BEIJING, Feb. 26, 2020 /PRNewswire/ -- NetEase, Inc.
(NASDAQ: NTES) ("NetEase" or the "Company"), one of China's leading internet and online game
services providers, today announced its unaudited financial results
for the fourth quarter and fiscal year ended December 31, 2019.
Fourth Quarter 2019 Financial
Highlights[1]
- Net revenues were RMB15,734.8
million (US$2,260.2 million),
an increase of 9.2% compared with the fourth quarter of 2018.
-
- Online game services net revenues were RMB11,604.3 million (US$1,666.9 million), an increase of 5.3% compared
with the fourth quarter of 2018.
- Youdao net revenues were RMB410.4
million (US$59.0 million), an
increase of 78.4% compared with the fourth quarter of 2018.
- Innovative businesses and others net revenues were
RMB3,720.0 million (US$534.4 million), an increase of 17.9% compared
with the fourth quarter of 2018.
- Gross profit was RMB8,210.4
million (US$1,179.4 million),
an increase of 9.0% compared with the fourth quarter of 2018.
- Total operating expenses were RMB5,234.0
million (US$751.8 million), an
increase of 17.5% compared with the fourth quarter of 2018.
- Net income from continuing operations attributable to the
Company's shareholders was RMB3,053.7
million (US$438.6 million).
Non-GAAP net income from continuing operations attributable to the
Company's shareholders was RMB3,662.3
million (US$526.1
million).[2]
- Basic net income per ADS from continuing operations was
US$3.40. Non-GAAP basic net income
per ADS from continuing operations was US$4.07.[2]
[1] In
September 2019, NetEase sold its Kaola e-commerce business,
the principal terms of which were previously announced. As a
result, Kaola has been deconsolidated from the Company and
its historical financial results are reflected in the Company's
consolidated financial statements as discontinued operations
accordingly. The financial information and non-GAAP financial
information disclosed in this press release are presented on a
continuing operations basis, unless otherwise specifically stated.
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[2] As
used in this press release, non-GAAP net income from continuing
operations attributable to the Company's shareholders and non-GAAP
basic and diluted net income from continuing operations per ADS are
defined to exclude share-based compensation expenses. See
"Unaudited Reconciliation of GAAP and Non-GAAP Results" at the end
of this press release.
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Fourth Quarter 2019 and Recent 2020 Operational
Highlights
- Expanded user base and diversified portfolio with new games
launched in China including:
-
- Fantasy Westward Journey 3D, released in
December, topped China's iOS
download chart soon after its launch, capturing wide interest from
game players.
- Introduced other thrilling new titles including
Xuan Yuan Sword: Dragon Upon the
Cloud, Bloom & Blade, Onmyoji: The Card Game
and Champion of the
Fields, The Ninth Institute and
Astracraft.
- Deepened international brand recognition with popular
games:
-
- Knives Out remained popular in Japan and topped the iOS grossing chart
several times in the fourth quarter.
- Identity V ranked third on Japan's top iOS grossing chart several times
in November and December.
- Marvel Super War,
released in December in several Southeast Asian markets, gained
popularity and topped many iOS download charts.
- Continued popularity of Blizzard Entertainment's World of
Warcraft® in China,
bolstered by the release of World of Warcraft Classic,
achieving a record number of total monthly subscribers in the
fourth quarter, with increased revenue quarter-over-quarter.
- Advanced exciting game pipeline, including: Onmyoji: Yokai
Koya, Harry Potter: Magic
Awakened,EVE Echoes, Ghost World Chronicle,
Revelation mobile game, Marvel
Duel, Diablo® Immortal™ and
Pokémon Quest.
- Net revenues from Youdao's learning services and products were
RMB311.9 million (US$44.8 million) for the fourth quarter of 2019,
a 128.6% increase from the same period in 2018.
- Advanced NetEase Cloud Music with strong revenue growth,
expanding the Company's community of independent musicians to more
than 100,000 and over 270 billion playbacks of their songs in
2019.
"We saw strong growth across our primary businesses, increasing
our total annual net revenues and net income from continuing
operations attributable to the Company's shareholders
year-over-year by 16% and 60%, respectively, due to strong
performances in our online game services as well as other business
segments," said Mr. William Ding,
Chief Executive Officer and Director of NetEase. "Our online game
services net revenues continued to grow, propelled by the sustained
and growing popularity of our existing titles, again demonstrating
the longevity of our game franchises. At the end of the year, we
launched the long-anticipated Fantasy Westward Journey 3D,
which gave us a wonderful start to the first quarter. We will
continue to bring more masterpieces to both domestic and global
players in 2020.
"Our online education and music businesses also performed
remarkably well. Youdao is exploring new approaches to grow its
business, replicating successful course experiences to produce
premium learning content, products and scale with a positive impact
to its margins. Our differentiation in music offerings is also
becoming more evident. We are helping hundreds of thousands of
independent musicians create and promote their work to Chinese
music lovers with our platform's specialized promotion and
distribution capabilities in independent music. We believe that
NetEase's orientation as a forerunner in these evolving markets
positions us well for growth and the ability to create additional
value for our stakeholders. Finally, with respect to the COVID-19
outbreak, we currently expect to see some impact to our business
lines in the near-term, however, the situation is evolving. NetEase
is committed to providing support to affected communities and
working together as we move through this challenging time," Mr.
Ding concluded.
Fourth Quarter 2019 Financial Results
Net Revenues
Net revenues for the fourth quarter of 2019 were RMB15,734.8 million (US$2,260.2 million), compared to RMB14,635.7 million and RMB14,405.3 million for the preceding quarter and
the fourth quarter of 2018, respectively.
Net revenues from online game services were RMB11,604.3 million (US$1,666.9 million) for the fourth quarter of
2019, compared to RMB11,534.8 million
and RMB11,019.6 million for the
preceding quarter and the fourth quarter of 2018, respectively. Net
revenues from mobile games accounted for approximately 70.4% of net
revenues from online games for the fourth quarter of 2019, compared
to 71.0% and 69.7% for the preceding quarter and the fourth quarter
of 2018, respectively.
Net revenues from Youdao were RMB410.4
million (US$59.0 million) for
the fourth quarter of 2019, compared to RMB345.9 million and RMB230.1 million for the preceding quarter and
the fourth quarter of 2018, respectively.
Net revenues from innovative businesses and others were
RMB3,720.0 million (US$534.4 million) for the fourth quarter of 2019,
compared to RMB2,755.0 million and
RMB3,155.6 million for the preceding
quarter and the fourth quarter of 2018, respectively.
