BEIJING, May 16, 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 first quarter ended March 31,
2018.
First Quarter 2018 Financial Highlights
- Net revenues[1] were RMB14.2
billion (US$2.3 billion), an
increase of 3.9% compared with the first quarter of 2017.
-
- Online game services net revenues were RMB8.8 billion (US$1.4
billion), a decrease of 18.4% compared with the first
quarter of 2017.
- E-commerce net revenues were RMB3.7
billion (US$595.0 million), an
increase of 101.0% compared with the first quarter of 2017.
- Advertising services net revenues were RMB462.0 million (US$73.7
million), an increase of 3.8% compared with the first
quarter of 2017.
- E-mail and others net revenues were RMB1.2 billion (US$194.1
million), an increase of 102.0% compared with the first
quarter of 2017.
- Gross profit was RMB6.0 billion
(US$949.1 million), a decrease of
20.4% compared with the first quarter of 2017.
- Total operating expenses were RMB4.7
billion (US$756.7 million), an
increase of 75.0% compared with the first quarter of 2017.
- Net income attributable to the Company's shareholders was
RMB751.9 million (US$119.9 million). Non-GAAP net income
attributable to the Company's shareholders was RMB1.3 billion (US$213.2
million).[2]
- Diluted earnings per ADS were US$0.91; non-GAAP diluted earnings per ADS were
US$1.61.
[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 first 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.
|
First Quarter 2018 and Recent Operational Highlights
- Progressed monetization of Knives Out and Terminator
2: Judgment Day, mainly through the sale of a range of virtual
items. International appeal of Knives Out continues to be
strong, consistently topping the charts in Japan.
- Fortified leading mobile portfolio with the introduction of a
number of new games including blockbuster hit Chu Liu Xiang in January and Identity
V and Shadowverse in April. Identity V is
NetEase's first asymmetrical battle arena (ABA) game, achieving
over 10 million active users in its first week. Shadowverse
is a collectible card game (CCG) licensed from Cygames.
- Maintained popularity for PC-client and mobile flagship titles
including Fantasy Westward Journey, Westward Journey
Online, New Ghost, Onmyoji and
Invincible.
- Accumulated over 60 million registered Minecraft users
in China and introduced an open
platform for third party developers.
- Furthered strategic diversification initiatives with the
continued development of upcoming games including manga-based
player versus player (PvP) game QwQ and Chinese-style CCG
Ancient Nocturne.
- Solidified leadership in cross-border and private label
e-commerce markets through enhanced customer services and closer
partnerships with international brands, yielding continued strong
growth momentum and greater economy of scale.
"We believe the advancements we made across our business
segments in the first quarter put us on track for a successful
year. We are excited by the longevity of and player loyalty to
our flagship games, the strong performances of our new titles
launched in the first quarter, and the continued rapid expansion of
our e-commerce business, as well as the healthy development of our
advertising services," said Mr. William
Ding, Chief Executive Officer and Director of NetEase.
"We continue to dominate China's MMORPG market with our new
chart-topping title, Chu Liu
Xiang, which modernized MMOPRG gameplay," Mr. Ding
continued. "Our strategy to introduce games in non-MMORPG genres is
also beginning to bear fruit. Monetization for Knives Out
and Terminator 2 is ramping up smoothly, and Identity
V, our very first ABA game, attracted a huge fan base
immediately following its launch in April.
"We are committed to executing on our game diversification
strategy, and we are becoming more adept at reaching non-MMORPG
users. As we work to expand our award-winning portfolio of online
games, we expect our marketing costs will normalize going forward,
compared with our marketing expenses in the first quarter of 2018.
For 2018, we will work to ensure that each of our business lines
continues to thrive, and we remain focused on creating additional
value for all of our stakeholders," concluded Mr. Ding.
First Quarter 2018 Financial Results
Net Revenues
Net revenues for the first quarter of 2018 were RMB14,173.0 million (US$2,259.5 million), compared to RMB14,607.6 million and RMB13,640.5 million for the preceding quarter and
the first quarter of 2017, respectively.
