BEIJING, Nov. 15, 2017 /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,
2017.
Third Quarter 2017 Financial Highlights
- Net revenues were RMB12.5 billion
(US$1.9 billion), an increase of
35.5% compared with the third quarter of 2016.
-
- Online game services net
revenues were RMB8.1 billion
(US$1.2 billion), an increase of
23.5% compared with the third quarter of 2016.
- Advertising services net
revenues were RMB631.4 million
(US$94.9 million), an increase of
12.1% compared with the third quarter of 2016.
- E-mail, e-commerce and others
net revenues were RMB3.7 billion
(US$561.3 million), an increase of
79.5% compared with the third quarter of 2016.
- Gross profit was RMB5.9 billion
(US$893.9 million), an increase of
11.5% compared with the third quarter of 2016.
- Total operating expenses were RMB3.4
billion (US$510.7 million), an
increase of 36.6% compared with the third quarter of 2016.
- Net income attributable to the Company's shareholders was
RMB2.5 billion (US$379.9 million). Non-GAAP net income
attributable to the Company's shareholders was RMB3.0 billion (US$454.6
million). [1]
- Diluted earnings per ADS were US$2.86; non-GAAP diluted earnings per ADS were
US$3.43.
|
[1] As used in this
press release, non-GAAP net income attributable to the Company's
shareholders is defined to exclude share-based compensation
expenses. See "Unaudited Reconciliation of GAAP and Non-GAAP
Results" at the end of this press release.
|
|
Third Quarter and Recent 2017 Operational Highlights
- Successfully launched Minecraft in China for PC JAVA, Android and iOS platforms,
accumulating nearly 30 million new registered users as of the end
of October 2017.
- Continued to expand international presence:
-
- Brought Onmyoji to Korea
and launched closed beta testing in the U.S. and Canada.
- Crusaders of Light
became one of the top-grossing games in more than 20 different
countries since its launch.
- Increased the popularity of several legacy games, achieving
record quarterly revenues for PC-client game Fantasy Westward
Journey Online and mobile game Invincible.
- Progressed diversification strategy with the upcoming pipeline
including MMORPG such as Chu Liu
Xiang and Tribes and Empires: Storm of Prophecy,
Japanese-themed RPG Forever 7 and card game HAN-GYAKU-SEI
Million Arthur, as well as a battle arena game based on
Onmyoji IP.
"We continue to amass one of China's preeminent mobile game portfolios
while simultaneously advancing our advertising services and
e-commerce business lines, growing our total net revenues by 35.5%
in the third quarter," said Mr. William
Ding, Chief Executive Officer and Director of NetEase. "As
expected, Onmyoji's slowdown in China persisted in the third quarter, however,
we are regaining traction with the introduction of new content and
promotional activities. In addition, the international reception to
Onmyoji remains solid, and the early testing for the battle
arena game based on Onmyoji IP is on track with our
expectations. We also strengthened our portfolio in the third
quarter by launching a number of expansion packs and new mobile
titles. These new launches, including our Japanese-themed RPG
Index and the blockbuster title Minecraft, have been
positively received, with early monetization efforts underway.
"There remain ample growth opportunities in China as we further diversify our portfolio by
exploring a variety of genres. We will also look to extend our
popular titles overseas in markets eager for new content and where
mobile growth remains robust. In addition, our advertising services
and e-commerce divisions Kaola.com and Yanxuan
continue to prosper. As we invest in the growth of each of these
business lines, together, they strengthen not only the NetEase
brand, but our commitment to our investors and community," Mr. Ding
concluded.
Third Quarter 2017 Financial Results
Net Revenues
Net revenues for the third quarter of 2017 were RMB12,477.8 million (US$1,875.4 million), compared to RMB13,376.0 million and RMB9,211.6 million for the preceding quarter and
the third quarter of 2016, respectively.
Net revenues from online games were RMB8,111.7 million (US$1,219.2 million) for the third quarter of
2017, compared to RMB9,430.2 million
and RMB6,568.0 million for the
preceding quarter and the third quarter of 2016, respectively.
Mobile games accounted for approximately 68.3% of net revenues from
online games in the third quarter of 2017, compared to 72.4% and
57.2% for the preceding quarter and the third quarter of 2016,
respectively.
Net revenues from advertising services were RMB631.4 million (US$94.9
million) for the third quarter of 2017, compared to
RMB595.6 million and RMB563.3 million for the preceding quarter and
the third quarter of 2016, respectively. The top performing
advertising verticals in the third quarter of 2017 were automobile,
real estate and internet services sectors.