Gross Profit
Gross profit for the fourth quarter of 2019 was RMB8,210.4 million (US$1,179.4 million), compared to RMB7,870.4 million and RMB7,530.5 million for the preceding quarter and
the fourth quarter of 2018, respectively.
Gross profit for online game services was stable
quarter-over-quarter. The year-over-year increase in online game
services gross profit was primarily due to increased revenue
contribution from mobile games including Life-After,
Invincible and Identity V.
The quarter-over-quarter and year-over-year increases in Youdao
gross profit were primarily due to increased net revenues from its
learning services and products.
The quarter-over-quarter increase in innovative businesses and
others gross profit was primarily contributed from NetEase Cloud
Music and NetEase's advertising services. The year-over-year
increase in innovative businesses and others gross profit was
primarily due to increased net revenues from NetEase Cloud
Music.
Gross Profit Margin
Gross profit margin for online game services for the fourth
quarter of 2019 was 63.1%, compared to 63.8% and 62.8% for the
preceding quarter and the fourth quarter of 2018, respectively.
Gross profit margin for online game services was generally stable,
fluctuating within a narrow band based on the revenue mix of mobile
and PC-client, as well as self-developed and licensed games.
Gross profit margin for Youdao for the fourth quarter of 2019
was 29.8%, compared to 25.8% and 29.7% for the preceding quarter
and the fourth quarter of 2018, respectively. The
quarter-over-quarter increase in Youdao gross profit margin was
mainly due to an improvement from its learning services and
products and online marketing services. Gross profit margin for
Youdao was stable year-over-year.
Gross profit margin for innovative businesses and others for the
fourth quarter of 2019 was 20.6%, compared to 15.2% and 17.0% for
the preceding quarter and the fourth quarter of 2018, respectively.
The quarter-over-quarter increase in innovative businesses and
others gross profit margin was primarily contributed from NetEase
Cloud Music and NetEase's advertising services. The year-over-year
increase in innovative businesses and others gross profit margin
was primarily due to increased net revenues from NetEase Cloud
Music.
Operating Expenses
Total operating expenses for the fourth quarter of 2019 were
RMB5,234.0 million (US$751.8 million), compared to RMB4,535.6 million and RMB4,455.4 million for the preceding quarter and
the fourth quarter of 2018, respectively. The quarter-over-quarter
and year-over-year increases in total operating expenses were
mainly due to increased marketing expenditures related to online
game services.
Other Income[3]
Other income consisted of investment income, interest income,
foreign exchange gains and losses and others. The
quarter-over-quarter and year-over-year increases in other income
for the fourth quarter of 2019 were mainly due to the fair value
changes of equity investments in publicly traded companies.
Income Taxes[3]
The Company recorded a net income tax charge of RMB876.3 million (US$125.9
million) for the fourth quarter of 2019, compared to
RMB88.0 million and RMB917.7 million for the preceding quarter and
the fourth quarter of 2018, respectively. The effective tax rate
for the fourth quarter of 2019 was 22.1%, compared to 2.1% and
25.9% for the preceding quarter and the fourth quarter of 2018,
respectively. The effective tax rate represents certain estimates
by the Company regarding the tax obligations and benefits
applicable to it in each quarter.
Net Income and Non-GAAP Net Income[3]
Net income from continuing operations attributable to the
Company's shareholders for the fourth quarter of 2019 totaled
RMB3,053.7 million (US$438.6 million), compared to RMB4,134.2 million and RMB2,536.2 million for the preceding quarter and
the fourth quarter of 2018, respectively.
Non-GAAP net income from continuing operations attributable to
the Company's shareholders for the fourth quarter of 2019 totaled
RMB3,662.3 million (US$526.1 million), compared to RMB4,726.0 million and RMB3,181.2 million for the preceding quarter and
the fourth quarter of 2018, respectively.
NetEase reported basic and diluted net income from continuing
operations per ADS of US$3.40 and
US$3.36, respectively, for the fourth
quarter of 2019. The Company reported basic and diluted net income
from continuing operations per ADS of US$4.60 and US$4.56, respectively, for the preceding quarter,
and basic and diluted net income from continuing operations per ADS
of US$2.85 and US$2.83, respectively, for the fourth quarter of
2018.
Non-GAAP basic and diluted net income from continuing operations
per ADS were US$4.07 and US$4.03, respectively, for the fourth quarter of
2019, compared to non-GAAP basic and diluted net income from
continuing operations per ADS of US$5.26 and US$5.22, respectively, for the preceding quarter,
and non-GAAP basic and diluted net income from continuing
operations per ADS of US$3.57 and
US$3.55, respectively, for the fourth
quarter of 2018.
[3] The
Company has adjusted the gain from the disposal of its Kaola
e-commerce business in the third quarter of 2019 from continuing
operations to discontinued operations. This resulted in, among
other things, a decrease in "Other, net," "Income tax" and "Net
income from continuing operations attributable to the Company's
shareholders" for the third quarter of 2019. Please see the
footnote to the consolidated statements of income in this press
release for additional information.
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Fiscal Year 2019 Financial Results
Net Revenues
Net revenues for fiscal year 2019 were RMB59,241.1 million (US$8,509.5 million), compared to RMB51,178.6 million for fiscal year 2018.
Net revenues from online game services were RMB46,422.6 million (US$6,668.2 million) for fiscal year 2019,
compared to RMB40,190.1 million for
fiscal year 2018. Mobile games accounted for approximately 71.4% of
net revenues from online game services for fiscal year 2019,
compared to 71.0% for fiscal year 2018.
Net revenues from Youdao were RMB1,304.9
million (US$187.4 million) for
fiscal year 2019, compared to RMB731.6
million for fiscal year 2018.
Net revenues from innovative businesses and others were
RMB11,513.6 million (US$1,653.8 million) for fiscal year 2019,
compared to RMB10,256.9 million for
fiscal year 2018.
Gross Profit
Gross profit for fiscal year 2019 was RMB31,555.3 million (US$4,532.6 million), compared to RMB27,346.1 million for fiscal year 2018.
The year-over-year increase in online game services gross profit
for fiscal year 2019 was primarily attributable to increased
revenue contribution from mobile games such as Life-After,
Invincible and Identity V.
The year-over-year increase in Youdao gross profit for fiscal
year 2019 was primarily attributable to the rapid development of
its learning services and products.