Net revenues from online games were RMB8,761.2 million (US$1,396.7 million) for the first quarter of
2018, compared to RMB8,004.4 million
and RMB10,735.5 million for the
preceding quarter and the first quarter of 2017, respectively.
Mobile games accounted for approximately 71.8% of net revenues from
online games for the first quarter of 2018, compared to 68.0% and
73.3% for the preceding quarter and the first quarter of 2017,
respectively.
Net revenues from e-commerce were RMB3,732.5 million (US$595.0 million) for the first quarter of 2018,
compared to RMB4,653.7 million and
RMB1,857.3 million for the preceding
quarter and the first quarter of 2017, respectively.
Net revenues from advertising services were RMB462.0 million (US$73.7
million) for the first quarter of 2018, compared to
RMB736.6 million and RMB445.2 million for the preceding quarter and
the first quarter of 2017, respectively. The top performing
advertising verticals in the first quarter of 2018 were real
estate, internet services and automobile sectors.
Net revenues from e-mail and others were RMB1,217.3 million (US$194.1 million) for the first quarter of 2018,
compared to RMB1,213.0 million and
RMB602.6 million for the preceding
quarter and the first quarter of 2017, respectively.
Gross Profit/ (Loss)
Gross profit for the first quarter of 2018 was RMB5,953.6 million (US$949.1 million), compared to RMB5,744.6 million and RMB7,483.6 million for the preceding quarter and
the first quarter of 2017, respectively.
The year-over-year decrease in online game services gross profit
was primarily due to decreased revenue contribution from
self-developed mobile games such as Onmyoji and the mobile
version of New Ghost, partially offset by increased revenue
contribution from Knives Out and Chu Liu Xiang. The quarter-over-quarter
increase in online game services gross profit was primarily due to
the increased revenue contribution from Knives Out and
Chu Liu Xiang.
The year-over-year increase in e-commerce gross profit was
primarily due to the rapid development of Kaola.com and
Yanxuan.
The quarter-over-quarter decrease in advertising services gross
profit was primarily due to seasonality.
The year-over-year and quarter-over-quarter changes in e-mail
and others gross profit/loss were primarily due to decreased
revenue contribution from certain online platform businesses, which
have relatively higher margins, as well as higher recognized costs
related to certain copyrights.
Gross Profit/ (Loss) Margin
Gross profit margin for online game services for the first
quarter of 2018 was 62.1%, compared to 61.4% and 63.9% for the
preceding quarter and the first quarter of 2017, respectively. The
year-over-year decrease in gross profit margin was mainly due to
decreased revenue contribution from self-developed mobile games,
while certain costs related to the Company's online games segment
were fixed.
Gross profit margin for e-commerce for the first quarter of 2018
was 9.5%, compared to 7.4% and 13.1% for the preceding quarter and
the first quarter of 2017, respectively. The year-over-year
decrease in e-commerce gross profit margin was primarily due to
certain sales discounts in the first quarter of 2018 to support the
rapid development of Kaola.com and Yanxuan. The
quarter-over-quarter increase in gross profit margin was primarily
due to seasonality as larger-scale promotions and sales discounts
typically occur in the fourth quarter of 2017.
Gross profit margin for advertising services for the first
quarter of 2018 was 59.0%, compared to 71.2% and 57.3% for the
preceding quarter and the first quarter of 2017, respectively. The
quarter-over-quarter decrease in gross profit margin was mainly due
to seasonality.
Gross loss margin for e-mail and others for the first quarter of
2018 was 9.9%, compared to gross loss margin of 3.3% and gross
profit margin of 20.3% for the preceding quarter and the first
quarter of 2017, respectively. The year-over-year and
quarter-over-quarter decreases in gross margin were 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 copyrights in
the first quarter of 2018.
