
Effective in the fourth quarter of 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.
Impact of the recently adopted major accounting
pronouncements
On January 1, 2018, the Company
adopted Topic 606 "Revenue from Contracts with Customers" using the
modified-retrospective transition approach and recorded a reduction
of its deferred revenue of approximately RMB81.7 million and a net increase to its
retained earnings of approximately RMB27.4
million (net of tax) as a result of estimating game point
breakage. The adoption of Topic 606 did not have a significant
impact on the Company's operating results for the second quarter of
2018 and comparable periods.
On January 1, 2018, the Company
adopted ASU No. 2016-01 "Financial Instruments-Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and
Financial Liabilities.", and reclassified RMB38.2 million of accumulated other
comprehensive income for the Company's available-for-sale equity
securities that existed as of December 31,
2017 into retained earnings upon the adoption. In addition,
the Company recorded a net investment loss of RMB78.5 million and RMB56.3 million related to the equity investments
with readily determinable fair value in the second quarter and the
first quarter of 2018, respectively. Given that there were no
material observable price changes in orderly transactions for the
identical or similar investments of the same issuer, the Company
did not record any changes to the carrying value of equity
investments without readily determinable fair value in the first
half of 2018.
The Company also adopted ASU 2016-18 "Statement of Cash Flows
(Topic 230): Restricted Cash" starting from the first quarter of
2018. Pursuant to the new guidance, the Company's cash, cash
equivalents and restricted cash increased by an aggregate of
RMB717.9 million for the second
quarter of 2017, compared to the amounts presented under previous
guidance.
Conference Call
NetEase's management team will host a teleconference call with
simultaneous webcast at 9:00 p.m. Eastern
Time on Wednesday, August 8, 2018 (Beijing/Hong Kong Time: 9:00 a.m., Thursday,
August 9, 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 1-929-477-0324 (international: 1-800-458-4121), 10-15
minutes prior to the initiation of the call. A replay of the call
will be available by dialing 1-719-457-0820 (international:
1-888-203-1112), and entering passcode 8957911#. The replay will be
available through August 22,
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, and partners with Blizzard Entertainment, Mojang AB
(a Microsoft subsidiary) and other global game developers to
operate some of the most popular international online games in
China. NetEase also operates
Kaola.com and Yanxuan, two e-commerce platforms that
cater to the rising middle-class consumer market in China. In addition, NetEase offers
advertising, e-mail and other services. 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. 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, 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 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) 571-8985-2955
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,
|
|
June
30,
|
|
June
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
2,764,140
|
|
3,079,286
|
|
465,353
|
Time
deposits
|
|
30,603,369
|
|
28,652,007
|
|
4,329,995
|
Restricted cash
|
|
5,926,906
|
|
4,283,759
|
|
647,377