Net revenues from e-mail, e-commerce and others were
RMB3,734.7 million (US$561.3 million) for the third quarter of 2017,
compared to RMB3,350.3 million and
RMB2,080.4 million for the preceding
quarter and the third quarter of 2016, respectively.
Gross Profit
Gross profit for the third quarter of 2017 was RMB5,947.6 million (US$893.9 million), compared to RMB6,736.9 million and RMB5,333.6 million for the preceding quarter and
the third quarter of 2016, respectively.
The year-over-year increase in online games gross profit was
primarily driven by revenue contribution from mobile games such as
Onmyoji, the mobile version of New Ghost, Land of
Glory, Invincible and Demon Seals mobile, as
well as the legacy PC-client game Fantasy Westward Journey
Online. The quarter-over-quarter decrease in online games gross
profit was primarily due to decreased revenue contribution from
mobile games.
The year-over-year and quarter-over-quarter increases in
advertising services gross profit were primarily due to NetEase's
enhanced monetization efforts.
The year-over-year decrease in e-mail, e-commerce and others
gross profit was primarily due to the increased revenue
contribution from Kaola.com and Yanxuan, which have
relatively lower margins, as a percentage of NetEase's e-mail,
e-commerce and others net revenues.
Gross Profit Margin
Gross profit margin for the online games business for the third
quarter of 2017 was 62.5%, compared to 63.1% and 65.0% for the
preceding quarter and the third quarter of 2016, respectively. The
year-over-year decrease in gross profit margin was mainly due to
increased revenue contribution from mobile games, which have
relatively lower gross profit margins, as a percentage of NetEase's
total online games net revenues.
Gross profit margin for the advertising services business for
the third quarter of 2017 was 68.0%, compared to 67.6% and 65.3%
for the preceding quarter and the third quarter of 2016,
respectively. The year-over-year increase in gross profit margin
was mainly due to NetEase's enhanced monetization efforts.
Gross profit margin for the e-mail, e-commerce and others
businesses for the third quarter of 2017 was 11.9%, compared to
11.3% and 33.5% for the preceding quarter and the third quarter of
2016, respectively. The year-over-year decrease in gross profit
margin for the e-mail, e-commerce and others businesses was
primarily due to the increased revenue contribution from
Kaola.com and Yanxuan, which have relatively lower
gross margins, as a percentage of NetEase's e-mail, e-commerce and
others net revenues.
Operating Expenses
Total operating expenses for the third quarter of 2017 were
RMB3,397.9 million (US$510.7 million), compared to RMB3,331.5 million and RMB2,487.0 million for the preceding quarter and
the third quarter of 2016, respectively. The year-over-year
increase in operating expenses was mainly due to higher
staff-related costs resulting from an increase in headcount and
average compensation, increased selling and marketing expenses and
operating expenses related to NetEase's e-commerce businesses. The
quarter-over-quarter increase in operating expenses was mainly due
to higher staff-related costs and R&D expenditures which was
partially offset by decreased selling and marketing expenses.
Income Taxes
The Company recorded a net income tax charge of RMB225.5 million (US$33.9
million) for the third quarter of 2017, compared to
RMB703.5 million and RMB427.2 million for the preceding quarter and
the third quarter of 2016, respectively. The effective tax rate for
the third quarter of 2017 was 8.1%, compared to 19.0% and 13.3% for
the preceding quarter and the third quarter of 2016, 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 third quarter of 2017 and 2016, and subject to a
preferential tax rate of 10% for 2016 and 2015, respectively. The
Company recognized related tax credits in the third quarter of 2017
and 2016 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
third quarter of 2017 totaled RMB2.5
billion (US$379.9 million),
compared to RMB3.0 billion and
RMB2.7 billion for the preceding
quarter and the third quarter of 2016, respectively. Non-GAAP net
income attributable to the Company's shareholders for the third
quarter of 2017 totaled RMB3.0
billion (US$454.6 million),
compared to RMB3.5 billion and
RMB3.0 billion for the preceding
quarter and the third quarter of 2016, respectively.
