BEIJING, Nov. 14, 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 third quarter ended September 30,
2018.
Third Quarter 2018 Financial Highlights
- Net revenues[1] were RMB16.9
billion (US$2.5 billion), an
increase of 35.1% compared with the third quarter of 2017.
Online game services net revenues
were RMB10.3 billion (US$1.5 billion), an increase of 27.6% compared
with the third quarter of 2017.
E-commerce net revenues were
RMB4.5 billion (US$649.2 million), an increase of 67.2% compared
with the third quarter of 2017.
Advertising services net revenues
were RMB644.2 million (US$93.8 million), an increase of 2.0% compared
with the third quarter of 2017.
E-mail and others net revenues
were RMB1.4 billion (US$204.4 million), an increase of 31.5% compared
with the third quarter of 2017.
- Gross profit was RMB7.5 billion
(US$1.1 billion), an increase of
26.9% compared with the third quarter of 2017.
- Total operating expenses were RMB5.4
billion (US$792.1 million), an
increase of 60.1% compared with the third quarter of 2017.
- Net income attributable to the Company's shareholders was
RMB1.6 billion (US$232.4 million). Non-GAAP net income
attributable to the Company's shareholders was RMB2.3 billion (US$328.9
million). [2]
- Diluted earnings per ADS were US$1.80; non-GAAP diluted earnings per ADS were
US$2.55.
[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 third 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.
|
Third Quarter 2018 and Recent Operational Highlights
- Introduced PC-client game Justice at the end of
June 2018, capturing wide interest
from both dedicated gamers and younger generations.
- Released additional mobile titles including ARPG Butterfly
Sword in August, collectible card RPG Ancient Nocturne
in September and a cooperative survival RPG Night Falls:
Survival in November, all of which became the best performing
games in their respective categories.
- Maintained popularity of PC-client and mobile flagship titles
including Fantasy Westward Journey and Westward
Journey series, Invincible, Onmyoji, Knives Out
and Identity V.
- Launched Blizzard Entertainment's new expansion for World of
Warcraft®, Battle
for Azeroth™ to an enthusiastic Chinese market, yielding
increases in both revenue and the total number of subscribers in
China.
- Announced collaboration with Blizzard Entertainment to
co-develop Diablo Immortal™, a mobile massively multiplayer
action-RPG for Android and iOS worldwide.
- Expanded popularity of Minecraft in China reaching more than 150 million
registered users, and continued to evolve developer platform.
- Furthered pipeline expansion initiatives with advances in
upcoming titles including Fantasy Westward Journey 3D.
- Advanced future prospects for NetEase Cloud Music
through financial investments by investors, including strategic
partner Baidu, General Atlantic, Boyu Capital and several other
investors. NetEase remains the controlling shareholder of
NetEase Cloud Music.
"We are very pleased with the strong third quarter performances
from each of our primary business lines, online games, e-commerce,
advertising services and e-mail and others, which delivered 35.1%
growth in total net revenues year-over-year," said Mr. William Ding, Chief Executive Officer and
Director of NetEase. "In the third quarter, net revenues for our
online games stood above RMB10
billion for the second consecutive quarter, supported by a
game portfolio that is more diversified than ever before.
"While the performances from our flagship titles remain
remarkably steady, we are innovators at our core. NetEase is one of
the very few companies that has consistently created distinct new
game IP for both PC-client and mobile platforms. Over the last few
months, we rolled out several more hit games including
Justice, Ancient Nocturne and Night Falls:
Survival. Additionally, we have taken a more global view of our
online games business. As a result, our international expansion,
took another leap forward this quarter, contributing more than 10%
of total online game net revenues for the first time in our
company's history. We are also very excited about our collaboration
with Blizzard to bring one of their biggest games to mobile
players, increasing our visibility and expanding our foothold in
the global online games market.
"Our e-commerce business grew 67.2% year-over-year in the third
quarter, well outpacing the industry average. While we continue to
grow this business, we are maintaining a disciplined approach to
spending.
"In addition to e-commerce, we believe there is tremendous value
in many of our incubated business initiatives that are yet to be
fully realized. We are particularly pleased to have completed the
latest round of financing in NetEase Cloud Music. We believe
this financing underscores the value of our proprietary platform,
and with this partnership in place we are ready to take the
business to the next level," concluded Mr. Ding.