Operating Expenses
Total operating expenses for the first quarter of 2018 were
RMB4,746.6 million (US$756.7 million), compared to RMB4,317.8 million and RMB2,711.7 million for the preceding quarter and
the first quarter of 2017, respectively. The year-over-year and
quarter-over-quarter increases in operating expenses were mainly
due to increased marketing expenditures related to online games and
research and development investments, as well as higher
staff-related costs. Shipping and handling costs included in
selling and marketing expenses for the first quarter of 2018 were
RMB325.8 million (US$51.9 million), compared to RMB393.3 million and RMB213.3 million for the preceding quarter and
the first quarter of 2017, respectively.
Income Taxes
The Company recorded a net income tax charge of RMB282.7 million (US$45.1
million) for the first quarter of 2018, compared to
RMB290.4 million and RMB943.0 million for the preceding quarter and
the first quarter of 2017, respectively. The effective tax rate for
the first quarter of 2018 was 26.0%, compared to 18.2% and 19.0%
for the preceding quarter and the first quarter of 2017,
respectively. The changes in the effective tax rate were mainly due
to the fact that certain subsidiaries of the Company experienced
higher operating losses in the current quarter. 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
first quarter of 2018 totaled RMB751.9
million (US$119.9 million),
compared to RMB1.3 billion and
RMB3.9 billion for the preceding
quarter and the first quarter of 2017, respectively. Non-GAAP net
income attributable to the Company's shareholders for the first
quarter of 2018 totaled RMB1.3
billion (US$213.2 million),
compared to RMB1.9 billion and
RMB4.3 billion for the preceding
quarter and the first quarter of 2017, respectively.
During the first quarter of 2018, the Company had a net foreign
exchange loss of RMB375.1 million
(US$59.8 million), compared to net
foreign exchange losses of RMB159.1
million and RMB48.5 million
for the preceding quarter and the first quarter of 2017,
respectively. The year-over-year and quarter-over-quarter changes
in foreign exchange losses were mainly due to unrealized exchange
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$0.91 each for the first quarter of
2018. The Company reported basic and diluted earnings per ADS of
US$1.56 and US$1.55, respectively, for the preceding quarter,
and basic and diluted earnings per ADS of US$4.76 and US$4.71, respectively, for the first quarter of
2017. Non-GAAP basic and diluted earnings per ADS were US$1.62 and US$1.61, respectively, for the first quarter of
2018, compared to non-GAAP basic and diluted earnings per ADS of
US$2.28 and US$2.26, respectively, for the preceding quarter,
and non-GAAP basic and diluted earnings per ADS of US$5.26 and US$5.21, respectively, for the first quarter of
2017.
Quarterly Dividend
The board of directors has approved a dividend of US$0.23 per ADS for the first quarter of 2018,
which is expected to be paid on June 8,
2018 to shareholders of record as of the close of business
on June 1, 2018.
NetEase paid a dividend of US$0.38
per ADS for the fourth quarter of 2017 on March 2, 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 March 31, 2018, the
Company's total cash and cash equivalents, current and non-current
time deposits and short-term investments balance totaled
RMB43.5 billion (US$6.9 billion), compared to RMB43.2 billion as of December 31, 2017. Cash flow generated from
operating activities was RMB1.9
billion (US$303.7 million) for
the first quarter of 2018, compared to RMB3.9 billion and RMB4.0
billion for the preceding quarter and the first 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. As of March 31,
2018, the Company had repurchased approximately 1.2 million
ADSs for approximately US$376.0
million under this program.
Under the terms of the current approved program, NetEase may
repurchase its issued and outstanding ADSs in open-market
transactions on the NASDAQ Global Select Market. The timing and
dollar amount of repurchase transactions will be subject to the
Securities and Exchange Commission (SEC) Rule 10b-18 requirements. It is also expected that
such repurchases will be effected pursuant to a plan in conformity
with SEC Rule 10b5-1. The extent to which NetEase repurchases
its ADSs will depend upon a variety of factors, including market
conditions, regulatory requirements and other corporate
considerations, as determined by NetEase\'s management team. The
repurchase program may be suspended or discontinued at any
time.
