BEIJING, May 15, 2019 /PRNewswire/ -- NetEase, Inc.
(NASDAQ: NTES) ("NetEase" or the "Company"), one of China's leading internet and online game
services providers, today announced its unaudited financial results
for the first quarter ended March 31,
2019.
First Quarter 2019 Financial Highlights
- Net revenues were RMB18,356.2
million (US$2,735.2 million),
an increase of 29.5% compared to the first quarter of 2018.
- Online game services net revenues were RMB11,850.2 million (US$1,765.7 million), an increase of 35.3%
compared to the first quarter of 2018.
- E-commerce net revenues were RMB4,789.3
million (US$713.6 million), an
increase of 28.3% compared to the first quarter of 2018.
- Advertising services net revenues were RMB438.6 million (US$65.3
million), a decrease of 5.1% compared to the first quarter
of 2018.
- Innovative businesses and others net revenues were RMB1,278.1 million (US$190.4 million), an increase of 5.0% compared
to the first quarter of 2018.
- Gross profit was RMB8,091.0
million (US$1,205.6 million),
an increase of 35.9% compared to the first quarter of 2018.
- Total operating expenses were RMB4,681.6
million (US$697.6 million), a
decrease of 1.4% compared to the first quarter of 2018.
- Net income attributable to the Company's shareholders was
RMB2,382.1 million (US$354.9 million). Non-GAAP net income
attributable to the Company's shareholders was RMB3,017.0 million (US$449.5 million).[1]
- Diluted earnings per ADS were US$2.75; non-GAAP diluted earnings per ADS were
US$3.48.[1]
First Quarter 2019 and Recent Operational
Highlights
- Sustained steady performances of flagship titles, such as
Fantasy Westward Journey and New Westward Journey
Online series with new expansion packs released.
- Delivered strong performances from top titles including
Night Falls: Survival, Onmyoji and
Invincible.
- Expanded the registered users of Minecraft in
China to more than 200
million.
- Broadened footprint beyond Chinese mainland and deepened global
reach:
- Launched Night Falls: Survival and Cyber Hunter in
Japan in April, both of which
consecutively topped Japan's iOS
download chart for several days.
- Knives Out remained popular in Japan and topped the iOS grossing chart in
March and May.
- Identity V reached Japan's top 5 iOS grossing chart for the first
time in April.
- Furthered plans to launch Ancient Nocturne in Japan and Korea this year.
- Advanced pipeline with upcoming titles including
BuildTopia, Sky, Love is Justice, Fantasy
Westward Journey 3D, Xuan Yuan
Sword: Dragon upon the Cloud and Ages
of Isle.
- Improved efficiency in e-commerce business with operational
restructuring, which included revamping warehouse logistics
operations, product navigation and pricing.
[1] As
used in this press release, non-GAAP net income attributable to the
Company's shareholders and non-GAAP diluted earnings 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.
|
"We are pleased to begin the year with a strong quarter. Our
total net revenues grew robustly by 30% and our net income more
than tripled year-over-year," said Mr. William Ding, Chief Executive Officer and
Director of NetEase. "Online game services revenues continued to
grow steadily with the support of a diversified portfolio and
impressive performances from all of our leading titles. In the
spirit of Chinese New Year and Lantern Festival, we rolled out a
number of updates that celebrated our traditional culture and
resonated strongly with our game players. We also made further
progress on international fronts, with Night Falls: Survival
and Cyber Hunter making strong debuts in Japan. After a few years of hard work, the
NetEase brand is now widely recognized in not only MMORPG, but also
in a broad range of non-MMORPG categories, both in China and internationally.
"Our heightened emphasis on online games, e-commerce,
advertising, online education and music allows us to sharpen our
focus on areas where we see the most potential for sustainable,
long-term growth. During the first quarter, we made a series of
structural optimizations to hone these core growth segments. Thanks
to the effective execution of our teams, we are already seeing
early success with this strategy, which directly resulted in a
considerable increase in our profits in the first quarter. We
remain focused on improving efficiency and increasing our return on
investment across these primary business lines, where we can
continue to create additional value for our stakeholders and
partners," Mr. Ding concluded.
First Quarter 2019 Financial Results
Net Revenues
Net revenues for the first quarter of 2019 were RMB18,356.2 million (US$2,735.2 million), compared to RMB19,844.3 million and RMB14,173.0 million for the preceding quarter and
the first quarter of 2018, respectively.