During the third quarter of 2017, the Company had a net foreign
exchange loss of RMB109.9 million
(US$16.5 million), compared to a net
foreign exchange loss of RMB131.3
million and a net foreign exchange gain of RMB14.8 million for the preceding quarter and the
third quarter of 2016, respectively. The year-over-year and
quarter-over-quarter changes in foreign exchange gains and losses
were mainly due to unrealized exchange gains and losses arising
from the Company's U.S. dollar-denominated bank deposits and
short-term loan balances as the exchange rate of the U.S. dollar
against the RMB fluctuated over the periods.
NetEase reported basic and diluted earnings per ADS of
US$2.88 and US$2.86, respectively, for the third quarter of
2017. The Company reported basic and diluted earnings per ADS of
US$3.39 and US$3.37, respectively, for the preceding quarter,
and basic and diluted earnings per ADS of US$3.14 and US$3.12, respectively, for the third quarter of
2016. Non-GAAP basic and diluted earnings per ADS were US$3.45 and US$3.43, respectively, for the third quarter of
2017, compared to non-GAAP basic and diluted earnings per ADS of
US$3.96 and US$3.94, respectively, in the preceding quarter,
and non-GAAP basic and diluted earnings per ADS of US$3.46 and US$3.43, respectively, for the third quarter of
2016.
Quarterly Dividend
The board of directors has approved a dividend of US$0.72 per ADS for the third quarter of 2017,
which is expected to be paid on December 8,
2017 to shareholders of record as of the close of business
on December 1, 2017.
NetEase paid a dividend of US$1.08
per ADS for the first quarter of 2017 on June 2, 2017 and paid a dividend of US$0.83 per ADS for the second quarter of 2017 on
September 1, 2017.
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, 2017, the
Company's total cash and cash equivalents, current and non-current
time deposits and short-term investments balance totaled
RMB40.7 billion (US$6.1 billion), compared to RMB36.9 billion as of December 31, 2016. Cash flow generated from
operating activities was RMB1.7
billion (US$248.8 million) for
the third quarter of 2017, compared to RMB2.3 billion and RMB3.7
billion for the preceding quarter and the third quarter of
2016, respectively.
Share Repurchase Program
On November 15, 2016, the Company
announced that its board of directors approved a share repurchase
program of up to US$1.0 billion of
the Company's outstanding ADSs for a period not to exceed 12
months. As of November 14, 2017, the
last day of such program, the Company had repurchased approximately
1.1 million ADSs for approximately US$306.1
million under this program.
The Company also today announced that its board of directors has
approved a new share repurchase program of up to US$1.0 billion of the Company's outstanding ADSs
for a period not to exceed 12 months beginning on November 16, 2017. NetEase plans to fund
repurchases made under this program from available working
capital.
Under the terms of the approved program, NetEase may repurchase
its issued and outstanding ADSs in open-market transactions on the
NASDAQ Global Select Market. The timing and dollar amount of
repurchase transactions will be subject to the Securities and
Exchange Commission (SEC) Rule 10b-18 requirements. It is also
expected that such repurchases will be effected pursuant to a plan
in conformity with SEC Rule 10b5-1. The extent to which
NetEase repurchases its ADSs will depend upon a variety of factors,
including market conditions, regulatory requirements and other
corporate considerations, as determined by NetEase's management
team. The repurchase program may be suspended or discontinued at
any time.
** The United States dollar
(US$) 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$1.00 = RMB6.6533 on September 29,
2017 as set forth in the H.10 statistical release of the
U.S. Federal Reserve Board. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at that
rate on September 29, 2017, or at any
other certain date. The percentages stated are calculated based on
RMB.
Conference Call
NetEase's management team will host a teleconference call with
simultaneous webcast at 8:00 p.m. Eastern
Time on Wednesday, November 15,
2017 (Beijing/Hong Kong
Time: 9:00 a.m., Thursday, November 16, 2017). 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 1-800-239-9838 (international: 1-323-794-2551), 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 4285607#. The replay will be
available through November 29,
2017.