** The United States dollar
(US$) 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$1.00 = RMB6.2726 on March 30,
2018 as set forth in the H.10 statistical release of the
U.S. Federal Reserve Board. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at that
rate on March 30, 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
In May 2014, the FASB issued ASU
No. 2014-09, "Revenue from Contracts with Customers (Topic
606)".
On January 1, 2018, the Company
adopted Topic 606, using the modified-retrospective transition
approach. Under this approach, the Company applies the new revenue
standard on a prospective basis, effective January 1, 2018, and records adjustments to its
fiscal 2018 opening balance sheet (as of January 1, 2018) to reflect the cumulative effect
of the new revenue standard.
The new revenue standard primarily impacts the accounting of the
recognition of breakage associated with its unused online points in
a personal game account as a result of recording revenue based upon
estimates of breakage under the new revenue standard. Under the
historical accounting standard, revenue for unused points was not
recorded until the points expired. Thus, for unused points, revenue
will be recorded earlier under the new standard. The
cumulative-effect adjustment includes 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). The adoption of Topic 606 did not have a significant impact
on the Company's operating results for the first quarter of 2018
and comparable periods.
In January 2016, the FASB issued
Accounting Standards Update No. 2016-01 (ASU No. 2016-01)
"Financial Instruments-Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities." The
Company anticipates that the adoption of the new standard will
increase the volatility of its investment income, net, as a result
of the remeasurement of its equity investments. The Company adopted
this guidance in the first quarter of 2018 and RMB38.2 million of accumulated other
comprehensive income for the Company's available-for-sale equity
securities that existed as of December 31,
2017 was reclassified into retained earnings upon the
adoption. For equity investments without readily determinable fair
value, the Company elected to measure them at their costs minus
impairment (if any), plus or minus changes resulting from
observable price changes in orderly transactions for the identical
or similar investments of the same issuer. In the first quarter of
2018, the Company recorded a net investment loss of RMB56.3 million related to the equity investments
with readily determinable fair value. 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
quarter of 2018.
In November 2016, the FASB issued
ASU 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash".
The guidance 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, amounts generally described as
restricted cash and restricted cash equivalents should be included
with cash and cash equivalents when reconciling the
beginning-of-period and end-of-period total amounts shown in the
statement of cash flows. The standard should be applied using a
retrospective transition method to each period presented. The
Company adopted this guidance in the first quarter of 2018.
Pursuant to the new guidance, the net change of cash, cash
equivalents and restricted cash decreased RMB360.0 million and increased RMB13.8 million for the preceding quarter and the