Net revenues from online game services were RMB11,850.2 million (US$1,765.7 million) for the first quarter of
2019, compared to RMB11,019.6 million
and RMB8,761.2 million for the
preceding quarter and the first quarter of 2018, respectively.
Mobile games accounted for approximately 72.1% of net revenues from
online game services for the first quarter of 2019, compared to
69.7% and 71.8% for the preceding quarter and the first quarter of
2018, respectively.
Net revenues from e-commerce were RMB4,789.3 million (US$713.6 million) for the first quarter of 2019,
compared to RMB6,678.7 million and
RMB3,732.5 million for the preceding
quarter and the first quarter of 2018, respectively.
Net revenues from advertising services were RMB438.6 million (US$65.3
million) for the first quarter of 2019, compared to
RMB760.5 million and RMB462.0 million for the preceding quarter and
the first quarter of 2018, respectively. The top performing
advertising verticals in the first quarter of 2019 were real
estate, automobile and internet services sectors.
Net revenues from innovative businesses and others were
RMB1,278.1 million (US$190.4 million) for the first quarter of 2019,
compared to RMB1,385.5 million and
RMB1,217.3 million for the preceding
quarter and the first quarter of 2018, respectively.
Gross Profit/(Loss)
Gross profit for the first quarter of 2019 was RMB8,091.0 million (US$1,205.6 million), compared to RMB7,657.5 million and RMB5,953.6 million for the preceding quarter and
the first quarter of 2018, respectively.
The quarter-over-quarter increase in online game services gross
profit was primarily due to increased revenues from mobile games
such as Night Falls: Survival and Invincible. The
year-over-year increase in online game services gross profit was
primarily due to increased revenues
from mobile games such as Night Falls: Survival, Knives
Out and Identity V, as well as certain PC-client games
such as Justice.
The quarter-over-quarter increase in e-commerce gross profit was
primarily due to seasonality with larger-scale promotions and
certain sales discounts in the fourth quarter of 2018. The
year-over-year increase in e-commerce gross profit was primarily
due to the increased sales volume of Kaola and
Yanxuan as well as improved procurement and operation
processes.
The quarter-over-quarter decrease in advertising services gross
profit was primarily due to seasonality. The year-over-year
decrease in advertising services gross profit was primarily due to
decreased revenue contribution based on the evolving competitive
macro-environment, and increased expenses related to staff and
content purchases.
The quarter-over-quarter increase in innovative businesses and
others gross loss was primarily due to seasonality with lower revenues generated from Cloud
Music and NetEase CC, a live video streaming
platform, as well as higher copyright costs. The year-over-year
increase in innovative businesses and others gross loss was
primarily due to decreased revenue contribution from certain online
platform businesses, which have relatively higher gross margins,
and partially offset by improving economies of scale of Cloud
Music.
Gross Profit/ (Loss) Margin
Gross profit margin for online game services for the first
quarter of 2019 was 63.7%, compared to 62.8% and 62.1% for the
preceding quarter and the first quarter of 2018, respectively. The
quarter-over-quarter and year-over-year increases in gross profit
margin were mainly due to increased revenues while certain costs related to the
Company's online game services were fixed.
Gross profit margin for e-commerce for the first quarter of 2019
was 10.2%, compared to 4.5% and 9.5% for the preceding quarter and
the first quarter of 2018, respectively. The quarter-over-quarter
increase in gross profit margin was primarily due to seasonality
with larger-scale promotions and certain sales discounts in the
fourth quarter of 2018. The year-over-year increase in e-commerce
gross profit margin was primarily due to increased sales volume of
Kaola and Yanxuan as well as improved procurement and
operation processes.
Gross profit margin for advertising services for the first
quarter of 2019 was 49.5%, compared to 66.3% and 59.0% for the
preceding quarter and the first quarter of 2018, respectively. The
quarter-over-quarter decrease in advertising services gross profit
margin was primarily due to seasonality. The year-over-year
decrease in advertising services gross profit margin was primarily
due to decreased revenue contribution based on the evolving
competitive macro-environment, and increased expenses related to
staff and content purchases.