The year-over-year increase in innovative businesses and others
gross profit for fiscal year 2019 was primarily due to increased
net revenues from NetEase Cloud Music, CC live-streaming and
Yanxuan, as well as improved cost control.
Operating Expenses
Total operating expenses for fiscal year 2019 were RMB17,764.6 million (US$2,551.7 million), compared to RMB17,368.8 million for fiscal year 2018. The
year-over-year increase in total operating expenses for fiscal year
2019 was primarily due to increased research and development
investments and staff-related costs, partially offset by decreased
selling and marketing expenditures.
Other Income
Other income consisted of investment income/ (loss), interest
income, foreign exchange gains and losses and others. The
year-over-year increase in other income for fiscal year 2019 was
mainly due to fair value changes of equity investments in publicly
traded companies.
Income Taxes
The Company recorded a net income tax charge of RMB2,914.7 million (US$418.7 million) and RMB2,460.7 million for fiscal years 2019 and
2018, respectively. The effective tax rate was 17.8% for fiscal
year 2019, compared to 22.2% for fiscal year 2018. The lower
effective tax rate for fiscal year 2019 was mainly due to reduced
losses from certain subsidiaries of the Company.
Net Income and Non-GAAP Net Income
Net income from continuing operations attributable to the
Company's shareholders for fiscal year 2019 totaled RMB13,275.0 million (US$1,906.8 million), compared to RMB8,291.1 million for fiscal year 2018.
Non-GAAP net income from continuing operations attributable to
the Company's shareholders for fiscal year 2019 totaled
RMB15,662.7 million (US$2,249.8 million), compared to RMB10,761.3 million for fiscal year 2018.
NetEase reported basic and diluted net income from continuing
operations per ADS of US$14.80 and
US$14.67, respectively, for fiscal
year 2019, and basic and diluted net income from continuing
operations per ADS of US$9.20 and
US$9.15, respectively, for fiscal
year 2018.
Non-GAAP basic and diluted net income from continuing operations
per ADS were US$17.46 and
US$17.31, respectively, for fiscal
year 2019, compared to non-GAAP basic and diluted net income from
continuing operations per ADS of US$11.94 and US$11.87, respectively, for fiscal year 2018.
Quarterly Dividend
The board of directors has approved a dividend of US$1.02 per ADS for the fourth quarter of 2019,
which is expected to be paid on March 20,
2020 to shareholders of record as of the close of business
on March 13, 2020.
NetEase paid a dividend of US$7.59
per ADS for the third quarter of 2019 on December 13, 2019.
Starting in the second quarter of 2019, the Company's policy has
been to set quarterly dividends at an amount equivalent to
approximately 20%-30% of the Company's anticipated net income after
tax in each fiscal quarter. The determination to make dividend
distributions and the amount of such distributions in any
particular quarter will be made at the discretion of the board of
directors and will be based upon the Company's operations and
earnings, cash flow, financial condition and other relevant
factors.
Other Information
As of December 31, 2019, the
Company's total cash and cash equivalents, current and non-current
time deposits and short-term investments balance totaled
RMB74,406.0 million (US$10,687.8 million), compared to RMB49,652.5 million as of December 31, 2018. Cash flow generated from
continuing operating activities was RMB16,911.0 million (US$2,429.1 million) for fiscal year 2019,
compared to RMB14,659.8 million for
fiscal year 2018.
Share Repurchase/ Purchase Program
On November 14, 2018, 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, 2018. As of November 15,
2019, the last day of such program, approximately 1,000 ADSs
had been repurchased under this program.
On November 20, 2019, the Company
announced that its board of directors had approved a share purchase program of up
to US$20.0 million of Youdao's
outstanding ADSs for a period not to exceed 12 months beginning on
November 25, 2019. Under the terms of
this program, NetEase may purchase Youdao's ADSs in open-market
transactions on the New York Stock Exchange. As of December 31, 2019, approximately 50,000 ADSs had
been purchased under this program.
On February 26, 2020, the Company
announced that its board of directors had approved a share
repurchase program of up to US$1.0
billion of the Company's outstanding ADSs for a period not
to exceed 12 months beginning on March 2,
2020. Under the terms of this program, NetEase may
repurchase its issued and outstanding ADSs in open-market
transactions on the NASDAQ Global Select Market.
For both of the above-mentioned current programs, it is expected
that the timing and dollar amount of purchase transactions will be
in accordance with the Securities and Exchange Commission (SEC)
Rule 10b-18 requirements and such
purchases may be affected pursuant to a plan in conformity with SEC
Rule 10b5-1. The extent to which NetEase repurchases its ADSs or
purchases Youdao's ADSs will depend upon a variety of factors,
including market conditions. These programs may be suspended or
discontinued at any time.
** The United States dollar
(US$) 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$1.00 = RMB 6.9618 on December 31,
2019 as set forth in the H.10 statistical release of the
U.S. Federal Reserve Board. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at that
rate on December 31, 2019, or at any
other certain date. The percentages stated are calculated based on
RMB.
Change in Segment Reporting
Effective in the third quarter of 2019, the Company changed its
segment disclosure to add the financial results of its certain
advertising services and Yanxuan into innovative businesses
and others in light of the relatively small revenue contribution
from those businesses to the Company's total consolidated net
revenues in 2019. The Company sold its Kaola e-commerce
business in September 2019. In
addition, the Company has commenced separately reporting the
results of its majority-controlled subsidiary Youdao, Inc. which
completed its initial public offering and listing on the New York
Stock Exchange in October 2019. As a
result, since the third quarter of 2019 the Company has reported
the following segments: online game services, Youdao and innovative
businesses and others. The Company retrospectively revised prior
period segment information to conform to current period
presentation. 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.
Impact of the Recently Adopted Major Accounting
Pronouncements
In February 2016, the FASB issued
ASU 2016-02 "Leases" as amended, which generally requires lessees
to recognize operating and financing lease liabilities and
corresponding right-of-use assets on the balance sheet and to
provide enhanced disclosures surrounding the amount, timing and
uncertainty of cash flows arising from leasing arrangements. The
Company adopted the new standard effective January 1, 2019 on a modified retrospective basis
and did not restate comparative periods. The Company recognized
approximately RMB577.0 million as
total right-of-use assets as well as total lease liabilities for
the operating leases on its consolidated balance sheet as of
January 1, 2019, excluding the impact
from held-for-sale businesses. The Company recognized RMB463.7 million and RMB471.4 million as total right-of-use assets and
total lease liabilities, respectively, for the operating leases on
its consolidated balance sheet as of December 31, 2019. Right-of-use assets are
included in other long-term assets, and lease liabilities are
included in accrual liabilities and other payables and other
long-term payables, respectively based on payment terms on the
consolidated balance sheet. Other than the foregoing, the Company
does not expect the new standard to have a material impact on the
net assets of the Company's consolidated financial statements.