Third Quarter 2018 Financial Results
Net Revenues
Net revenues for the third quarter of 2018 were RMB16,855.3 million (US$2,454.2 million), compared to RMB16,283.9 million and RMB12,477.8 million for the preceding quarter and
the third quarter of 2017, respectively.
Net revenues from online games were RMB10,348.4 million (US$1,506.8 million) for the third quarter of
2018, compared to RMB10,060.8 million
and RMB8,111.7 million for the
preceding quarter and the third quarter of 2017, respectively.
Mobile games accounted for approximately 68.0% of net revenues from
online games for the third quarter of 2018, compared to 74.7% and
68.3% for the preceding quarter and the third quarter of 2017,
respectively.
Net revenues from e-commerce were RMB4,458.8 million (US$649.2 million) for the third quarter of 2018,
compared to RMB4,365.5 million and
RMB2,667.5 million for the preceding
quarter and the third quarter of 2017, respectively.
Net revenues from advertising services were RMB644.2 million (US$93.8
million) for the third quarter of 2018, compared to
RMB634.1 million and RMB631.4 million for the preceding quarter and
the third quarter of 2017, respectively. The top performing
advertising verticals in the third quarter of 2018 were automobile,
real estate and internet services sectors.
Net revenues from e-mail and others were RMB1,403.8 million (US$204.4 million) for the third quarter of 2018,
compared to RMB1,223.5 million and
RMB1,067.2 million for the preceding
quarter and the third quarter of 2017, respectively.
Gross Profit/ (Loss)
Gross profit for the third quarter of 2018 was RMB7,547.3 million (US$1,098.9 million), compared to RMB7,245.1 million and RMB5,947.6 million for the preceding quarter and
the third quarter of 2017, respectively.
The year-over-year increase in online game services gross profit
was primarily due to increased revenue contribution from
self-developed mobile games such as Chu
Liu Xiang, Knives Out and Identity V and
PC-client games such as Justice and Fantasy Westward
Journey Online. The quarter-over-quarter increase in online
game services gross profit was primarily due to increased revenue
contribution from PC-client games such as Justice, and
partially offset by the decreased revenue contribution from
self-developed mobile games.
The year-over-year increase in e-commerce gross profit was
primarily due to the rapid development of Kaola and
Yanxuan.
The year-over-year and quarter-over-quarter decreases in
advertising services gross profit were primarily due to higher
staff-related costs and content purchase expenditures.
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 revenue
contribution from NetEase Cloud Music and certain online
platform businesses.
Gross Profit/ (Loss) Margin
Gross profit margin for online game services for the third
quarter of 2018 was 65.1%, compared to 64.3% and 62.5% for the
preceding quarter and the third quarter of 2017, respectively. The
year-over-year increase in gross profit margin was mainly due to
increased revenue, while certain costs related to the Company's
online games segment were fixed. The quarter-over-quarter increase
in gross profit margin was mainly due to increased revenue
contribution from PC-client games, which have relatively higher
gross profit margins than mobile games.
Gross profit margin for e-commerce for the third quarter of 2018
was 10.0%, compared to 10.1% and 11.5% for the preceding quarter
and the third quarter of 2017, respectively. The year-over-year
decrease in e-commerce gross profit margin was primarily due to
certain sales discounts in the third quarter of 2018 to support the
rapid development of Kaola and Yanxuan.
Gross profit margin for advertising services for the third
quarter of 2018 was 63.6%, compared to 67.0% and 68.0% for the
preceding quarter and the third quarter of 2017, respectively. The
year-over-year and quarter-over-quarter decreases in gross profit
margins were mainly due to higher staff-related costs and content
purchase expenditures.
Gross loss margin for e-mail and others for the third quarter of
2018 was 3.3%, compared to gross loss margin of 7.3% and gross
profit margin of 13.1% for the preceding quarter and the third
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 third quarter of 2018. The
quarter-over-quarter improvement in e-mail and others gross margin
was primarily due to higher revenue contribution from NetEase
Cloud Music and certain online platform businesses.
Operating Expenses
Total operating expenses for the third quarter of 2018 were
RMB5,440.1 million (US$792.1 million), compared to RMB4,911.5 million and RMB3,397.9 million for the preceding quarter and
the third quarter of 2017, respectively. The year-over-year and
quarter-over-quarter increases in operating expenses were mainly
due to increased staff-related costs, research and development
investments and marketing expenditures. Shipping and handling costs
included in selling and marketing expenses for the third quarter of
2018 were RMB385.5 million
(US$56.1 million), compared to
RMB386.6 million and RMB294.8 million for the preceding quarter and
the third quarter of 2017, respectively.