Gross loss margin for innovative businesses and others for the
first quarter of 2019 was 13.1%, compared to 5.2% and 9.9% for the
preceding quarter and the first quarter of 2018, respectively. The
quarter-over-quarter increase in gross loss margin was primarily
due to seasonality with lower
revenues generated from Cloud Music
and NetEase CC, as well as higher copyright costs. The
year-over-year increase in gross loss margin was primarily due to
decreased revenue contribution from certain online platform
businesses, which have relatively higher gross profit margins, and
partially offset by improving economies of scale of Cloud
Music.
Operating Expenses
Total operating expenses for the first quarter of 2019 were
RMB4,681.6 million (US$697.6 million), compared to RMB5,412.3 million and RMB4,746.6 million for the preceding quarter and
the first quarter of 2018, respectively. The quarter-over-quarter
decrease in operating expenses was mainly due to decreased
marketing expenditures related to online game services and
e-commerce, as well as decreased shipping and handling costs, and
partially offset by increased staff related costs. The
year-over-year decrease in operating expenses was mainly due to
decreased marketing expenditures related to online game services,
partially offset by increased staff related costs. Shipping and
handling costs included in selling and marketing expenses for the
first quarter of 2019 were RMB404.6
million (US$60.3 million),
compared to RMB572.5 million and
RMB325.8 million for the preceding
quarter and the first quarter of 2018,
respectively.
Income Taxes
The Company recorded a net income tax charge of RMB1,269.0 million (US$189.1 million) for the first quarter of 2019,
compared to RMB919.7 million and
RMB282.7 million for the preceding
quarter and the first quarter of 2018, respectively. The effective
tax rate for the first quarter of 2019 was 34.0%, compared to 34.0%
and 26.0% for the preceding quarter and the first quarter of 2018,
respectively.
Net Income After Tax
Net income attributable to the Company's shareholders for the
first quarter of 2019 totaled RMB2,382.1
million (US$354.9 million),
compared to RMB1,697.7 million and
RMB751.9 million for the preceding
quarter and the first quarter of 2018, respectively. Non-GAAP net
income attributable to the Company's shareholders for the first
quarter of 2019 totaled RMB3,017.0
million (US$449.5 million),
compared to RMB2,359.6 million and
RMB1,337.2 million for the preceding
quarter and the first quarter of 2018, respectively.
During the first quarter of 2019, the Company had a net foreign
exchange loss of RMB45.4 million
(US$6.8 million), compared to net
foreign exchange losses of RMB27.1
million and RMB375.1 million
for the preceding quarter and the first quarter of 2018,
respectively. The changes in foreign exchange 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, as well as certain foreign currency
transactions.
NetEase reported basic and diluted earnings per ADS of
US$2.77 and US$2.75, respectively, for the first quarter of
2019. The Company reported basic and diluted earnings per ADS of
US$1.98 and US$1.96, respectively, for the preceding quarter,
and basic and diluted earnings per ADS of US$0.85 each for the first quarter of 2018.
Non-GAAP basic and diluted earnings per ADS were US$3.51 and US$3.48, respectively, for the first quarter of
2019, compared to non-GAAP basic and diluted earnings per ADS of
US$2.75 and US$2.73, respectively, for the preceding quarter,
and non-GAAP basic and diluted earnings per ADS of US$1.52 and US$1.51, respectively, for the first quarter of
2018.
Quarterly Dividend
The board of directors has approved a dividend of US$0.69 per ADS for the first quarter of 2019,
which is expected to be paid on June 7,
2019 to shareholders of record as of the close of business
on May 31, 2019.
NetEase paid a dividend of US$0.48
per ADS for the fourth quarter of 2018 on March 15, 2019.
Under the Company's quarterly dividend policy announced on
May 13, 2014, quarterly dividends
will be set at an amount equivalent to approximately 25% of the
Company's anticipated net income after tax in each fiscal quarter.
The determination to make dividend distributions and the amount of
such distributions in any particular quarter will be made at the
discretion of the board of directors and will be based upon the
Company's operations and earnings, cash flow, financial condition
and other relevant factors.
Other Information
As of March 31, 2019, the
Company's total cash and cash equivalents, current and non-current
time deposits and short-term investments balance totaled
RMB51,853.1 million (US$7,726.4 million), compared to RMB50,064.3 million as of December 31, 2018. Cash flow generated from
operating activities was RMB3,386.6
million (US$504.6 million) for
the first quarter of 2019, compared to RMB5,935.4 million and RMB1,905.0 million for the preceding quarter and
the first quarter of 2018, respectively.