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, advertising services, e-mail services and e-commerce
platforms. 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:
Juliet Yang
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,
|
|
|
2016
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
5,439,499
|
|
2,575,522
|
|
387,104
|
Time
deposits
|
|
19,361,098
|
|
30,140,825
|
|
4,530,207
|
Restricted cash
|
|
3,473,273
|
|
6,286,905
|
|
944,930
|
Accounts
receivable, net
|
|
4,251,297
|
|
3,259,524
|
|
489,911
|
Prepayments and other current assets
|
|
5,276,082
|
|
8,601,166
|
|
1,292,767
|
Short-term investments
|
|
11,582,116
|
|
7,963,448
|
|
1,196,917
|
Total current
assets
|
|
49,383,365
|
|
58,827,390
|
|
8,841,836
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
Property, equipment and software, net
|
|
2,419,510
|
|
3,356,472
|
|
504,482
|
Land use
right, net
|
|
588,887
|
|
596,458
|
|
89,648
|
Deferred
tax assets *
|
|
560,323
|
|
628,518
|
|
94,467
|
Time
deposits
|
|
550,000
|
|
50,000
|
|
7,515
|
Restricted cash
|
|
2,060,000
|
|
200
|
|
30
|
Other
long-term assets
|
|
2,469,775
|
|
3,040,485
|
|
456,990
|
Total non-current
assets
|
|
8,648,495
|
|
7,672,133
|
|
1,153,132
|
Total
assets
|
|
58,031,860
|
|
66,499,523
|
|
9,994,968
|
|
|
|
|
|
|
|
Liabilities, Redeemable Noncontrolling
Interests and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
1,396,187
|
|
2,068,879
|
|
310,955
|
Salary
and welfare payables
|
|
1,491,448
|
|
1,386,495
|
|
208,392
|
Taxes
payable
|
|
1,722,501
|
|
970,515
|
|
145,870
|
Short-term loans
|
|
3,815,691
|
|
5,732,593
|
|
861,616
|
Deferred
revenue
|
|
7,531,238
|
|
6,165,997
|
|
926,758
|
Accrued
liabilities and other payables
|
|
3,219,419
|
|
3,771,389
|
|
566,845
|
Total current
liabilities
|
|
19,176,484
|
|
20,095,868
|
|
3,020,436
|
|
|
|
|
|
|
|
Long-term
payable:
|
|
|
|
|
|
|
Deferred
tax liabilities *
|
|
392,235
|
|
109,002
|
|
16,383
|
Other
long-term payable
|
|
200
|
|
10,642
|
|
1,600
|
Total
liabilities
|
|
19,568,919
|
|
20,215,512
|
|
3,038,419
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
-
|
|
567,266
|
|
85,261
|
|
|
|
|
|
|
|
Total NetEase, Inc.'s
equity
|
|
38,191,081
|
|
45,015,752
|
|
6,765,928
|
Noncontrolling
interests
|
|
271,860
|
|
700,993
|
|
105,360
|
Total shareholders'
equity
|
|
38,462,941
|
|
45,716,745
|
|
6,871,288
|
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interests and
shareholders'
equity
|
|
58,031,860
|
|
66,499,523
|
|
9,994,968
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
*In 2017, the
Company adopted the guidance of ASU 2015-17 issued by FASB in
November 2015, which requires entities to
present deferred tax assets ("DTA") and deferred tax liabilities
("DTL") as non-current in the balance sheets. Pursuant to
the
guidance, the Company retrospectively reclassified current DTA and
current DTL to non-current assets and to non-current
liabilities, respectively, in the consolidated balance sheet as of
December 31, 2016.
|
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
(RMB and USD in
thousands, except per share data)
|
|
|
Quarter
Ended
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
9,211,645
|
|
13,376,048
|
|
12,477,789
|
|
1,875,429
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
(3,878,071)
|
|
(6,639,158)
|
|
(6,530,214)
|
|
(981,500)
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
5,333,574
|
|
6,736,890
|
|
5,947,575
|
|
893,929