|
Accounts
receivable, net
|
|
3,619,725
|
|
3,863,986
|
|
583,939
|
Inventories,net
|
|
5,474,929
|
|
5,676,108
|
|
857,794
|
Prepayments and other current assets
|
|
3,816,028
|
|
4,422,491
|
|
668,342
|
Short-term investments
|
|
9,742,663
|
|
12,396,615
|
|
1,873,421
|
Total current
assets
|
|
61,947,760
|
|
62,374,252
|
|
9,426,221
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
Property, equipment and software, net
|
|
3,769,326
|
|
4,873,181
|
|
736,453
|
Land use
right, net
|
|
593,279
|
|
586,951
|
|
88,702
|
Deferred
tax assets
|
|
823,495
|
|
789,535
|
|
119,317
|
Time
deposits
|
|
100,000
|
|
150,000
|
|
22,669
|
Restricted cash
|
|
200
|
|
-
|
|
-
|
Other
long-term assets
|
|
3,797,355
|
|
6,626,149
|
|
1,001,368
|
Total non-current
assets
|
|
9,083,655
|
|
13,025,816
|
|
1,968,509
|
Total
assets
|
|
71,031,415
|
|
75,400,068
|
|
11,394,730
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
2,442,531
|
|
2,308,212
|
|
348,825
|
Salary
and welfare payables
|
|
2,189,110
|
|
2,084,242
|
|
314,978
|
Taxes
payable
|
|
1,564,692
|
|
1,128,385
|
|
170,526
|
Short-term loans
|
|
6,623,502
|
|
12,725,741
|
|
1,923,160
|
Deferred
revenue
|
|
6,237,969
|
|
6,355,372
|
|
960,447
|
Accrued
liabilities and other payables
|
|
4,692,310
|
|
5,018,767
|
|
758,454
|
Total current
liabilities
|
|
23,750,114
|
|
29,620,719
|
|
4,476,390
|
|
|
|
|
|
|
|
Long-term
payable:
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
213,215
|
|
447,148
|
|
67,575
|
Other
long-term payable
|
|
18,250
|
|
143,986
|
|
21,760
|
Total
liabilities
|
|
23,981,579
|
|
30,211,853
|
|
4,565,725
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
614,696
|
|
958,965
|
|
144,922
|
|
|
|
|
|
|
|
Total NetEase, Inc.'s
equity
|
|
45,732,007
|
|
43,611,502
|
|
6,590,727
|
Noncontrolling
interests
|
|
703,133
|
|
617,748
|
|
93,356
|
Total shareholders'
equity
|
|
46,435,140
|
|
44,229,250
|
|
6,684,083
|
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interests and
shareholders'
equity
|
|
71,031,415
|
|
75,400,068
|
|
11,394,730
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
(RMB and USD in
thousands, except per share data)
|
|
|
Quarter
Ended
|
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
13,376,048
|
|
14,172,990
|
|
16,283,885
|
|
2,460,879
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
(6,639,158)
|
|
(8,219,412)
|
|
(9,038,773)
|
|
(1,365,972)
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
6,736,890
|
|
5,953,578
|
|
7,245,112
|
|
1,094,907
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(1,685,699)
|
|
(2,490,868)
|
|
(2,273,243)
|
|
(343,541)
|
General and
administrative expenses
|
|
(594,344)
|
|
(796,820)
|
|
(720,852)
|
|
(108,938)
|
Research and
development expenses
|
|
(1,051,477)
|
|
(1,458,947)
|
|
(1,917,426)
|
|
(289,768)
|
Total operating
expenses
|
|
(3,331,520)
|
|
(4,746,635)
|
|
(4,911,521)
|
|
(742,247)
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
3,405,370
|
|
1,206,943
|
|
2,333,591
|
|
352,660
|
Other
income:
|
|
|
|
|
|
|
|
|
Investment income/
(loss), net
|
|
105,053
|
|
80,771
|
|
(124,120)
|
|
(18,757)
|
Interest income,
net
|
|
162,078
|
|
165,459
|
|
141,645
|
|
21,406
|
Exchange (losses)/
gains, net
|
|
(131,305)
|
|
(375,094)
|
|
232,777
|
|
35,178
|
Other, net
|
|
156,703
|
|
9,416
|
|
99,682
|
|
15,064
|
|
|
|
|
|
|
|
|
|
Income before
tax
|
|
3,697,899
|
|
1,087,495
|
|
2,683,575
|
|