Share Repurchase Program
On November 15, 2017, the Company
announced that its board of directors had approved a share
repurchase program of up to US$1.0
billion of the Company's outstanding ADSs for a period not
to exceed 12 months beginning on November
16, 2017. On June 11, 2018,
the Company announced that its board of directors approved an
amendment to expand the authorized repurchase amount to
US$2.0 billion. As of November 15, 2018, the last day of such program,
the Company had repurchased approximately 4.6 million ADSs for
approximately US$1,178.5 million
under this program.
On November 14, 2018, the Company
also announced that its board of directors had approved a new share
repurchase program of up to US$1.0
billion of the Company's outstanding ADSs for a period not
to exceed 12 months beginning on November
16, 2018. As of March 31,
2019, no ADSs had been repurchased under this program.
Under the terms of the current approved program, NetEase may
repurchase its issued and outstanding ADSs in open-market
transactions on the NASDAQ Global Select Market. The timing and
dollar amount of repurchase transactions will be subject to the
Securities and Exchange Commission (SEC) Rule 10b-18 requirements. It is also expected that
such repurchases will be effected pursuant to a plan in conformity
with SEC Rule 10b5-1. The extent to which NetEase repurchases its
ADSs will depend upon a variety of factors, including market
conditions, regulatory requirements and other corporate
considerations, as determined by NetEase's management team. The
repurchase program may be suspended or discontinued at any
time.
** The United States dollar
(US$) amounts disclosed in this press release are presented solely
for the convenience of the reader. Translations of amounts from RMB
into United States dollars for the
convenience of the reader were calculated at the noon buying rate
of US$1.00 = RMB6.7112 on March 29,
2019 as set forth in the H.10 statistical release of the
U.S. Federal Reserve Board. No representation is made that the RMB
amounts could have been, or could be, converted into US$ at that
rate on March 29, 2019, or at any
other certain date. The percentages stated are calculated based on
RMB.
Change in Segment Reporting
Effective as of December 31, 2018,
the Company renamed its "e-mail and others" segment to "innovative
businesses and others" to better articulate the businesses included
in this segment, there's no change to the business mix included in
this segment. The Company now reports four reporting
segments: online game services, e-commerce, advertising services
and innovative businesses and others, and retrospectively revised
prior period segment information to conform to current period
presentation.
Impact of the Recently Adopted Major Accounting
Pronouncement
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 RMB861.5 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. The Company
recognized RMB747.4 million and
RMB763.2 million as total
right-of-use assets and total lease liabilities, respectively, for
the operating leases on its consolidated balance sheet as of
March 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.
Conference Call
NetEase's management team will host a teleconference call with
simultaneous webcast at 7:30 p.m. Eastern
Time on Wednesday, May 15, 2019 (Beijing/Hong Kong Time: 7:30 a.m., Thursday, May
16, 2019). 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 1-929-477-0448, 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 7691549#. The replay will be
available through May 29, 2019. This
call will be webcast live and the replay will be available for 12
months. Both will be available on NetEase's Investor Relations
website at http://ir.netease.com.
About NetEase, Inc.
NetEase, Inc. (NASDAQ: NTES) is a leading internet technology
company in China. Dedicated to
providing online services centered around content, community,
communication and commerce, NetEase develops and operates some of
China's most popular PC-client and
mobile games, e-commerce businesses and advertising services, as
well as a variety of other innovative businesses. 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 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 online
game, e-commerce and other innovative businesses; 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 attributable to the Company's shareholders and
non-GAAP basic and diluted earnings per ADS, as supplemental
metrics in reviewing and assessing its operating performance and
formulating its business plan. The presentation of non-GAAP
financial measures is not intended to be considered in isolation or
as a substitute for the financial information prepared and
presented in accordance with accounting principles generally
accepted in the United States of
America ("U.S. GAAP").
NetEase defines non-GAAP net income attributable to the
Company's shareholders as net income attributable to the Company's
shareholders excluding share-based compensation expenses. Non-GAAP
net income attributable to the Company's shareholders enables
NetEase's management to assess its operating results without
considering the impact of share-based compensation expenses, which
are non-cash charges. NetEase believes that these non-GAAP
financial measures provide useful information to investors in
understanding and evaluating the Company's current operating
performance and future prospects in the same manner as management
does, if they so choose. NetEase also believes that the use of this
non-GAAP financial measure facilitates investors' assessment of its
operating performance.