Income Taxes
The Company recorded a net income tax charge of RMB843.8 million (US$122.9
million) for the third quarter of 2018, compared to
RMB420.5 million and RMB225.5 million for the preceding quarter and
the third quarter of 2017, respectively. The effective tax rate for
the third quarter of 2018 was 34.2%, compared to 15.7% and 8.1% for
the preceding quarter and the third quarter of 2017, respectively.
Certain subsidiaries of the Company are recognized as Key Software
Enterprises and therefore subject to a preferential tax rate of 10%
for the relevant fiscal years. The Company then recognizes such tax
credits in the quarters when they are received. The year-over-year
and quarter-over-quarter changes in the effective tax rate were
mainly due to the recognition of such tax credits. 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
third quarter of 2018 totaled RMB1.6
billion (US$232.4 million),
compared to RMB2.1 billion and
RMB2.5 billion for the preceding
quarter and the third quarter of 2017, respectively. Non-GAAP net
income attributable to the Company's shareholders for the third
quarter of 2018 totaled RMB2.3
billion (US$328.9 million),
compared to RMB2.7 billion and
RMB3.0 billion for the preceding
quarter and the third quarter of 2017, respectively.
During the third quarter of 2018, the Company had a net foreign
exchange gain of RMB56.1 million
(US$8.2 million), compared to a net
foreign exchange gain of RMB232.8
million and a net foreign exchange loss of RMB109.9 million for the preceding quarter and
the third 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$1.81 and US$1.80, respectively, for the third quarter of
2018. The Company reported basic and diluted earnings per ADS of
US$2.36 and US$2.35, respectively, for the preceding quarter,
and basic and diluted earnings per ADS of US$2.79 and US$2.77, respectively, for the third quarter of
2017. Non-GAAP basic and diluted earnings per ADS were US$2.56 and US$2.55, respectively, for the third quarter of
2018, compared to non-GAAP basic and diluted earnings per ADS of
US$3.05 and US$3.04, respectively, for the preceding quarter,
and non-GAAP basic and diluted earnings per ADS of US$3.34 and US$3.32, respectively, for the third quarter of
2017.
Quarterly Dividend
The board of directors has approved a dividend of US$0.45 per ADS for the third quarter of 2018,
which is expected to be paid on December 7,
2018 to shareholders of record as of the close of business
on November 30, 2018.
NetEase paid a dividend of US$0.38
per ADS for the fourth quarter of 2017 on March 2, 2018, a dividend of US$0.23 per ADS for the first quarter of 2018 on
June 8, 2018 and a dividend of
US$0.61 per ADS for the second
quarter of 2018 on August 31,
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 September 30, 2018, the
Company's total cash and cash equivalents, current and non-current
time deposits and short-term investments balance totaled
RMB42.6 billion (US$6.2 billion), compared to RMB43.2 billion as of December 31, 2017. Cash flow generated from
operating activities was RMB3.6
billion (US$526.7 million) for
the third quarter of 2018, compared to RMB2.0 billion and RMB1.7
billion for the preceding quarter and the third quarter of
2017, respectively.
Share Repurchase Program
On November 15, 2017, the Company
announced that its board of directors had 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 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 September 30, 2018, the
Company had repurchased approximately 4.5 million ADSs for
approximately US$1,168 million under
this program.
The Company also announced today that its board of directors had
approved a new share repurchase program of up to US$1.0 billion of the Company's outstanding ADSs
for a period not to exceed 12 months beginning on November 16, 2018.
Under the terms of the current approved program, NetEase may
repurchase its issued and outstanding ADSs in open-market
transactions on the NASDAQ Global Select Market. The timing and
dollar amount of repurchase transactions will be subject to the
Securities and Exchange Commission (SEC) Rule 10b-18 requirements. It is also expected that
such repurchases will be effected pursuant to a plan in conformity
with SEC Rule 10b5-1. The extent to which NetEase repurchases
its ADSs will depend upon a variety of factors, including market
conditions, regulatory requirements and other corporate
considerations, as determined by NetEase's management team. The
repurchase program may be suspended or discontinued at any
time.
** The United States dollar
(US$) 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$1.00 = RMB6.8680 on September 28,
2018 as set forth in the H.10 statistical release of the
U.S. Federal Reserve Board. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at that
rate on September 28, 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 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 third 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 net investment losses of RMB238.4 million related to the equity
investments with readily determinable fair value for the nine
months ended September 30, 2018.