405,551
|
Income tax
|
|
(703,465)
|
|
(282,687)
|
|
(420,525)
|
|
(63,551)
|
|
|
|
|
|
|
|
|
|
Net income after
tax
|
|
2,994,434
|
|
804,808
|
|
2,263,050
|
|
342,000
|
Accretion and deemed
dividends in connection with
repurchase of redeemable noncontrolling
interests
|
|
-
|
|
(49,710)
|
|
(125,698)
|
|
(18,996)
|
Net income
attributable to noncontrolling interests
and redeemable noncontrolling
interests
|
|
(22,323)
|
|
(3,199)
|
|
(30,836)
|
|
(4,660)
|
Net income
attributable to
the Company's shareholders
|
|
2,972,111
|
|
751,899
|
|
2,106,516
|
|
318,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
0.90
|
|
0.23
|
|
0.65
|
|
0.10
|
Basic earnings per
ADS
|
|
22.55
|
|
5.73
|
|
16.20
|
|
2.45
|
Diluted earnings per
share
|
|
0.90
|
|
0.23
|
|
0.65
|
|
0.10
|
Diluted earnings per
ADS
|
|
22.41
|
|
5.68
|
|
16.13
|
|
2.44
|
|
|
|
|
|
|
|
|
|
Weighted average
number of
ordinary shares outstanding, basic
|
|
3,294,950
|
|
3,281,948
|
|
3,250,448
|
|
3,250,448
|
Weighted average
number of
ADS outstanding, basic
|
|
131,798
|
|
131,278
|
|
130,018
|
|
130,018
|
Weighted average
number of
ordinary shares outstanding, diluted
|
|
3,315,410
|
|
3,308,240
|
|
3,264,346
|
|
3,264,346
|
Weighted average
number of
ADS outstanding, diluted
|
|
132,616
|
|
132,330
|
|
130,574
|
|
130,574
|
|
|
|
|
|
|
|
|
|
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
|
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
|
2,994,434
|
|
804,808
|
|
2,263,050
|
|
342,000
|
Adjustments to reconcile net
income to net
cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
170,571
|
|
366,436
|
|
470,813
|
|
71,151
|
Fair value changes and
impairment losses of short-term investments,
associated
companies and other long-term investments
|
|
(101,746)
|
|
(47,931)
|
|
73,982
|
|
11,180
|
Share-based compensation
cost
|
|
500,082
|
|
585,655
|
|
618,684
|
|
93,497
|
Allowance for/ (reversal of)
provision for doubtful debts
|
|
10,940
|
|
55,544
|
|
(40,924)
|
|
(6,185)
|
Losses /(gains) on disposal
of property,
equipment and
software
|
|
444
|
|
(1,261)
|
|
(252)
|
|
(38)
|
Unrealized exchange losses/
(gains)
|
|
121,586
|
|
394,651
|
|
(240,378)
|
|
(36,327)
|
Gains on disposal of
subsidiaries
|
|
(9,595)
|
|
(37,382)
|
|
-
|
|
-
|
Deferred income
taxes
|
|
105,717
|
|
26,826
|
|
231,502
|
|
34,985
|
Net equity share of losses
from associated companies
|
|
8,187
|
|
10,960
|
|
47,749
|
|
7,216
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
266,928
|
|
(888,205)
|
|
623,889
|
|
94,284
|
Inventories
|
|
(1,332,712)
|
|
353,869
|
|
(555,048)
|
|
(83,881)
|
Prepayments and other current assets
|
|
419,056
|
|
(838,855)
|
|
353,950
|
|
53,492
|
Accounts payable
|
|
334,678
|
|
(22,254)
|
|
(295,359)
|
|
(44,636)
|
Salary and welfare payables
|
|
233,427
|
|
(230,401)
|
|
129,164
|
|
19,520
|
Taxes payable
|
|
(952,134)
|
|
492,999
|
|
(931,744)
|
|
(140,809)
|
Deferred revenue
|
|
(844,471)
|
|
935,171
|
|
(736,072)
|
|
(111,238)
|
Accrued liabilities and other payables
|
|
395,975
|
|
(55,653)
|
|
(55,079)
|
|
(8,322)
|
Net cash provided by operating activities
|
|
2,321,367
|
|
1,904,977
|
|
1,957,927
|
|
295,889
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property,
equipment and software
|
|
(433,021)
|
|
(670,133)
|
|
(774,913)
|
|
(117,108)
|
Proceeds from sale of
property, equipment and software
|
|
1,921
|
|
2,975
|
|
1,127
|
|
170
|
Purchase of other intangible