Non-GAAP financial measures are not defined under U.S. GAAP and
are not presented in accordance with U.S. GAAP. Non-GAAP financial
measures have limitations as analytical tools. One of the key
limitations of using non-GAAP net income attributable to the
Company's shareholders is that it does not reflect all items of
expense that affect our operations. Share-based compensation
expenses have been and may continue to be incurred in our business
and are not reflected in the presentation of non-GAAP net income
attributable to the Company's shareholders. In addition, the
non-GAAP financial measures NetEase uses may differ from the
non-GAAP measures used by other companies, including peer
companies, and therefore their comparability may be limited.
NetEase compensates for these limitations by reconciling
non-GAAP net income attributable to the Company's shareholders to
the nearest U.S. GAAP performance measure, all of which should be
considered when evaluating the Company's performance. See
"Reconciliation of GAAP and Non-GAAP Results" at the end of this
press release. NetEase encourages you to review its financial
information in its entirety and not rely on a single financial
measure.
Contact for Media and Investors:
Margaret Shi
NetEase, Inc.
ir@service.netease.com
Tel: (+86) 571-8985-3378
Brandi
Piacente
Investor Relations
brandi@corp.netease.com
Tel: (+1) 212-481-2050
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(RMB and USD in
thousands)
|
|
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
5,389,198
|
|
4,132,058
|
|
615,696
|
Time
deposits
|
|
32,900,287
|
|
33,252,706
|
|
4,954,808
|
Restricted cash
|
|
4,817,340
|
|
5,113,030
|
|
761,865
|
Accounts
receivable, net
|
|
4,288,500
|
|
5,070,886
|
|
755,586
|
Inventories,net
|
|
5,017,823
|
|
4,277,632
|
|
637,387
|
Prepayments and other current assets
|
|
4,627,797
|
|
5,382,188
|
|
801,970
|
Short-term investments
|
|
11,674,775
|
|
14,418,356
|
|
2,148,402
|
Total current
assets
|
|
68,715,720
|
|
71,646,856
|
|
10,675,714
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
Property, equipment and software, net
|
|
5,378,560
|
|
5,432,244
|
|
809,430
|
Land use
right, net
|
|
3,502,569
|
|
3,549,448
|
|
528,884
|
Deferred
tax assets
|
|
1,064,295
|
|
967,499
|
|
144,162
|
Time
deposits
|
|
100,000
|
|
50,000
|
|
7,450
|
Other
long-term assets
|
|
8,206,784
|
|
9,793,274
|
|
1,459,243
|
Total non-current
assets
|
|
18,252,208
|
|
19,792,465
|
|
2,949,169
|
Total
assets
|
|
86,967,928
|
|
91,439,321
|
|
13,624,883
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
2,384,818
|
|
2,949,296
|
|
439,459
|
Salary
and welfare payables
|
|
2,991,897
|
|
2,436,531
|
|
363,054
|
Taxes
payable
|
|
2,272,023
|
|
3,209,566
|
|
478,240
|
Short-term loans
|
|
13,658,554
|
|
14,134,554
|
|
2,106,114
|
Deferred
revenue
|
|
7,953,255
|
|
8,349,947
|
|
1,244,181
|
Accrued
liabilities and other payables
|
|
5,848,463
|
|
5,149,503
|
|
767,300
|
Total current
liabilities
|
|
35,109,010
|
|
36,229,397
|
|
5,398,348
|
|
|
|
|
|
|
|
Long-term
payable:
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
393,681
|
|
600,433
|
|
89,467
|
Other
long-term payable
|
|
53,656
|
|
503,178
|
|
74,976
|
Total
liabilities
|
|
35,556,347
|
|
37,333,008
|
|
5,562,791
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
5,385,736
|
|
5,526,052
|
|
823,407
|
|
|
|
|
|
|
|
Total NetEase, Inc.'s
equity
|
|
45,231,636
|
|
47,768,218
|
|
7,117,687
|
Noncontrolling
interests
|
|
794,209
|
|
812,043
|
|
120,998
|