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 for the nine months ended September 30, 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
RMB22.3 million for the third 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 8:00 p.m. Eastern
Time on Wednesday, November 14, 2018 (Beijing/Hong Kong Time: 9:00 a.m., Thursday,
November 15, 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 1-800-949-2175 (international: 1-646-828-8143), 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 7700686#. The replay will be
available through November 28,
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 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) 571-8985-3378
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,
|
|
September
30,
|
|
September
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
2,764,140
|
|
4,778,084
|
|
695,702
|
Time
deposits
|
|
30,603,369
|
|
26,321,114
|
|
3,832,428
|
Restricted cash
|
|
5,926,906
|
|
4,943,423
|
|
719,776
|
Accounts
receivable, net
|
|
3,619,725
|
|
4,569,249
|
|
665,295
|
Inventories,net
|
|
5,474,929
|
|
6,291,106
|
|
916,003
|
Prepayments and other current assets
|
|
3,816,028
|
|
4,710,367
|
|
685,843
|
Short-term investments
|
|
9,742,663
|
|
11,337,409
|
|
1,650,758
|
Total current
assets
|
|
61,947,760
|
|
62,950,752
|
|
9,165,805
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
Property, equipment and software, net
|
|
3,769,326
|
|
5,305,776
|
|
772,536
|
Land use
right, net
|
|
593,279
|
|
3,520,608
|
|
512,610
|
Deferred
tax assets
|
|
823,495
|
|
995,592
|
|
144,961
|
Time
deposits
|
|
100,000
|
|
150,000
|
|
21,840
|
Restricted cash
|
|
200
|
|
-
|
|
-
|
Other
long-term assets
|
|
3,797,355
|
|
7,066,259
|
|
1,028,868
|
Total non-current
assets
|
|
9,083,655
|
|
17,038,235
|
|
2,480,815
|
Total
assets
|
|
71,031,415
|
|
79,988,987
|
|
11,646,620
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
2,442,531
|
|
2,574,525
|
|
374,858
|
Salary
and welfare payables
|
|
2,189,110
|
|
2,681,013
|
|
390,363
|
Taxes
payable
|
|
1,564,692
|
|
1,830,483
|
|
266,523
|
Short-term loans
|
|
6,623,502
|
|
13,645,930
|
|
1,986,886
|
Deferred
revenue
|
|
6,237,969
|
|
7,367,655
|
|
1,072,751
|
Accrued
liabilities and other payables
|
|
4,692,310
|
|
5,024,653
|
|
731,604
|
Total current
liabilities
|
|
23,750,114
|
|
33,124,259
|
|
4,822,985
|
|
|
|
|
|
|
|
Long-term
payable:
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
213,215
|
|
458,347
|
|
66,737
|
Other
long-term payable
|
|
18,250
|
|
167,443
|
|
24,380
|
Total
liabilities
|
|
23,981,579
|
|
33,750,049
|
|
4,914,102
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
614,696
|
|
2,111,692
|
|
307,468
|
|
|
|
|
|
|
|
Total NetEase, Inc.'s
equity
|
|
45,732,007
|
|
43,375,843
|
|
6,315,644
|
Noncontrolling
interests
|
|
703,133
|
|
751,403
|
|
109,406
|
Total shareholders'
equity
|
|
46,435,140
|
|
44,127,246
|
|
6,425,050
|
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interests and
shareholders'
equity
|
|
71,031,415
|
|
79,988,987
|
|
11,646,620
|
|
|
|
|
|
|
|
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
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
12,477,789
|
|
16,283,885
|
|
16,855,303
|
|
2,454,178
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
(6,530,214)
|
|
(9,038,773)
|
|
(9,307,955)
|
|
(1,355,264)
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
5,947,575
|
|
7,245,112
|
|
7,547,348
|
|
1,098,914
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(1,645,829)
|
|
(2,273,243)
|
|
(2,357,010)
|
|
(343,187)
|
General and
administrative expenses
|
|
(599,116)
|
|
(720,852)
|
|
(822,292)
|
|
(119,728)
|
Research and
development expenses
|
|
(1,152,941)
|
|
(1,917,426)
|
|
(2,260,768)
|
|
(329,174)
|
Total operating