first quarter of 2017, respectively, 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, May 16, 2018 (Beijing/Hong Kong Time: 9:00 a.m., Thursday, May
17, 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 1-866-548-4713 (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 1005515#. The replay will be
available through May 30, 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. 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.
|
|
|
|
|
|
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UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
(RMB and USD in
thousands)
|
|
|
|
|
|
|
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
2,764,140
|
|
3,727,435
|
|
594,241
|
Time
deposits
|
|
30,603,369
|
|
28,509,513
|
|
4,545,087
|
Restricted cash
|
|
5,926,906
|
|
5,761,728
|
|
918,555
|
Accounts
receivable, net
|
|
3,619,725
|
|
4,446,185
|
|
708,826
|
Inventories,net
|
|
5,474,929
|
|
5,121,060
|
|
816,417
|
Prepayments and other current assets
|
|
3,816,028
|
|
4,716,200
|
|
751,874
|
Short-term investments
|
|
9,742,663
|
|
11,100,719
|
|
1,769,716
|
Total current
assets
|
|
61,947,760
|
|
63,382,840
|
|
10,104,716
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
Property, equipment and software, net
|
|
3,769,326
|
|
4,261,599
|
|
679,399
|
Land use
right, net
|
|
593,279
|
|
590,101
|
|
94,076
|
Deferred
tax assets
|
|
823,495
|
|
851,584
|
|
135,763
|
Time
deposits
|
|
100,000
|
|
150,000
|
|
23,914
|
Restricted cash
|
|
200
|
|
200
|
|
32
|
Other
long-term assets
|
|
3,797,355
|
|
4,539,050
|
|
723,631
|
Total non-current
assets
|
|
9,083,655
|
|
10,392,534
|
|
1,656,815
|
Total
assets
|
|
71,031,415
|
|
73,775,374
|
|
11,761,531
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
2,442,531
|
|
2,365,787
|
|
377,162
|
Salary
and welfare payables
|
|
2,189,110
|
|
1,955,058
|
|
311,682
|
Taxes
payable
|
|
1,564,692
|
|
2,060,103
|
|
328,429
|
Short-term loans
|
|
6,623,502
|
|
9,516,159
|
|
1,517,100
|
Deferred
revenue
|
|
6,237,969
|
|
7,091,444
|
|
1,130,543
|
Accrued
liabilities and other payables
|
|
4,692,310
|
|
4,890,544
|
|
779,668
|
Total current
liabilities
|
|
23,750,114
|
|
27,879,095
|
|
4,444,584
|
|
|
|
|
|
|
|
Long-term
payable:
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
213,215
|
|
277,696
|
|
44,271
|
Other
long-term payable
|
|
18,250
|
|
143,853
|
|
22,934
|
Total
liabilities
|
|
23,981,579
|
|
28,300,644
|
|
4,511,789
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
614,696
|
|
410,323
|
|
65,415
|
|
|
|
|
|
|
|
Total NetEase, Inc.'s
equity
|
|
45,732,007
|
|
44,488,422
|
|
7,092,501
|
Noncontrolling
interests
|
|
703,133
|
|
575,985
|
|
91,826
|
Total shareholders'
equity
|
|
46,435,140
|
|
45,064,407
|
|
7,184,327
|
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interests and
shareholders'
equity
|
|
71,031,415
|
|
73,775,374
|
|
11,761,531
|
|
|
|
|
|
|
|
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
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2017
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
13,640,546
|
|
14,607,636
|
|
14,172,990
|
|
2,259,507
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
(6,156,929)
|
|
(8,863,025)
|
|
(8,219,412)
|
|
(1,310,368)
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
7,483,617
|
|
5,744,611
|
|
5,953,578
|
|
949,139
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(1,228,854)
|
|
(2,397,214)
|
|
(2,490,868)
|
|
(397,103)
|
General and
administrative expenses
|
|
(558,028)
|
|
(678,370)
|
|
(796,820)
|
|
(127,032)
|