Total shareholders'
equity
|
|
46,025,845
|
|
48,580,261
|
|
7,238,685
|
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling interests and
shareholders'
equity
|
|
86,967,928
|
|
91,439,321
|
|
13,624,883
|
|
|
|
|
|
|
|
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
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2018
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
14,172,990
|
|
19,844,275
|
|
18,356,157
|
|
2,735,152
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
(8,219,412)
|
|
(12,186,817)
|
|
(10,265,194)
|
|
(1,529,562)
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
5,953,578
|
|
7,657,458
|
|
8,090,963
|
|
1,205,590
|
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(2,490,868)
|
|
(2,405,349)
|
|
(1,695,392)
|
|
(252,621)
|
General and
administrative expenses
|
|
(796,820)
|
|
(851,573)
|
|
(820,120)
|
|
(122,202)
|
Research and
development expenses
|
|
(1,458,947)
|
|
(2,155,409)
|
|
(2,166,123)
|
|
(322,762)
|
Total operating
expenses
|
|
(4,746,635)
|
|
(5,412,331)
|
|
(4,681,635)
|
|
(697,585)
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
1,206,943
|
|
2,245,127
|
|
3,409,328
|
|
508,005
|
|
|
|
|
|
|
|
|
|
Other
income:
|
|
|
|
|
|
|
|
|
Investment income,
net
|
|
80,771
|
|
46,484
|
|
155,795
|
|
23,214
|
Interest income,
net
|
|
165,459
|
|
167,296
|
|
173,600
|
|
25,867
|
Exchange losses,
net
|
|
(375,094)
|
|
(27,103)
|
|
(45,394)
|
|
(6,764)
|
Other, net
|
|
9,416
|
|
276,568
|
|
38,904
|
|
5,797
|
|
|
|
|
|
|
|
|
|
Income before
tax
|
|
1,087,495
|
|
2,708,372
|
|
3,732,233
|
|
556,119
|
Income tax
|
|
(282,687)
|
|
(919,674)
|
|
(1,268,959)
|
|
(189,081)
|
|
|
|
|
|
|
|
|
|
Net income after
tax
|
|
804,808
|
|
1,788,698
|
|
2,463,274
|
|
367,038
|
Accretion and deemed
dividends in connection with
repurchase of redeemable noncontrolling
interests
|
|
(49,710)
|
|
(54,604)
|
|
(68,783)
|
|
(10,249)
|
Net income
attributable to noncontrolling interests
|
|
(3,199)
|
|
(36,395)
|
|
(12,373)
|
|
(1,844)
|
Net income
attributable to
the Company's shareholders
|
|
751,899
|
|
1,697,699
|
|
2,382,118
|
|
354,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
|
0.23
|
|
0.53
|
|
0.74
|
|
0.11
|
Basic earnings per
ADS
|
|
5.73
|
|
13.27
|
|
18.57
|
|
2.77
|
Diluted earnings per
share
|
|
0.23
|
|
0.53
|
|
0.74
|
|
0.11
|
Diluted earnings per
ADS
|
|
5.68
|
|
13.18
|
|
18.43
|
|
2.75
|
|
|
|
|
|
|
|
|
|
Weighted average
number of
ordinary shares outstanding, basic
|
|
3,281,948
|
|
3,199,277
|
|
3,206,194
|
|
3,206,194
|
Weighted average
number of
ADS outstanding, basic
|
|
131,278
|
|
127,971
|
|
128,248
|
|
128,248
|
Weighted average
number of
ordinary shares outstanding, diluted
|
|
3,308,240
|
|
3,220,724
|
|
3,231,321
|
|
3,231,321
|
Weighted average
number of
ADS outstanding, diluted
|
|
132,330
|
|
128,829
|
|
129,253
|
|
129,253
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(RMB and USD in
thousands)
|
|
|
|
Quarter
Ended
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2018
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
|
804,808
|
|
1,788,698
|
|
2,463,274
|
|
367,038
|
Adjustments to reconcile net
income to net
cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
366,436
|
|
676,020
|
|
587,342
|
|
87,517
|
Fair value changes and
impairment losses of short-term investments,
investments in
associated companies, other long-term investments
and other financial
instruments
|
|
(47,931)
|
|
(88,012)
|
|
(158,461)
|
|
(23,611)
|
Share-based compensation
cost
|