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(1,275,073)
|
|
(1,685,699)
|
|
(1,645,829)
|
|
(247,370)
|
General and
administrative expenses
|
|
(391,655)
|
|
(594,344)
|
|
(599,116)
|
|
(90,048)
|
Research and
development expenses
|
|
(820,246)
|
|
(1,051,477)
|
|
(1,152,941)
|
|
(173,289)
|
Total operating
expenses
|
|
(2,486,974)
|
|
(3,331,520)
|
|
(3,397,886)
|
|
(510,707)
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
2,846,600
|
|
3,405,370
|
|
2,549,689
|
|
383,222
|
Other
income:
|
|
|
|
|
|
|
|
|
Investment income,
net
|
|
99,679
|
|
105,053
|
|
117,746
|
|
17,697
|
Interest income,
net
|
|
162,145
|
|
162,078
|
|
164,684
|
|
24,752
|
Exchange gains/
(losses), net
|
|
14,807
|
|
(131,305)
|
|
(109,891)
|
|
(16,517)
|
Other, net
|
|
99,387
|
|
156,703
|
|
44,876
|
|
6,745
|
|
|
|
|
|
|
|
|
|
Net income before
tax
|
|
3,222,618
|
|
3,697,899
|
|
2,767,104
|
|
415,899
|
Income tax
|
|
(427,177)
|
|
(703,465)
|
|
(225,494)
|
|
(33,892)
|
|
|
|
|
|
|
|
|
|
Net income after
tax
|
|
2,795,441
|
|
2,994,434
|
|
2,541,610
|
|
382,007
|
Net income
attributable to noncontrolling interests
and redeemable noncontrolling
interests
|
|
(55,423)
|
|
(22,323)
|
|
(14,161)
|
|
(2,128)
|
Net income
attributable to
the Company's shareholders
|
|
2,740,018
|
|
2,972,111
|
|
2,527,449
|
|
379,879
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
0.84
|
|
0.90
|
|
0.77
|
|
0.12
|
Basic earnings per
ADS
|
|
20.90
|
|
22.55
|
|
19.18
|
|
2.88
|
Diluted earnings per
share
|
|
0.83
|
|
0.90
|
|
0.76
|
|
0.11
|
Diluted earnings per
ADS
|
|
20.73
|
|
22.41
|
|
19.05
|
|
2.86
|
|
|
|
|
|
|
|
|
|
Weighted average
number of
ordinary shares outstanding, basic
|
|
3,277,540
|
|
3,294,950
|
|
3,294,167
|
|
3,294,167
|
Weighted average
number of
ADS outstanding, basic
|
|
131,102
|
|
131,798
|
|
131,767
|
|
131,767
|
Weighted average
number of
ordinary shares outstanding, diluted
|
|
3,304,995
|
|
3,315,410
|
|
3,317,373
|
|
3,317,373
|
Weighted average
number of
ADS outstanding, diluted
|
|
132,200
|
|
132,616
|
|
132,695
|
|
132,695
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
2,795,441
|
|
4,011,180
|
|
2,994,434
|
|
2,541,610
|
|
382,007
|
Adjustments to reconcile net
income to net
cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
89,905
|
|
146,144
|
|
170,571
|
|
210,791
|
|
31,682
|
Impairment loss for
investments
|
|
-
|
|
22,200
|
|
4,000
|
|
18,337
|
|
2,756
|
Share-based compensation
cost
|
|
277,265
|
|
413,420
|
|
500,082
|
|
497,460
|
|
74,769
|
Allowance for provision for doubtful debts
|
|
10,329
|
|
3,188
|
|
10,940
|
|
17,784
|
|
2,673
|
(Gains)/ losses on disposal
of property,
equipment and
software
|
|
(404)
|
|
(316)
|
|
444
|
|
(174)
|
|
(26)
|
Unrealized exchange (gains)/
losses
|
|
(22,477)
|
|
42,125
|
|
121,586
|
|
118,646
|
|
17,833
|
Gain on disposal of
long-term investments
|
|
-
|
|
-
|
|
(9,595)
|
|
-
|
|
-
|
Deferred income
taxes
|
|
49,766
|
|
(279,046)
|
|
105,717
|
|
(180,849)
|
|
(27,182)
|
Net equity share of loss/
(gains) from associated companies
|
|
2,917
|
|
27,074
|
|
8,187
|
|
(2,180)
|
|
(328)
|
Fair value changes of
short-term investments
|
|
(85,413)
|
|
(89,505)
|
|
(105,746)
|
|
(112,996)
|
|
(16,983)
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(181,029)
|
|
564,743
|
|
266,928
|
|
125,160
|
|
18,812
|
Prepayments and other current assets
|
|
71,458
|
|
(1,302,870)
|
|
(913,656)
|
|
(1,141,181)
|
|
(171,521)
|
Accounts payable
|
|
13,156
|
|
170,289
|
|
334,678
|
|
191,847
|
|