Research and
development expenses
|
|
(924,797)
|
|
(1,242,213)
|
|
(1,458,947)
|
|
(232,590)
|
Total operating
expenses
|
|
(2,711,679)
|
|
(4,317,797)
|
|
(4,746,635)
|
|
(756,725)
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
4,771,938
|
|
1,426,814
|
|
1,206,943
|
|
192,414
|
Other
income:
|
|
|
|
|
|
|
|
|
Investment income,
net
|
|
43,284
|
|
96,030
|
|
80,771
|
|
12,877
|
Interest income,
net
|
|
149,828
|
|
190,733
|
|
165,459
|
|
26,378
|
Exchange losses,
net
|
|
(48,525)
|
|
(159,106)
|
|
(375,094)
|
|
(59,799)
|
Other, net
|
|
37,687
|
|
37,814
|
|
9,416
|
|
1,501
|
|
|
|
|
|
|
|
|
|
Net income before
tax
|
|
4,954,212
|
|
1,592,285
|
|
1,087,495
|
|
173,371
|
Income tax
|
|
(943,032)
|
|
(290,372)
|
|
(282,687)
|
|
(45,067)
|
|
|
|
|
|
|
|
|
|
Net income after
tax
|
|
4,011,180
|
|
1,301,913
|
|
804,808
|
|
128,304
|
Deemed dividends in
connection with repurchase
of redeemable noncontrolling
interests
|
|
-
|
|
-
|
|
(49,710)
|
|
(7,925)
|
Net income
attributable to noncontrolling interests
and redeemable noncontrolling
interests
|
|
(88,414)
|
|
(16,300)
|
|
(3,199)
|
|
(510)
|
Net income
attributable to
the Company's shareholders
|
|
3,922,766
|
|
1,285,613
|
|
751,899
|
|
119,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
1.19
|
|
0.39
|
|
0.23
|
|
0.04
|
Basic earnings per
ADS
|
|
29.83
|
|
9.79
|
|
5.73
|
|
0.91
|
Diluted earnings per
share
|
|
1.18
|
|
0.39
|
|
0.23
|
|
0.04
|
Diluted earnings per
ADS
|
|
29.55
|
|
9.71
|
|
5.68
|
|
0.91
|
|
|
|
|
|
|
|
|
|
Weighted average
number of
ordinary shares outstanding, basic
|
|
3,288,105
|
|
3,284,028
|
|
3,281,948
|
|
3,281,948
|
Weighted average
number of
ADS outstanding, basic
|
|
131,524
|
|
131,361
|
|
131,278
|
|
131,278
|
Weighted average
number of
ordinary shares outstanding, diluted
|
|
3,318,547
|
|
3,310,586
|
|
3,308,240
|
|
3,308,240
|
Weighted average
number of
ADS outstanding, diluted
|
|
132,742
|
|
132,423
|
|
132,330
|
|
132,330
|
|
|
|
|
|
|
|
|
|
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
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2017
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
|
4,011,180
|
|
1,301,913
|
|
804,808
|
|
128,304
|
Adjustments to reconcile net
income to net
cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
146,144
|
|
274,298
|
|
366,436
|
|
58,419
|
Impairment loss for
investments
|
|
22,200
|
|
14,000
|
|
-
|
|
-
|
Share-based compensation
cost
|
|
413,420
|
|
593,301
|
|
585,655
|
|
93,367
|
Allowance for provision for
doubtful debts
|
|
3,188
|
|
28,914
|
|
55,544
|
|
8,855
|
(Gains) /losses on disposal
of property,
equipment and
software
|
|
(316)
|
|
5,118
|
|
(1,261)
|
|
(201)
|
Unrealized exchange
losses
|
|
42,125
|
|
155,511
|
|
394,651
|
|
62,917
|
Gains on disposal of a
subsidiary
|
|
-
|
|
-
|
|
(37,382)
|
|
(5,960)
|
Deferred income
taxes
|
|
(279,046)
|
|
(83,865)
|
|
26,826
|
|
4,277
|
Net equity share of losses/
(gains) from associated companies
|
|
27,074
|
|
(20,849)
|
|
10,960
|
|
1,747
|
Fair value changes of
short-term investments and available-
for-sale
securities
|
|
(89,505)
|
|
(81,546)
|
|
(47,931)
|
|
(7,641)
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
564,743
|
|
(391,603)
|
|
(888,205)
|
|
(141,601)
|
Inventories
|
|
(562,658)
|
|
(506,556)
|
|
353,869
|
|
56,415
|
Prepayments and other current assets
|
|
(740,212)
|
|
(148,776)
|
|
(838,855)
|
|
(133,732)
|
Accounts payable
|
|
170,289
|
|
403,973
|
|
(22,254)
|
|
(3,548)