Notes to Unaudited Financial Information
The unaudited financial information disclosed in this press
release is preliminary. The audit of the financial statements and
related notes to be included in the Company's annual report on Form
20-F for the year ended December 31,
2019 is still in progress. In addition, because an audit of
the Company's internal controls over financial reporting in
connection with section 404 of the Sarbanes-Oxley Act of 2002 has
not yet been completed, the Company makes no representation as to
the effectiveness of those internal controls as of the end of
fiscal year 2019.
Adjustments to the financial statements may be identified when
the audit work is completed, which could result in significant
differences between the Company's audited financial statements and
this preliminary unaudited financial information.
Conference Call
NetEase's management team will host a teleconference call with
simultaneous webcast at 9:00 p.m. Eastern
Time on Wednesday, February 26, 2020 (Beijing/Hong Kong Time: 10:00 a.m., Thursday,
February 27, 2020). NetEase's management will be on the call
to discuss the quarterly results and answer questions.
Interested parties may participate in the conference call by
dialing 1-929-477-0324 and providing conference ID: 3349954, 10-15
minutes prior to the initiation of the call. A replay of the call
will be available by dialing 1-719-457-0820 and entering passcode
3349954#. The replay will be available through March 11, 2020.
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 based in China dedicated
to providing premium online services centered around content,
community, communication and commerce. NetEase develops and
operates some of the most popular PC-client and mobile games in
China and has been expanding
rapidly into other international markets such as Japan and North
America in more recent years. In addition to its
self-developed game content, NetEase also operates some of the most
popular international online games in China by partnering with Blizzard
Entertainment, Mojang AB (a Microsoft subsidiary) and other global
game developers. NetEase also offers other innovative services,
including the intelligent learning services of its
majority-controlled subsidiary, Youdao, music streaming and its
private label e-commerce platform, Yanxuan. 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 within China or globally, 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 risk that Covid-19 or other health
risks in China or globally could
adversely affect the Company's operations or financial results; the
ability of NetEase to effectively market its games and other
services and achieve a positive return on its marketing
expenditures; the risk that changes in Chinese government
regulation of the market for online games, education products and
services and e-commerce may limit future growth of NetEase's
revenues or cause revenues to decline; the risk that NetEase may
not be able to continuously develop new and creative online
services or that NetEase will not be able to set, or follow in a
timely manner, trends in the market; the risk that the e-commerce
market or the internet advertising market in China will not grow and will remain subject to
intense competition; 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); 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 from continuing operations attributable to the
Company's shareholders and non-GAAP basic and diluted net income
from continuing operations 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 from continuing operations
attributable to the Company's shareholders as net income from
continuing operations attributable to the Company's shareholders
excluding share-based compensation expenses. Non-GAAP net income
from continuing operations 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 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 from continuing operations
attributable to the Company's shareholders is that it does not
reflect all items of expense/ income 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 from continuing operations 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 from continuing operations 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
netease@thepiacentegroup.com
Tel: (+1) 212-481-2050
NETEASE,
INC.
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UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
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(RMB and USD in
thousands)
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December
31,
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December
31,
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December
31,
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2018
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2019
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2019
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RMB
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RMB
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USD (Note
1)
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Assets
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Current
assets:
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Cash and
cash equivalents
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4,977,432
|
|
3,246,373
|
|
466,312
|
Time
deposits
|
|
32,900,287
|
|
53,487,075
|
|
7,682,937
|
Restricted cash
|
|
4,692,050
|
|
3,150,354
|
|
452,520
|
Accounts
receivable, net
|
|
4,002,487
|
|
4,169,358
|
|
598,891
|
Inventories, net
|
|
1,065,615
|
|
650,557
|
|
93,447
|
Prepayments and other current assets
|
|
3,925,205
|
|
4,817,422
|
|
691,979
|
Short-term investments
|
|
11,674,775
|
|
15,312,595
|
|
2,199,517
|
Assets
held for sale
|
|
5,477,869
|
|
271,278
|
|
38,967
|
Total current
assets
|
|
68,715,720
|
|
85,105,012
|
|
12,224,570
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
Property, equipment and software, net
|
|
4,672,079
|
|
4,621,712
|
|
663,867
|
Land use
right, net
|
|
3,271,512
|
|
3,707,179
|
|
532,503
|
Deferred
tax assets
|
|
1,064,295
|
|
903,904
|
|
129,838
|
Time
deposits
|
|
100,000
|
|
2,360,000
|
|
338,993
|
Other
long-term assets
|
|
8,175,177
|
|
15,424,166
|
|
2,215,543
|
Assets
held for sale
|
|
969,145
|
|
2,398
|
|
344
|
Total non-current
assets
|
|
18,252,208
|
|
27,019,359
|
|
3,881,088
|
Total
assets
|
|
86,967,928
|
|
112,124,371
|
|
16,105,658
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
1,201,210
|
|
1,212,303
|
|
174,136
|
Salary
and welfare payables
|
|
2,799,212
|
|
2,957,360
|
|
424,798
|
Taxes
payable
|
|
2,260,646
|
|
3,156,513
|
|
453,405
|
Short-term loans
|
|
13,658,554
|
|
16,828,226
|
|
2,417,223
|
Deferred
revenue
|
|
7,718,485
|
|
8,602,227
|
|
1,235,633
|
Accrued
liabilities and other payables
|
|
5,005,190
|
|
5,484,228
|
|
787,760
|
Liabilites held for sale
|
|
2,465,713
|
|
2,156
|
|
310
|
Total current
liabilities
|
|
35,109,010
|
|
38,243,013