28,835
|
Salary and welfare payables
|
|
(139,693)
|
|
(160,858)
|
|
233,427
|
|
(177,525)
|
|
(26,682)
|
Taxes payable
|
|
120,128
|
|
779,410
|
|
(952,134)
|
|
(577,588)
|
|
(86,812)
|
Deferred revenue
|
|
592,143
|
|
(573,805)
|
|
(844,471)
|
|
53,034
|
|
7,971
|
Accrued liabilities and other payables
|
|
136,456
|
|
257,788
|
|
395,975
|
|
73,080
|
|
10,984
|
Net cash provided by operating activities
|
|
3,729,948
|
|
4,031,161
|
|
2,321,367
|
|
1,655,256
|
|
248,788
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
equipment and software
|
|
(165,535)
|
|
(325,438)
|
|
(433,021)
|
|
(512,359)
|
|
(77,008)
|
Proceeds from sale of
property, equipment and software
|
|
552
|
|
852
|
|
1,921
|
|
465
|
|
70
|
Purchase of other intangible
assets
|
|
(2,429)
|
|
-
|
|
(25)
|
|
-
|
|
-
|
Purchase of land use
right
|
|
-
|
|
-
|
|
-
|
|
(6,488)
|
|
(975)
|
Net change in short-term
investments
with terms of
three months or less
|
|
(365,269)
|
|
1,839,344
|
|
(1,558,339)
|
|
1,943,208
|
|
292,067
|
Purchase of short-term
investments
|
|
(3,440,000)
|
|
(4,465,000)
|
|
(4,926,000)
|
|
(1,865,000)
|
|
(280,312)
|
Proceeds from maturities of
short-term investments
|
|
1,657,273
|
|
3,229,235
|
|
4,877,695
|
|
4,851,772
|
|
729,228
|
Investment in associated
companies
|
|
(363,586)
|
|
-
|
|
-
|
|
(81,293)
|
|
(12,218)
|
Proceeds from disposal of
investment in associated company
and long-term
investments
|
|
-
|
|
-
|
|
9,983
|
|
340,435
|
|
51,168
|
Transfer to restricted
cash
|
|
(845,328)
|
|
(13,822)
|
|
(717,855)
|
|
(22,341)
|
|
(3,358)
|
Placement/rollover of
matured time deposits
|
|
(6,750,017)
|
|
(8,856,849)
|
|
(3,859,217)
|
|
(13,084,711)
|
|
(1,966,650)
|
Proceeds from maturities of
time deposits
|
|
5,966,100
|
|
3,109,265
|
|
3,875,136
|
|
8,035,982
|
|
1,207,819
|
Net change in other
assets
|
|
(222,456)
|
|
(134,573)
|
|
(301,311)
|
|
(566,205)
|
|
(85,104)
|
Net cash used in investing activities
|
|
(4,530,695)
|
|
(5,616,986)
|
|
(3,031,033)
|
|
(966,535)
|
|
(145,273)
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds of short-term bank
loans
|
|
3,005,008
|
|
12,137,004
|
|
14,433,788
|
|
16,590,069
|
|
2,493,510
|
Payment of short-term bank
loans
|
|
(2,320,920)
|
|
(11,447,074)
|
|
(13,450,327)
|
|
(16,133,060)
|
|
(2,424,821)
|
Capital contribution from
noncontrolling interests and redeemable
noncontrolling
interests shareholders
|
|
-
|
|
500,000
|
|
311,500
|
|
60,000
|
|
9,018
|
Repurchase of
shares
|
|
-
|
|
(163,279)
|
|
(527,821)
|
|
(933,861)
|
|
(140,361)
|
Dividends paid to
shareholders
|
|
(683,826)
|
|
(917,088)
|
|
(980,513)
|
|
(735,611)
|
|
(110,563)
|
Net cash provided by /(used in) financing
activities
|
|
262
|
|
109,563
|
|
(213,373)
|
|
(1,152,463)
|
|
(173,217)
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on
cash
|
|
|
|
|
|
|
|
|
|
|
held in foreign currencies
|
|
25,128
|
|
(3,986)
|
|
(23,712)
|
|
26,764
|
|
4,023
|
Net decrease in cash and cash equivalents
|
|
(775,357)
|
|
(1,480,248)
|
|
(946,751)
|
|
(436,978)
|
|
(65,679)
|
Cash and cash
equivalents, beginning of the period
|
|
5,257,160
|
|
5,439,499
|
|
3,959,251
|
|
3,012,500
|
|
452,783
|
Cash and cash
equivalents, end of the period
|
|
4,481,803
|
|
3,959,251
|
|
3,012,500
|
|
2,575,522
|
|
387,104
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income tax,
net
|
|
417,623
|
|
1,003,426
|
|
735,718
|
|
1,212,178
|
|
182,192
|
Supplemental
schedule of non-cash investing
|
|
|
|
|
|
|
|
|
|
|