|
Salary and welfare payables
|
|
(160,858)
|
|
805,435
|
|
(230,401)
|
|
(36,731)
|
Taxes payable
|
|
779,410
|
|
594,408
|
|
492,999
|
|
78,596
|
Deferred revenue
|
|
(573,805)
|
|
73,352
|
|
935,171
|
|
149,088
|
Accrued liabilities and other payables
|
|
257,788
|
|
864,426
|
|
(55,653)
|
|
(8,872)
|
Net cash provided by operating activities
|
|
4,031,161
|
|
3,881,454
|
|
1,904,977
|
|
303,699
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property,
equipment and software
|
|
(325,438)
|
|
(572,115)
|
|
(670,133)
|
|
(106,835)
|
Proceeds from sale of
property, equipment and software
|
|
852
|
|
1,187
|
|
2,975
|
|
474
|
Purchase of other intangible
assets and licensed copyrights
of video
content
|
|
(62,212)
|
|
(351,378)
|
|
(337,592)
|
|
(53,820)
|
Net change in short-term
investments with terms of three
months or
less
|
|
1,839,344
|
|
(3,119,511)
|
|
(1,372,886)
|
|
(218,870)
|
Purchase of short-term
investments
|
|
(4,465,000)
|
|
(1,235,000)
|
|
(1,624,000)
|
|
(258,904)
|
Proceeds from maturities of
short-term investments
|
|
3,229,235
|
|
2,656,842
|
|
1,722,295
|
|
274,574
|
Acquisitions of long-term
investments
|
|
(39,762)
|
|
(552,086)
|
|
(115,383)
|
|
(18,395)
|
Placement/rollover of
matured time deposits
|
|
(8,856,849)
|
|
(8,183,371)
|
|
(5,910,677)
|
|
(942,301)
|
Proceeds from maturities of
time deposits
|
|
3,109,265
|
|
7,409,214
|
|
7,332,776
|
|
1,169,017
|
Net change in other
assets
|
|
(32,599)
|
|
(48,516)
|
|
(95,594)
|
|
(15,240)
|
Net cash used in investing activities
|
|
(5,603,164)
|
|
(3,994,734)
|
|
(1,068,219)
|
|
(170,300)
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
|
2017
|
|
2017
|
|
2018
|
|
2018
|
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds of short-term bank
loans
|
|
|
12,137,004
|
|
18,172,348
|
|
22,966,267
|
|
3,661,363
|
|
Payment of short-term bank
loans
|
|
|
(11,447,074)
|
|
(17,197,778)
|
|
(19,870,507)
|
|
(3,167,826)
|
|
Capital contribution from/
(repurchase of) noncontrolling
interests and redeemable
noncontrolling interests shareholders
|
|
|
500,000
|
|
40,000
|
|
(455,000)
|
|
(72,538)
|
|
Repurchase of
shares
|
|
|
(163,279)
|
|
(436,630)
|
|
(2,328,028)
|
|
(371,142)
|
|
Dividends paid to
shareholders
|
|
|
(917,088)
|
|
(624,395)
|
|
(315,511)
|
|
(50,300)
|
|
Net cash provided by /(used in) financing
activities
|
|
|
109,563
|
|
(46,455)
|
|
(2,779)
|
|
(443)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash
equivalents
|
|
|
|
|
|
|
|
|
|
|
and restricted cash held in foreign currencies
|
|
|
(4,009)
|
|
(11,646)
|
|
(35,862)
|
|
(5,717)
|
|
Net (decrease)/ increase in cash, cash equivalents and
restricted cash
|
|
|
(1,466,449)
|
|
(171,381)
|
|
798,117
|
|
127,239
|
|
Cash, cash
equivalents and restricted cash,
beginning of the period *
|
|
|
10,972,772
|
|
8,862,627
|
|
8,691,246
|
|
1,385,589
|
|
Cash, cash
equivalents and restricted cash, end of the period
*
|
|
|
9,506,323
|
|
8,691,246
|
|
9,489,363
|
|
1,512,828
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income tax,
net of tax refund
|
|
|
1,003,426
|
|
(238,447)
|
|
451,043
|
|
71,907
|
|
Supplemental
schedule of non-cash investing
|
|
|
|
|
|
|
|
|
|
|
and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
Fixed asset purchases
financed by
accounts payable
and accrued liabilities
|
|
|
282,753
|
|
293,194
|
|
327,030
|
|
52,136
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*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.