|
|
5,493,265
|
|
|
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
392,598
|
|
382,030
|
|
54,875
|
Other
long-term payable
|
|
48,921
|
|
456,912
|
|
65,631
|
Liabilites held for sale
|
|
5,818
|
|
961
|
|
138
|
Total non-current
liabilities
|
|
447,337
|
|
839,903
|
|
120,644
|
Total
liabilities
|
|
35,556,347
|
|
39,082,916
|
|
5,613,909
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
5,385,736
|
|
10,448,600
|
|
1,500,847
|
|
|
|
|
|
|
|
Total NetEase, Inc.'s
equity
|
|
45,231,636
|
|
61,453,699
|
|
8,827,272
|
Noncontrolling
interests
|
|
794,209
|
|
1,139,156
|
|
163,630
|
Total shareholders'
equity
|
|
46,025,845
|
|
62,592,855
|
|
8,990,902
|
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interests and
shareholders'
equity
|
|
86,967,928
|
|
112,124,371
|
|
16,105,658
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
|
|
|
|
|
|
|
(in thousands,
except per share data or per ADS data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2018
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
14,405,268
|
|
14,635,690
|
|
15,734,804
|
|
2,260,163
|
|
51,178,575
|
|
59,241,145
|
|
8,509,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
(6,874,738)
|
|
(6,765,340)
|
|
(7,524,376)
|
|
(1,080,809)
|
|
(23,832,426)
|
|
(27,685,845)
|
|
(3,976,823)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
7,530,530
|
|
7,870,350
|
|
8,210,428
|
|
1,179,354
|
|
27,346,149
|
|
31,555,300
|
|
4,532,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(1,603,137)
|
|
(1,619,531)
|
|
(2,153,743)
|
|
(309,366)
|
|
(6,911,710)
|
|
(6,221,127)
|
|
(893,609)
|
General and
administrative expenses
|
|
(821,925)
|
|
(753,794)
|
|
(812,754)
|
|
(116,745)
|
|
(3,078,635)
|
|
(3,130,298)
|
|
(449,639)
|
Research and
development expenses
|
|
(2,030,323)
|
|
(2,162,254)
|
|
(2,267,488)
|
|
(325,704)
|
|
(7,378,460)
|
|
(8,413,224)
|
|
(1,208,484)
|
Total operating
expenses
|
|
(4,455,385)
|
|
(4,535,579)
|
|
(5,233,985)
|
|
(751,815)
|
|
(17,368,805)
|
|
(17,764,649)
|
|
(2,551,732)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
3,075,145
|
|
3,334,771
|
|
2,976,443
|
|
427,539
|
|
9,977,344
|
|
13,790,651
|
|
1,980,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income/
(loss), net
|
|
46,366
|
|
394,907
|
|
731,447
|
|
105,066
|
|
(22,383)
|
|
1,306,320
|
|
187,641
|
Interest income,
net
|
|
166,291
|
|
184,795
|
|
279,546
|
|
40,154
|
|
586,671
|
|
821,774
|
|
118,040
|
Exchange (losses)/
gains, net
|
|
(15,906)
|
|
120,562
|
|
(128,522)
|
|
(18,461)
|
|
(51,799)
|
|
25,166
|
|
3,615
|
Other, net
|
|
272,948
|
|
214,847
|
|
109,385
|
|
15,712
|
|
586,916
|
|
439,422
|
|
63,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
tax
|
|
3,544,844
|
|
4,249,882
|
|
3,968,299
|
|
570,010
|
|
11,076,749
|
|
16,383,333
|
|
2,353,318
|
Income tax
|
|
(917,654)
|
|
(87,957)
|
|
(876,329)
|
|
(125,877)
|
|
(2,460,650)
|
|
(2,914,726)
|
|
(418,674)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income from
continuing operations
|
|
2,627,190
|
|
4,161,925
|
|
3,091,970
|
|
444,133
|
|
8,616,099
|
|
13,468,607
|
|
1,934,644
|
Net (loss)/ income
from discontinued operations
|
|
(838,492)
|
|
8,596,089
|
|
-
|
|
-
|
|
(2,138,682)
|
|
7,962,519
|
|
1,143,744
|
Net
income
|
|
1,788,698
|
|
12,758,014
|
|
3,091,970
|
|
444,133
|
|
6,477,417
|
|
21,431,126
|
|
3,078,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deemed dividends
attributable to redeemable
noncontrolling interests
|
|
(54,604)
|
|
(70,124)
|
|
(59,588)
|
|
(8,559)
|
|
(248,098)
|
|
(271,543)
|
|
(39,005)
|
Net (income)/ loss
attributable to noncontrolling
interests
|
|
(36,395)
|
|
42,409
|
|
21,350
|
|
3,067
|
|
(76,912)
|
|
77,933
|
|
11,194
|
Net income
attributable to the Company's
shareholders
|
|
1,697,699
|
|
12,730,299
|
|
3,053,732
|
|
438,641
|
|
6,152,407
|
|
21,237,516
|
|
3,050,577
|
Including:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Net income from
continuing operations attributable to
the Company's shareholders
|
|
2,536,191
|
|
4,134,210
|
|
3,053,732
|
|
438,641
|
|
8,291,089
|
|
13,274,997
|
|
1,906,833
|
-Net (loss)/ income
from discontined operations
attributable to the Company's
shareholders
|
|
(838,492)
|
|
8,596,089
|
|
-
|
|
-
|
|
(2,138,682)
|
|
7,962,519
|
|
1,143,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income/
(loss) per share:
|
|
0.53
|
|
3.95
|
|
0.95
|
|
0.14
|
|
1.90
|
|
6.59
|
|
0.95
|
-Continuing
operations
|
|
0.79
|
|
1.28
|
|
0.95
|
|
0.14
|
|
2.56
|
|
4.12
|
|
0.59
|
-Discontinued
operations
|
|
(0.26)
|
|
2.67
|
|
-
|
|
-
|
|
(0.66)
|
|
2.47
|
|
0.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income/
(loss) per ADS:
|
|
13.27
|
|
98.66
|
|
23.65
|
|
3.40
|
|
47.54
|
|
164.86
|
|
23.68
|
-Continuing
operations
|
|
19.82
|
|
32.04
|
|
23.65
|
|
3.40
|
|
64.07
|
|
103.05
|
|
14.80
|
-Discontinued
operations
|
|
(6.55)
|
|
66.62
|
|
-
|
|
-
|
|
(16.53)
|
|
61.81
|
|
8.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net
income/ (loss) per share:
|
|
0.53
|
|
3.91
|
|
0.93
|
|
0.13
|
|
1.89
|
|
6.53
|
|
0.94
|
-Continuing
operations
|
|
0.79
|
|
1.27
|
|
0.93
|
|
0.13
|
|
2.55
|
|
4.08
|
|
0.59
|
-Discontinued
operations
|
|
(0.26)
|
|
2.64
|
|
-
|
|
-
|
|
(0.66)
|
|
2.45
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net
income/ (loss) per ADS:
|
|
13.18
|
|
97.80
|
|
23.37
|
|
3.36
|
|
47.26
|
|
163.37
|
|
23.47
|
-Continuing
operations
|
|
19.69
|
|
31.76
|
|
23.37
|
|
3.36
|
|
63.69
|
|
102.12
|
|
14.67
|
-Discontinued
operations
|
|
(6.51)
|
|
66.04
|
|
-
|
|
-
|
|
(16.43)
|
|
61.25
|
|
8.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of ordinary shares
outstanding, basic
|
|
3,199,277
|
|
3,225,704
|
|
3,228,387
|
|
3,228,387
|
|
3,235,324
|
|
3,220,473
|
|
3,220,473
|
Weighted average
number of ADS outstanding, basic
|
|
127,971
|
|
129,028
|
|
129,135
|
|
129,135
|
|
129,413
|
|
128,819
|
|
128,819
|
Weighted average
number of ordinary shares
outstanding, diluted
|
|
3,220,724
|
|
3,254,269
|
|
3,266,587
|
|
3,266,587
|
|
3,254,689
|
|
3,249,972
|
|
3,249,972
|
Weighted average
number of ADS outstanding, diluted
|
|
128,829
|
|
130,171
|
|
130,663
|
|
130,663
|
|
130,188
|
|
129,999
|
|
129,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: The Company has adjusted
the related gain from disposal of Kaola e-commerce business
in the third quarter of 2019 from continuing operations to
discontinued
operations. This resulted in a decrease in "Other, net" and "Income
tax", and an increase in "Net (loss)/ income from discontinued
operations", in the Company's
consolidated statements of income, amounting to RMB8,751.2 million
for the third quarter of 2019. Accordingly, basic and diluted net
income per ADS from continuing
operations decreased by RMB67.82 and RMB67.23, respectively, and
basic and diluted net income per ADS from discontinued operations
increased by the same amounts
for the third quarter of 2019. There is no impact on "Net income
attributable to the Company's shareholders".