and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
Fixed asset purchases
financed by
accounts payable
and accrued liabilities
|
|
179,662
|
|
282,753
|
|
259,657
|
|
259,593
|
|
39,017
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
6,568,016
|
|
9,430,175
|
|
8,111,652
|
|
1,219,192
|
Advertising
services
|
|
563,271
|
|
595,593
|
|
631,446
|
|
94,907
|
E-mail, e-commerce
and others
|
|
2,080,358
|
|
3,350,280
|
|
3,734,691
|
|
561,330
|
Total net
revenues
|
|
9,211,645
|
|
13,376,048
|
|
12,477,789
|
|
1,875,429
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
(2,299,455)
|
|
(3,475,188)
|
|
(3,039,004)
|
|
(456,766)
|
Advertising
services
|
|
(195,376)
|
|
(192,955)
|
|
(202,208)
|
|
(30,392)
|
E-mail, e-commerce
and others
|
|
(1,383,240)
|
|
(2,971,015)
|
|
(3,289,002)
|
|
(494,342)
|
Total cost of
revenues
|
|
(3,878,071)
|
|
(6,639,158)
|
|
(6,530,214)
|
|
(981,500)
|
|
|
|
|
|
|
|
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
4,268,561
|
|
5,954,987
|
|
5,072,648
|
|
762,426
|
Advertising
services
|
|
367,895
|
|
402,638
|
|
429,238
|
|
64,515
|
E-mail, e-commerce
and others
|
|
697,118
|
|
379,265
|
|
445,689
|
|
66,988
|
Total gross
profit
|
|
5,333,574
|
|
6,736,890
|
|
5,947,575
|
|
893,929
|
|
|
|
|
|
|
|
|
|
Gross profit
margin:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
65.0%
|
|
63.1%
|
|
62.5%
|
|
62.5%
|
Advertising
services
|
|
65.3%
|
|
67.6%
|
|
68.0%
|
|
68.0%
|
E-mail, e-commerce
and others
|
|
33.5%
|
|
11.3%
|
|
11.9%
|
|
11.9%
|
|
|
|
|
|
|
|
|
|
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 = RMB6.6533 on the last trading day of September 2017
(September 29, 2017) as set
forth in the H.10 statistical release of the U.S. Federal Reserve
Board.
|
Note 2:
|
Share-based
compensation cost reported in the Company's unaudited condensed
consolidated
statements of comprehensive income is set out as follows in RMB and
USD (in thousands):
|
|
|
Quarter
Ended
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Share-based
compensation cost included in:
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
127,344
|
|
198,732
|
|
202,887
|
|
30,494
|
Operating
expenses
|
|
|
|
|
|
|
|
|
- Selling and
marketing expenses
|
|
13,743
|
|
22,899
|
|
22,949
|
|
3,449
|
- General and
administrative expenses
|
|
67,613
|
|
147,515
|
|
147,037
|
|
22,100
|
- Research and
development expenses
|
|
68,565
|
|
130,936
|
|
124,587
|
|
18,726
|
|
|
|
|
|
|
|
|
|
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
|
|
|
September
30,
|
|
June
30,
|
|
September
30,
|
|
September
30,
|
|
|
2016
|
|
2017
|
|
2017
|
|
2017
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net income
attributable to the Company's shareholders
|
|
2,740,018
|
|
2,972,111
|
|
2,527,449
|
|
379,879
|
Add: Share-based
compensation
|
|
277,265
|
|
500,082
|
|
497,460
|
|
74,769
|
Non-GAAP net income
attributable to the Company's shareholders
|
|
3,017,283
|
|
3,472,193
|
|
3,024,909
|
|
454,648
|
|
|
|
|
|
|
|
|
|
Non-GAAP basic
earnings per share
|
|
0.92
|
|
1.05
|
|
0.92
|
|
0.14
|
Non-GAAP basic
earnings per ADS
|
|
23.01
|
|
26.34
|
|
22.96
|
|
3.45
|
Non-GAAP diluted
earnings per share
|
|
0.91
|
|
1.05
|
|
0.91
|
|
0.14
|
Non-GAAP diluted
earnings per ADS
|
|
22.82
|
|
26.18
|
|
22.80
|
|
3.43
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
View original
content:http://www.prnewswire.com/news-releases/netease-reports-third-quarter-2017-unaudited-financial-results-300556822.html
SOURCE NetEase, Inc.