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
UNAUDITED SEGMENT
INFORMATION
|
|
|
|
|
|
|
(RMB and USD in
thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2017
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
10,735,463
|
|
8,004,352
|
|
8,761,247
|
|
1,396,748
|
E-commerce
|
|
1,857,339
|
|
4,653,652
|
|
3,732,474
|
|
595,044
|
Advertising
services
|
|
445,187
|
|
736,597
|
|
462,017
|
|
73,657
|
E-mail and
others
|
|
602,557
|
|
1,213,035
|
|
1,217,252
|
|
194,058
|
Total net
revenues
|
|
13,640,546
|
|
14,607,636
|
|
14,172,990
|
|
2,259,507
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
(3,871,955)
|
|
(3,087,192)
|
|
(3,316,189)
|
|
(528,679)
|
E-commerce
|
|
(1,614,517)
|
|
(4,310,338)
|
|
(3,376,328)
|
|
(538,266)
|
Advertising
services
|
|
(190,241)
|
|
(212,488)
|
|
(189,543)
|
|
(30,218)
|
E-mail and
others
|
|
(480,216)
|
|
(1,253,007)
|
|
(1,337,352)
|
|
(213,205)
|
Total cost of
revenues
|
|
(6,156,929)
|
|
(8,863,025)
|
|
(8,219,412)
|
|
(1,310,368)
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss):
|
|
|
|
|
|
|
|
|
Online game
services
|
|
6,863,508
|
|
4,917,160
|
|
5,445,058
|
|
868,069
|
E-commerce
|
|
242,822
|
|
343,314
|
|
356,146
|
|
56,778
|
Advertising
services
|
|
254,946
|
|
524,109
|
|
272,474
|
|
43,439
|
E-mail and
others
|
|
122,341
|
|
(39,972)
|
|
(120,100)
|
|
(19,147)
|
Total gross
profit
|
|
7,483,617
|
|
5,744,611
|
|
5,953,578
|
|
949,139
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss) margin:
|
|
|
|
|
|
|
|
Online game
services
|
|
63.9%
|
|
61.4%
|
|
62.1%
|
|
62.1%
|
E-commerce
|
|
13.1%
|
|
7.4%
|
|
9.5%
|
|
9.5%
|
Advertising
services
|
|
57.3%
|
|
71.2%
|
|
59.0%
|
|
59.0%
|
E-mail and
others
|
|
20.3%
|
|
(3.3%)
|
|
(9.9%)
|
|
(9.9%)
|
|
|
|
|
|
|
|
|
|
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 =
RMB6.2726 on the last trading day of
March 2018 (March 30, 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
|
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
2017
|
|
2017
|
|
2018
|
|
2018
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
Share-based
compensation cost included in:
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
170,229
|
|
248,433
|
|
188,563
|
|
30,061
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
- Selling and
marketing expenses
|
|
19,609
|
|
29,925
|
|
28,725
|
|
4,579
|
|
- General and
administrative expenses
|
|
120,958
|
|
165,827
|
|
199,128
|
|
31,746
|
|
- Research and
development expenses
|
|
102,624
|
|
149,116
|
|
169,239
|
|
26,981
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2017
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net income
attributable to the Company's shareholders
|
|
3,922,766
|
|
1,285,613
|
|
751,899
|
|
119,869
|
Add: Share-based
compensation
|
|
413,420
|
|
593,301
|
|
585,321
|
|
93,314
|
Non-GAAP net income
attributable to
the Company's shareholders
|
|
4,336,186
|
|
1,878,914
|
|
1,337,220
|
|
213,183
|
|
|
|
|
|
|
|
|
|
Non-GAAP basic
earnings per share
|
|
1.32
|
|
0.57
|
|
0.41
|
|
0.06
|
Non-GAAP basic
earnings per ADS
|
|
32.97
|
|
14.30
|
|
10.19
|
|
1.62
|
Non-GAAP diluted
earnings per share
|
|
1.31
|
|
0.57
|
|
0.40
|
|
0.06
|
Non-GAAP diluted
earnings per ADS
|
|
32.67
|
|
14.19
|
|
10.11
|
|
1.61
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/netease-reports-first-quarter-2018-unaudited-financial-results-300649407.html
SOURCE NetEase, Inc.