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
(RMB and USD in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2018
|
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
1,788,698
|
|
|
12,758,014
|
|
3,091,970
|
|
444,133
|
|
6,477,417
|
|
21,431,126
|
|
3,078,388
|
Net loss/ (income) from
discontinued operations
|
|
838,492
|
|
|
(8,596,089)
|
|
-
|
|
-
|
|
2,138,682
|
|
(7,962,519)
|
|
(1,143,744)
|
Adjustments to reconcile net
income to net
cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
666,790
|
|
|
703,387
|
|
695,644
|
|
99,923
|
|
2,060,135
|
|
2,613,782
|
|
375,446
|
Fair
value changes and impairment losses of short-term
investments,
investments in associated companies,
other long-term
investments and other intangible assets,
net
|
|
(87,895)
|
|
|
(330,352)
|
|
(724,520)
|
|
(104,071)
|
|
(55,611)
|
|
(1,231,732)
|
|
(176,927)
|
Share-based compensation
cost
|
|
645,458
|
|
|
593,259
|
|
622,363
|
|
89,397
|
|
2,471,731
|
|
2,404,089
|
|
345,326
|
(Reversal of)/ allowance for
provision for doubtful debts
|
|
(2,090)
|
|
|
4,725
|
|
(17,843)
|
|
(2,563)
|
|
50,954
|
|
(28,583)
|
|
(4,106)
|
(Gains)/ losses on disposal of property, equipment and
software
|
|
(640)
|
|
|
(2,639)
|
|
3,571
|
|
513
|
|
(1,385)
|
|
5,122
|
|
736
|
Unrealized exchange losses/
(gains)
|
|
2,348
|
|
|
(111,807)
|
|
131,869
|
|
18,942
|
|
31,998
|
|
(9,981)
|
|
(1,434)
|
Gains on disposal of
long-term investments and businesses
|
|
(175,957)
|
|
|
(83,678)
|
|
(2,677)
|
|
(385)
|
|
(213,339)
|
|
(98,489)
|
|
(14,147)
|
Deferred income
taxes
|
|
(133,514)
|
|
|
(114,434)
|
|
(504,313)
|
|
(72,440)
|
|
(70,621)
|
|
150,629
|
|
21,637
|
Net
equity share of losses/ (gains) from associated
companies
|
|
17,643
|
|
|
(8,595)
|
|
(12,269)
|
|
(1,762)
|
|
98,301
|
|
(4,322)
|
|
(621)
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
340,955
|
|
|
(333,859)
|
|
545,607
|
|
78,372
|
|
(612,656)
|
|
(11,314)
|
|
(1,625)
|
Inventories
|
|
(129,588)
|
|
|
83,150
|
|
36,191
|
|
5,199
|
|
(81,440)
|
|
415,057
|
|
59,619
|
Land
use right/ prepayments of land use right
|
|
-
|
|
|
(418,876)
|
|
(45,295)
|
|
(6,506)
|
|
-
|
|
(464,171)
|
|
(66,674)
|
Other prepayments and current assets
|
|
105,360
|
|
|
(327,558)
|
|
(264,013)
|
|
(37,923)
|
|
(719,035)
|
|
(1,024,393)
|
|
(147,145)
|
Accounts payable
|
|
12,090
|
|
|
(105,131)
|
|
136,690
|
|
19,634
|
|
112,435
|
|
13,229
|
|
1,900
|
Salary and welfare payables
|
|
283,346
|
|
|
(447,025)
|
|
1,034,413
|
|
148,584
|
|
725,515
|
|
146,146
|
|
20,993
|
Taxes payable
|
|
429,145
|
|
|
(408,348)
|
|
168,247
|
|
24,167
|
|
685,024
|
|
(133,801)
|
|
(19,219)
|
Deferred revenue
|
|
542,501
|
|
|
816,599
|
|
406,160
|
|
58,341
|
|
1,757,874
|
|
883,742
|
|
126,942
|
Accrued liabilities and other payables
|
|
135,999
|
|
|
175,544
|
|
208,902
|
|
30,007
|
|
(196,136)
|
|
(182,646)
|
|
(26,235)
|
Net cash provided by
continuing operating activities
|
|
5,279,141
|
|
|
3,846,287
|
|
5,510,697
|
|
791,562
|
|
14,659,843
|
|
16,910,971
|
|
2,429,110
|
Net
cash provided by/ (used in) discontinued operating
activities
|
|
656,301
|
|
|
7,136
|
|
-
|
|
-
|
|
(1,243,966)
|
|
305,487
|
|
43,880
|
Net cash provided by
operating activities
|
|
5,935,442
|
|
|
3,853,423
|
|
5,510,697
|
|
791,562
|
|
13,415,877
|
|
17,216,458
|
|
2,472,990
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property,
equipment and software
|
|
(304,900)
|
|
|
(329,722)
|
|
(235,717)
|
|
(33,859)
|
|
(2,169,404)
|
|
(1,209,477)
|
|
(173,731)
|
Proceeds from sale of
property, equipment and software
|
|
922
|
|
|
5,190
|
|
49,693
|
|
7,138
|
|
6,688
|
|
60,601
|
|
8,705
|
Purchase of intangible assets, content and licensed
copyrights
|
|
(635,495)
|
|
|
(208,748)
|
|
(760,698)
|
|
(109,267)
|
|
(1,741,225)
|
|
(2,119,307)
|
|
(304,419)
|
Purchase of land use
right
|
|
(31,759)
|
|
|
-
|
|
-
|
|
-
|
|
(2,926,795)
|
|
-
|
|
-
|
Net change in short-term
investments with terms of three
months or
less
|
|
(2,619,634)
|
|
|
(683,304)
|
|
(1,802,689)
|
|
(258,940)
|
|
(1,172,326)
|
|
(1,023,165)
|
|
(146,969)
|
Purchase of short-term
investments with terms over three months
|
(2,940,000)
|
|
|
(4,997,000)
|
|
(3,373,000)
|
|
(484,501)
|
|
(13,393,000)
|
|
(22,370,000)
|
|
(3,213,249)
|
Proceeds from maturities of short-term investments with terms
over three
months
|
|
5,302,899
|
|
|
5,901,842
|
|
9,252,687
|
|
1,329,065
|
|
13,071,359
|
|
20,225,342
|
|
2,905,189
|
Investment in associated