expenses
|
|
(3,397,886)
|
|
(4,911,521)
|
|
(5,440,070)
|
|
(792,089)
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
2,549,689
|
|
2,333,591
|
|
2,107,278
|
|
306,825
|
|
|
|
|
|
|
|
|
|
Other
income:
|
|
|
|
|
|
|
|
|
Investment income/
(loss), net
|
|
117,746
|
|
(124,120)
|
|
(25,401)
|
|
(3,698)
|
Interest income,
net
|
|
164,684
|
|
141,645
|
|
113,118
|
|
16,470
|
Exchange (losses)/
gains, net
|
|
(109,891)
|
|
232,777
|
|
56,097
|
|
8,168
|
Other, net
|
|
44,876
|
|
99,682
|
|
213,564
|
|
31,096
|
|
|
|
|
|
|
|
|
|
Income before
tax
|
|
2,767,104
|
|
2,683,575
|
|
2,464,656
|
|
358,861
|
Income tax
|
|
(225,494)
|
|
(420,525)
|
|
(843,795)
|
|
(122,859)
|
|
|
|
|
|
|
|
|
|
Net income after
tax
|
|
2,541,610
|
|
2,263,050
|
|
1,620,861
|
|
236,002
|
Accretion and deemed
dividends in connection with
repurchase of redeemable noncontrolling
interests
|
|
-
|
|
(125,698)
|
|
(18,086)
|
|
(2,633)
|
Net income
attributable to noncontrolling interests
and redeemable noncontrolling
interests
|
|
(14,161)
|
|
(30,836)
|
|
(6,482)
|
|
(944)
|
Net income
attributable to
the Company's shareholders
|
|
2,527,449
|
|
2,106,516
|
|
1,596,293
|
|
232,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
0.77
|
|
0.65
|
|
0.50
|
|
0.07
|
Basic earnings per
ADS
|
|
19.18
|
|
16.20
|
|
12.43
|
|
1.81
|
Diluted earnings per
share
|
|
0.76
|
|
0.65
|
|
0.49
|
|
0.07
|
Diluted earnings per
ADS
|
|
19.05
|
|
16.13
|
|
12.37
|
|
1.80
|
|
|
|
|
|
|
|
|
|
Weighted average
number of
ordinary shares outstanding, basic
|
|
3,294,167
|
|
3,250,448
|
|
3,210,940
|
|
3,210,940
|
Weighted average
number of
ADS outstanding, basic
|
|
131,767
|
|
130,018
|
|
128,438
|
|
128,438
|
Weighted average
number of
ordinary shares outstanding, diluted
|
|
3,317,373
|
|
3,264,346
|
|
3,226,763
|
|
3,226,763
|
Weighted average
number of
ADS outstanding, diluted
|
|
132,695
|
|
130,574
|
|
129,071
|
|
129,071
|
|
|
|
|
|
|
|
|
|
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
|
|
|
September
30,
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
2,541,610
|
|
804,808
|
|
2,263,050
|
|
1,620,861
|
|
236,002
|
Adjustments to reconcile net
income to net
cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
210,791
|
|
366,436
|
|
470,813
|
|
570,232
|
|
83,027
|
Fair value changes and
impairment losses of short-term investments,
associated
companies and other long-term investments
|
|
(94,659)
|
|
(47,931)
|
|
73,982
|
|
6,233
|
|
908
|
Share-based compensation
cost
|
|
497,460
|
|
585,655
|
|
618,684
|
|
663,031
|
|
96,540
|
Allowance for/ (reversal of)
provision for doubtful debts
|
|
17,784
|
|
55,544
|
|
(40,924)
|
|
38,424
|
|
5,595
|
(Gains) /losses on disposal
of property,
equipment and
software
|
|
(174)
|
|
(1,261)
|
|
(252)
|
|
768
|
|
112
|
Unrealized exchange losses/
(gains)
|
|
118,646
|
|
394,651
|
|
(240,378)
|
|
(116,521)
|
|
(16,966)
|
Gains on disposal of
subsidiaries
|
|
-
|
|
(37,382)
|
|
-
|
|
-
|
|
-
|
Deferred income
taxes
|
|
(180,849)
|
|
26,826
|
|
231,502
|
|
(194,858)
|
|
(28,372)
|
Net equity share of losses
from associated companies
|
|
(2,180)
|
|
10,960
|
|
47,749
|
|
21,949
|
|
3,196
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
125,160
|
|
(888,205)
|
|
623,889
|
|
(729,660)
|
|
(106,241)
|
Inventories
|
|
(1,194,873)
|
|
353,869
|
|
(555,048)
|
|
(614,998)
|
|
(89,545)
|
Prepayments and other current assets
|
|
53,692
|
|
(838,855)
|
|
353,950
|
|
(447,543)
|
|
(65,164)
|
Accounts payable
|
|
191,847
|
|
(22,254)
|
|
(295,359)
|
|
420,882
|
|
61,282
|
Salary and welfare payables
|
|
(177,525)
|
|
(230,401)
|
|
129,164
|
|
596,723
|
|
86,885
|
Taxes payable
|
|
(577,588)
|
|
492,999
|
|
(931,744)
|
|
702,261
|
|
102,251
|
Deferred revenue
|
|
53,034
|
|
935,171
|
|