assets and licensed copyrights
of video
content
|
|
(149,574)
|
|
(337,592)
|
|
(334,576)
|
|
(50,562)
|
Prepayment for purchase of
land use right
|
|
-
|
|
-
|
|
(556,171)
|
|
(84,051)
|
Net change in short-term
investments with terms of three
months or
less
|
|
(1,558,339)
|
|
(1,372,886)
|
|
1,954,370
|
|
295,351
|
Purchase of short-term
investments
|
|
(4,926,000)
|
|
(1,624,000)
|
|
(6,399,000)
|
|
(967,040)
|
Proceeds from maturities of
short-term investments
|
|
4,877,695
|
|
1,722,295
|
|
3,268,014
|
|
493,874
|
Acquisitions of long-term
investments
|
|
(57,123)
|
|
(115,383)
|
|
(1,482,713)
|
|
(224,073)
|
Proceeds from disposal of
long-term investments
|
|
9,983
|
|
-
|
|
-
|
|
-
|
Placement/rollover of
matured time deposits
|
|
(3,859,217)
|
|
(5,910,677)
|
|
(4,304,035)
|
|
(650,441)
|
Proceeds from maturities of
time deposits
|
|
3,875,136
|
|
7,332,776
|
|
4,935,749
|
|
745,908
|
Net change in other
assets
|
|
(94,639)
|
|
(95,594)
|
|
(178,027)
|
|
(26,902)
|
Net cash used in investing activities
|
|
(2,313,178)
|
|
(1,068,219)
|
|
(3,870,175)
|
|
(584,874)
|
|
|
|
|
|
|
|
|
|
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
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Proceeds of short-term bank
loans
|
14,433,788
|
|
22,966,267
|
|
46,794,505
|
|
7,071,754
|
Payment of short-term bank
loans
|
(13,450,327)
|
|
(19,870,507)
|
|
(43,987,242)
|
|
(6,647,511)
|
Capital contribution from/
(repurchase of) noncontrolling
interests and redeemable
noncontrolling interests shareholders
|
311,500
|
|
(455,000)
|
|
433,872
|
|
65,568
|
Repurchase of
shares
|
(527,821)
|
|
(2,328,028)
|
|
(3,341,505)
|
|
(504,980)
|
Dividends paid to
shareholders
|
(980,513)
|
|
(315,511)
|
|
(191,583)
|
|
(28,953)
|
Net cash used in financing
activities
|
(213,373)
|
|
(2,779)
|
|
(291,953)
|
|
(44,122)
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash
equivalents
|
|
|
|
|
|
|
|
and restricted cash held in foreign currencies
|
(23,785)
|
|
(35,862)
|
|
77,883
|
|
11,770
|
Net (decrease)/ increase in cash, cash equivalents and
restricted cash
|
(228,969)
|
|
798,117
|
|
(2,126,318)
|
|
(321,337)
|
Cash, cash
equivalents and restricted cash,
beginning of the period *
|
9,506,323
|
|
8,691,246
|
|
9,489,363
|
|
1,434,067
|
Cash, cash
equivalents and restricted cash, end of the period
*
|
9,277,354
|
|
9,489,363
|
|
7,363,045
|
|
1,112,730
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash paid for income tax,
net of tax refund
|
735,718
|
|
451,043
|
|
535,944
|
|
80,994
|
Supplemental
schedule of non-cash investing
|
|
|
|
|
|
|
|
and financing
activities:
|
|
|
|
|
|
|
|
Fixed asset purchases
financed by
accounts payable
and accrued liabilities
|
259,657
|
|
327,030
|
|
362,207
|
|
54,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*In 2018, the Company
adopted the guidance of ASU 2016-18 issued by FASB in
November 2016, which requires that a statement of cash
flows
explain the change during the period in the total of cash, cash
equivalents, and amounts generally described as restricted cash or
restricted cash
equivalents. Therefore, the Company included restricted cash with
cash and cash equivalents when reconciling the beginning-of-
period and end-of-period total amounts shown in the statement of
cash flows. Pursuant to the guidance, the Company
retropsectively restated the statement of cash
flows in the comparative periods.