companies and other long-term
investments
|
|
(393,801)
|
|
|
(711,229)
|
|
(231,714)
|
|
(33,284)
|
|
(3,023,491)
|
|
(1,562,188)
|
|
(224,394)
|
Proceeds from disposal of
long-term investments
|
|
-
|
|
|
127,332
|
|
28,289
|
|
4,064
|
|
-
|
|
406,702
|
|
58,419
|
Placement/rollover of
matured time deposits
|
|
(19,933,370)
|
|
|
(19,339,634)
|
|
(24,912,424)
|
|
(3,578,446)
|
|
(41,553,428)
|
|
(77,083,350)
|
|
(11,072,330)
|
Proceeds from maturities of
time deposits
|
|
13,349,755
|
|
|
11,869,243
|
|
7,964,392
|
|
1,144,013
|
|
39,924,525
|
|
54,381,647
|
|
7,811,435
|
Net change in other
assets
|
|
46,513
|
|
|
63,196
|
|
(17,229)
|
|
(2,475)
|
|
(133,039)
|
|
(42,345)
|
|
(6,082)
|
Amounts received from/(paid
to) disposed businesses
|
|
436,593
|
|
|
1,488,349
|
|
7,092,216
|
|
1,018,733
|
|
(1,889,560)
|
|
9,031,051
|
|
1,297,229
|
Net cash used in continuing
investing activities
|
|
(7,722,277)
|
|
|
(6,814,485)
|
|
(6,946,194)
|
|
(997,759)
|
|
(14,999,696)
|
|
(21,304,489)
|
|
(3,060,197)
|
Net cash (used in)/ provided
by discontinued investing activities
|
|
(509,944)
|
|
|
(264,897)
|
|
-
|
|
-
|
|
1,430,181
|
|
(832,252)
|
|
(119,546)
|
Net cash used in investing
activities
|
|
(8,232,221)
|
|
|
(7,079,382)
|
|
(6,946,194)
|
|
(997,759)
|
|
(13,569,515)
|
|
(22,136,741)
|
|
(3,179,743)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
(RMB and USD in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2018
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds of short-term bank
loans with terms over three months
|
|
25,000
|
|
58,840
|
|
358,372
|
|
51,477
|
|
34,256
|
|
730,087
|
|
104,870
|
Payment of short-term bank
loans with terms over three months
|
|
-
|
|
-
|
|
(296,823)
|
|
(42,636)
|
|
(18,761)
|
|
(296,823)
|
|
(42,636)
|
Net changes in short-term
loans with terms of three months or less
|
|
16,163
|
|
1,469,031
|
|
1,472,244
|
|
211,475
|
|
6,194,113
|
|
2,538,267
|
|
364,599
|
Capital contribution from noncontrolling interests
and
redeemable noncontrolling
interests shareholders, net
|
|
3,216,112
|
|
128,192
|
|
6,528,274
|
|
937,728
|
|
4,334,684
|
|
6,940,990
|
|
997,011
|
Cash (paid)/ refund received
for share repurchase
|
|
(61,574)
|
|
(7)
|
|
-
|
|
-
|
|
(7,516,679)
|
|
10,638
|
|
1,528
|
Dividends paid to
shareholders
|
|
(399,374)
|
|
(923,444)
|
|
(6,890,484)
|
|
(989,756)
|
|
(1,440,194)
|
|
(8,840,634)
|
|
(1,269,878)
|
Net cash provided by
financing activities
|
|
2,796,327
|
|
732,612
|
|
1,171,583
|
|
168,288
|
|
1,587,419
|
|
1,082,525
|
|
155,494
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
exchange rate changes on cash, cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and restricted cash held in
foreign currencies
|
|
(14,517)
|
|
38,196
|
|
(26,846)
|
|
(3,856)
|
|
81,511
|
|
29,080
|
|
4,177
|
Net increase/
(decrease) in cash, cash equivalents and restricted
cash
|
|
485,031
|
|
(2,455,151)
|
|
(290,760)
|
|
(41,765)
|
|
1,515,292
|
|
(3,808,678)
|
|
(547,082)
|
Cash, cash
equivalents and restricted cash,
at the beginning of the period
|
|
9,721,507
|
|
9,143,771
|
|
6,688,620
|
|
960,760
|
|
8,691,246
|
|
10,206,538
|
|
1,466,077
|
Cash, cash
equivalents and restricted cash, at end of the
period
|
|
10,206,538
|
|
6,688,620
|
|
6,397,860
|
|
918,995
|
|
10,206,538
|
|
6,397,860
|
|
918,995
|
Less: Cash,
cash equivalents and restricted cash of held for sale
|
|
537,056
|
|
14,693
|
|
1,133
|
|
163
|
|
537,056
|
|
1,133
|
|
163
|
Cash, cash
equivalents and restricted cash of continuing
operations at end of the period
|
|
9,669,482
|
|
6,673,927
|
|
6,396,727
|
|
918,832
|
|
9,669,482
|
|
6,396,727
|
|
918,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information of continuing
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income tax,
net
|
|
418,783
|
|
906,425
|
|
1,189,622
|
|
170,879
|
|
2,003,158
|
|
3,193,802
|
|
458,761
|
Cash paid for interest
expense
|
|
98,528
|
|
73,573
|
|
133,748
|
|
19,212
|
|
301,761
|
|
431,395
|
|
61,966
|
Supplemental
schedule of non-cash investing and financing
activities of continuing
opearations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset purchases financed by accounts payable and accrued
liabilities
|
|
351,610
|
|
292,528
|
|
304,944
|
|
43,802
|
|
351,610
|
|
304,944
|
|
43,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED SEGMENT
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
(RMB and USD in
thousands, except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2018