(736,072)
|
|
1,012,281
|
|
147,391
|
Accrued liabilities and other payables
|
|
73,080
|
|
(55,653)
|
|
(55,079)
|
|
67,466
|
|
9,820
|
Net cash provided by operating activities
|
|
1,655,256
|
|
1,904,977
|
|
1,957,927
|
|
3,617,531
|
|
526,721
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
equipment and software
|
|
(512,359)
|
|
(670,133)
|
|
(774,913)
|
|
(670,337)
|
|
(97,603)
|
Proceeds from sale of
property, equipment and software
|
|
465
|
|
2,975
|
|
1,127
|
|
1,616
|
|
235
|
Purchase of other intangible
assets and licensed copyrights
|
|
(111,639)
|
|
(337,592)
|
|
(334,576)
|
|
(287,867)
|
|
(41,914)
|
Prepayment for purchase of
land use right
|
|
(6,488)
|
|
-
|
|
(556,171)
|
|
(2,420,029)
|
|
(352,363)
|
Net change in short-term
investments with terms of three
months or
less
|
|
1,943,208
|
|
(1,372,886)
|
|
1,954,370
|
|
865,824
|
|
126,066
|
Purchase of short-term
investments
|
|
(1,865,000)
|
|
(1,624,000)
|
|
(6,399,000)
|
|
(2,460,000)
|
|
(358,183)
|
Proceeds from maturities of
short-term investments
|
|
4,851,772
|
|
1,722,295
|
|
3,268,014
|
|
2,778,151
|
|
404,507
|
Acquisitions of long-term
investments
|
|
(466,754)
|
|
(115,383)
|
|
(1,482,713)
|
|
(1,031,594)
|
|
(150,203)
|
Proceeds from disposal of
long-term investments
|
|
340,435
|
|
-
|
|
-
|
|
-
|
|
-
|
Placement/rollover of
matured time deposits
|
|
(13,084,711)
|
|
(5,910,677)
|
|
(4,304,035)
|
|
(11,405,346)
|
|
(1,660,650)
|
Proceeds from maturities of
time deposits
|
|
8,035,982
|
|
7,332,776
|
|
4,935,749
|
|
14,306,245
|
|
2,083,029
|
Net change in other
assets
|
|
(69,105)
|
|
(95,594)
|
|
(178,027)
|
|
(75,563)
|
|
(11,002)
|
Net cash used in investing activities
|
|
(944,194)
|
|
(1,068,219)
|
|
(3,870,175)
|
|
(398,900)
|
|
(58,081)
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
September
30,
|
|
March
31,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
2018
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds in short-term
loan with terms of three months or less
|
|
457,009
|
|
3,095,760
|
|
2,807,263
|
|
265,422
|
|
38,646
|
|
Capital contribution from/
(repurchase of) noncontrolling
interests and redeemable
noncontrolling interests shareholders
|
|
60,000
|
|
(455,000)
|
|
433,872
|
|
1,139,700
|
|
165,944
|
|
Repurchase of
shares
|
|
(933,861)
|
|
(2,328,028)
|
|
(3,341,505)
|
|
(1,785,572)
|
|
(259,984)
|
|
Dividends paid to
shareholders
|
|
(735,611)
|
|
(315,511)
|
|
(191,583)
|
|
(533,726)
|
|
(77,712)
|
|
Net cash used in financing
activities
|
|
(1,152,463)
|
|
(2,779)
|
|
(291,953)
|
|
(914,176)
|
|
(133,106)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash
equivalents
|
|
|
|
|
|
|
|
|
|
|
|
and restricted cash held in foreign currencies
|
|
26,674
|
|
(35,862)
|
|
77,883
|
|
54,007
|
|
7,864
|
|
Net (decrease)/ increase in cash, cash equivalents and
restricted cash
|
|
(414,727)
|
|
798,117
|
|
(2,126,318)
|
|
2,358,462
|
|
343,398
|
|
Cash, cash
equivalents and restricted cash,
beginning of the period *
|
|
9,277,354
|
|
8,691,246
|
|
9,489,363
|
|
7,363,045
|
|
1,072,080
|
|
Cash, cash
equivalents and restricted cash, end of the period
*
|
|
8,862,627
|
|
9,489,363
|
|
7,363,045
|
|
9,721,507
|
|
1,415,478
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income tax,
net of tax refund
|
|
1,212,178
|
|
451,043
|
|
535,944
|
|
600,115
|
|
87,378
|
|
Supplemental
schedule of non-cash investing
|
|
|
|
|
|
|
|
|
|
|
|
and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset purchases
financed by
accounts payable
and accrued liabilities
|
|
259,593
|
|
327,030
|
|
362,207
|
|
382,176
|
|
55,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
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|
*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.