|
|
|
|
|
|
|
|
|
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
|
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
9,430,175
|
|
8,761,247
|
|
10,060,827
|
|
1,520,428
|
E-commerce
|
|
2,491,975
|
|
3,732,474
|
|
4,365,501
|
|
659,730
|
Advertising
services
|
|
595,593
|
|
462,017
|
|
634,071
|
|
95,823
|
E-mail and
others
|
|
858,305
|
|
1,217,252
|
|
1,223,486
|
|
184,898
|
Total net
revenues
|
|
13,376,048
|
|
14,172,990
|
|
16,283,885
|
|
2,460,879
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
(3,475,188)
|
|
(3,316,189)
|
|
(3,594,833)
|
|
(543,264)
|
E-commerce
|
|
(2,178,430)
|
|
(3,376,328)
|
|
(3,922,430)
|
|
(592,772)
|
Advertising
services
|
|
(192,955)
|
|
(189,543)
|
|
(209,320)
|
|
(31,633)
|
E-mail and
others
|
|
(792,585)
|
|
(1,337,352)
|
|
(1,312,190)
|
|
(198,303)
|
Total cost of
revenues
|
|
(6,639,158)
|
|
(8,219,412)
|
|
(9,038,773)
|
|
(1,365,972)
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss):
|
|
|
|
|
|
|
|
|
Online game
services
|
|
5,954,987
|
|
5,445,058
|
|
6,465,994
|
|
977,164
|
E-commerce
|
|
313,545
|
|
356,146
|
|
443,071
|
|
66,958
|
Advertising
services
|
|
402,638
|
|
272,474
|
|
424,751
|
|
64,190
|
E-mail and
others
|
|
65,720
|
|
(120,100)
|
|
(88,704)
|
|
(13,405)
|
Total gross
profit
|
|
6,736,890
|
|
5,953,578
|
|
7,245,112
|
|
1,094,907
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss) margin:
|
|
|
|
|
|
|
Online game
services
|
|
63.1%
|
|
62.1%
|
|
64.3%
|
|
64.3%
|
E-commerce
|
|
12.6%
|
|
9.5%
|
|
10.1%
|
|
10.1%
|
Advertising
services
|
|
67.6%
|
|
59.0%
|
|
67.0%
|
|
67.0%
|
E-mail and
others
|
|
7.7%
|
|
(9.9%)
|
|
(7.3%)
|
|
(7.3%)
|
|
|
|
|
|
|
|
|
|
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 = RMB6.6171 on the last trading day of June 2018 (June 29,
2018) 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
|
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Share-based
compensation cost included in:
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
198,732
|
|
188,563
|
|
170,982
|
|
25,839
|
Operating
expenses
|
|
|
|
|
|
|
|
|
- Selling and
marketing expenses
|
|
22,899
|
|
28,725
|
|
29,288
|
|
4,426
|
- General and
administrative expenses
|
|
147,515
|
|
199,128
|
|
197,550
|
|
29,854
|
- Research and
development expenses
|
|
130,936
|
|
169,239
|
|
220,864
|
|
33,378
|
|
|
|
|
|
|
|
|
|
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
|
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net income
attributable to the Company's shareholders
|
|
2,972,111
|
|
751,899
|
|
2,106,516
|
|
318,344
|
Add: Share-based
compensation
|
|
500,082
|
|
585,321
|
|
618,367
|
|
93,450
|
Non-GAAP net income
attributable to
the Company's shareholders
|
|
3,472,193
|
|
1,337,220
|
|
2,724,883
|
|
411,794
|
|
|
|
|
|
|
|
|
|
Non-GAAP basic
earnings per share
|
|
1.05
|
|
0.41
|
|
0.84
|
|
0.13
|
Non-GAAP basic
earnings per ADS
|
|
26.34
|
|
10.19
|
|
20.96
|
|
3.17
|
Non-GAAP diluted
earnings per share
|
|
1.05
|
|
0.40
|
|
0.83
|
|
0.13
|
Non-GAAP diluted
earnings per ADS
|
|
26.18
|
|
10.11
|
|
20.87
|
|
3.15
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/netease-reports-second-quarter-2018-unaudited-financial-results-300693929.html
SOURCE NetEase, Inc.