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game
services
|
|
11,019,553
|
|
11,534,763
|
|
11,604,332
|
|
1,666,858
|
|
40,190,057
|
|
46,422,640
|
|
6,668,195
|
Youdao
|
|
230,091
|
|
345,908
|
|
410,432
|
|
58,955
|
|
731,598
|
|
1,304,883
|
|
187,435
|
Innovative businesses
and
others
|
|
3,155,624
|
|
2,755,019
|
|
3,720,040
|
|
534,350
|
|
10,256,920
|
|
11,513,622
|
|
1,653,828
|
Total net
revenues
|
|
14,405,268
|
|
14,635,690
|
|
15,734,804
|
|
2,260,163
|
|
51,178,575
|
|
59,241,145
|
|
8,509,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game
services
|
|
(4,094,688)
|
|
(4,172,678)
|
|
(4,281,559)
|
|
(615,007)
|
|
(14,617,656)
|
|
(16,974,234)
|
|
(2,438,196)
|
Youdao
|
|
(161,810)
|
|
(256,674)
|
|
(288,002)
|
|
(41,369)
|
|
(515,133)
|
|
(934,261)
|
|
(134,198)
|
Innovative businesses
and
others
|
|
(2,618,240)
|
|
(2,335,988)
|
|
(2,954,815)
|
|
(424,433)
|
|
(8,699,637)
|
|
(9,777,350)
|
|
(1,404,429)
|
Total cost of
revenues
|
|
(6,874,738)
|
|
(6,765,340)
|
|
(7,524,376)
|
|
(1,080,809)
|
|
(23,832,426)
|
|
(27,685,845)
|
|
(3,976,823)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game
services
|
|
6,924,865
|
|
7,362,085
|
|
7,322,773
|
|
1,051,851
|
|
25,572,401
|
|
29,448,406
|
|
4,229,999
|
Youdao
|
|
68,281
|
|
89,234
|
|
122,430
|
|
17,586
|
|
216,465
|
|
370,622
|
|
53,237
|
Innovative businesses
and
others
|
|
537,384
|
|
419,031
|
|
765,225
|
|
109,917
|
|
1,557,283
|
|
1,736,272
|
|
249,399
|
Total gross
profit
|
|
7,530,530
|
|
7,870,350
|
|
8,210,428
|
|
1,179,354
|
|
27,346,149
|
|
31,555,300
|
|
4,532,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game
services
|
|
62.8%
|
|
63.8%
|
|
63.1%
|
|
63.1%
|
|
63.6%
|
|
63.4%
|
|
63.4%
|
Youdao
|
|
29.7%
|
|
25.8%
|
|
29.8%
|
|
29.8%
|
|
29.6%
|
|
28.4%
|
|
28.4%
|
Innovative businesses
and
others
|
|
17.0%
|
|
15.2%
|
|
20.6%
|
|
20.6%
|
|
15.2%
|
|
15.1%
|
|
15.1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 =
RMB 6.9618 on the last trading day of
December 2019 (December 31, 2019) as set forth in the H.10
statistical release of the U.S. Federal Reserve Board.
Note 2: Share-based compensation cost reported in the Company's
unaudited condensed consolidated statements of comprehensive income
is set out as follows in RMB and USD (in thousands):
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2018
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Share-based
compensation cost included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
204,776
|
|
180,990
|
|
191,470
|
|
27,503
|
|
757,341
|
|
758,810
|
|
108,996
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Selling and
marketing expenses
|
|
27,267
|
|
21,176
|
|
17,353
|
|
2,493
|
|
102,638
|
|
84,920
|
|
12,198
|
- General and
administrative expenses
|
|
196,703
|
|
200,394
|
|
211,506
|
|
30,381
|
|
787,200
|
|
797,120
|
|
114,499
|
- Research and
development expenses
|
|
216,712
|
|
190,699
|
|
202,034
|
|
29,020
|
|
824,552
|
|
763,239
|
|
109,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands,
except per share data or per ADS data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
Year
Ended
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
|
2018
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net income from
continuing operations attributable to
the Company's shareholders
|
|
2,536,191
|
|
4,134,210
|
|
3,053,732
|
|
438,641
|
|
8,291,089
|
|
13,274,997
|
|
1,906,833
|
Add: Share-based
compensation
|
|
645,038
|
|
591,769
|
|
608,598
|
|
87,420
|
|
2,470,179
|
|
2,387,675
|
|
342,968
|
Non-GAAP net income
from continuing operations
attributable to the Company's
shareholders
|
|
3,181,229
|
|
4,725,979
|
|
3,662,330
|
|
526,061
|
|
10,761,268
|
|
15,662,672
|
|
2,249,801
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP basic net
income from continuing
operations per share
|
|
0.99
|
|
1.47
|
|
1.13
|
|
0.16
|
|
3.33
|
|
4.86
|
|
0.70
|
Non-GAAP basic net
income from continuing
operations per ADS
|
|
24.86
|
|
36.63
|
|
28.36
|
|
4.07
|
|
83.15
|
|
121.59
|
|
17.46
|
Non-GAAP diluted net
income from continuing
operations per share
|
|
0.99
|
|
1.45
|
|
1.12
|
|
0.16
|
|
3.31
|
|
4.82
|
|
0.69
|
Non-GAAP diluted net
income from continuing
operations per ADS
|
|
24.69
|
|
36.31
|
|
28.03
|
|
4.03
|
|
82.66
|
|
120.48
|
|
17.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/netease-reports-fourth-quarter-and-fiscal-year-2019-unaudited-financial-results-301011653.html
SOURCE NetEase, Inc.