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|
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|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
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|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
UNAUDITED SEGMENT
INFORMATION
|
|
|
|
|
(RMB and USD in
thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
8,111,652
|
|
10,060,827
|
|
10,348,430
|
|
1,506,760
|
E-commerce
|
|
2,667,450
|
|
4,365,501
|
|
4,458,828
|
|
649,218
|
Advertising
services
|
|
631,446
|
|
634,071
|
|
644,207
|
|
93,798
|
E-mail and
others
|
|
1,067,241
|
|
1,223,486
|
|
1,403,838
|
|
204,402
|
Total net
revenues
|
|
12,477,789
|
|
16,283,885
|
|
16,855,303
|
|
2,454,178
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
(3,039,004)
|
|
(3,594,833)
|
|
(3,611,946)
|
|
(525,909)
|
E-commerce
|
|
(2,361,429)
|
|
(3,922,430)
|
|
(4,011,132)
|
|
(584,032)
|
Advertising
services
|
|
(202,208)
|
|
(209,320)
|
|
(234,800)
|
|
(34,188)
|
E-mail and
others
|
|
(927,573)
|
|
(1,312,190)
|
|
(1,450,077)
|
|
(211,135)
|
Total cost of
revenues
|
|
(6,530,214)
|
|
(9,038,773)
|
|
(9,307,955)
|
|
(1,355,264)
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss):
|
|
|
|
|
|
|
|
|
Online game
services
|
|
5,072,648
|
|
6,465,994
|
|
6,736,484
|
|
980,851
|
E-commerce
|
|
306,021
|
|
443,071
|
|
447,696
|
|
65,186
|
Advertising
services
|
|
429,238
|
|
424,751
|
|
409,407
|
|
59,610
|
E-mail and
others
|
|
139,668
|
|
(88,704)
|
|
(46,239)
|
|
(6,733)
|
Total gross
profit
|
|
5,947,575
|
|
7,245,112
|
|
7,547,348
|
|
1,098,914
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss) margin:
|
|
|
|
|
|
|
Online game
services
|
|
62.5%
|
|
64.3%
|
|
65.1%
|
|
65.1%
|
E-commerce
|
|
11.5%
|
|
10.1%
|
|
10.0%
|
|
10.0%
|
Advertising
services
|
|
68.0%
|
|
67.0%
|
|
63.6%
|
|
63.6%
|
E-mail and
others
|
|
13.1%
|
|
(7.3%)
|
|
(3.3%)
|
|
(3.3%)
|
|
|
|
|
|
|
|
|
|
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 =
RMB6.8680 on the last trading day of
September 2018 (September 28, 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
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Share-based
compensation cost included in:
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
202,887
|
|
170,982
|
|
198,269
|
|
28,869
|
Operating
expenses
|
|
|
|
|
|
|
|
|
- Selling and
marketing expenses
|
|
22,949
|
|
29,288
|
|
26,779
|
|
3,899
|
- General and
administrative expenses
|
|
147,037
|
|
197,550
|
|
206,483
|
|
30,065
|
- Research and
development expenses
|
|
124,587
|
|
220,864
|
|
231,500
|
|
33,707
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/netease-reports-third-quarter-2018-unaudited-financial-results-300750368.html
SOURCE NetEase, Inc.