|
585,655
|
|
662,280
|
|
635,198
|
|
94,648
|
Allowance for/ (reversal of)
provision for doubtful debts
|
|
55,544
|
|
(2,090)
|
|
(18,319)
|
|
(2,730)
|
(Gains)/ losses on disposal
of property, equipment and software
|
|
(1,261)
|
|
(640)
|
|
2,738
|
|
408
|
Unrealized exchange
losses
|
|
394,651
|
|
1,675
|
|
46,028
|
|
6,858
|
Gains on disposal of
long-term investments, business and
subsidiaries
|
|
(37,382)
|
|
(175,957)
|
|
(11,978)
|
|
(1,785)
|
Deferred income
taxes
|
|
26,826
|
|
(133,369)
|
|
303,547
|
|
45,230
|
Net equity share of losses
from associated companies
|
|
10,960
|
|
17,643
|
|
17,483
|
|
2,605
|
Changes in operating assets
and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
(888,205)
|
|
283,044
|
|
(773,799)
|
|
(115,300)
|
Inventories
|
|
353,869
|
|
1,273,230
|
|
740,191
|
|
110,292
|
Prepayments and other current assets
|
|
(838,855)
|
|
209,737
|
|
(867,742)
|
|
(129,298)
|
Accounts payable
|
|
(22,254)
|
|
(188,464)
|
|
560,129
|
|
83,462
|
Salary and welfare payables
|
|
(230,401)
|
|
310,915
|
|
(555,379)
|
|
(82,754)
|
Taxes payable
|
|
492,999
|
|
430,123
|
|
937,352
|
|
139,670
|
Deferred revenue
|
|
935,171
|
|
593,199
|
|
396,692
|
|
59,109
|
Accrued liabilities and other payables
|
|
(55,653)
|
|
277,410
|
|
(917,722)
|
|
(136,744)
|
Net cash provided by operating activities
|
|
1,904,977
|
|
5,935,442
|
|
3,386,574
|
|
504,615
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property,
equipment and software
|
|
(670,133)
|
|
(412,766)
|
|
(422,648)
|
|
(62,977)
|
Proceeds from sale of
property, equipment and software
|
|
2,975
|
|
973
|
|
3,820
|
|
569
|
Purchase of intangible
assets, content and licensed copyrights
|
|
(401,295)
|
|
(635,495)
|
|
(851,560)
|
|
(126,886)
|
Purchase of land use
right
|
|
-
|
|
(31,759)
|
|
-
|
|
-
|
Net change in short-term
investments with terms of three
months or
less
|
|
(1,372,886)
|
|
(2,619,634)
|
|
(40,255)
|
|
(5,998)
|
Purchase of short-term
investments with terms over three months
|
|
(1,624,000)
|
|
(2,940,000)
|
|
(4,890,000)
|
|
(728,633)
|
Proceeds from maturities of
short-term investments with terms over
three
months
|
|
1,722,295
|
|
5,333,016
|
|
2,311,322
|
|
344,398
|
Placement/rollover of
matured time deposits
|
|
(5,910,677)
|
|
(19,933,370)
|
|
(16,596,540)
|
|
(2,472,962)
|
Proceeds from maturities of
time deposits
|
|
7,332,776
|
|
13,349,755
|
|
15,959,459
|
|
2,378,034
|
Investment in associated
companies and other long-term investments
|
|
(115,383)
|
|
(393,801)
|
|
(392,016)
|
|
(58,412)
|
Proceeds from disposal of
long-term investments and business
|
|
-
|
|
-
|
|
208,682
|
|
31,095
|
Net change in other
assets
|
|
(31,891)
|
|
50,860
|
|
(31,529)
|
|
(4,698)
|
Net cash used in investing activities
|
|
(1,068,219)
|
|
(8,232,221)
|
|
(4,741,265)
|
|
(706,470)
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
|
(RMB and USD in
thousands)
|
|
|
|
Quarter
Ended
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2018
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Proceeds of short-term bank
loans with terms over three months
|
|
9,256
|
|
25,000
|
|
15,000
|
|
2,235
|
Payment of short-term bank
loans with terms over three months
|
|
(9,505)
|
|
-
|
|
-
|
|
-
|
Net proceeds in short-term
loans with terms of three months or less
|
|
3,096,009
|
|
16,163
|
|
741,113
|
|
110,429
|
(Repurchase of)/ capital
contribution from noncontrolling interests and
redeemable noncontrolling
interests shareholders, net
|
|
(455,000)
|
|
3,216,112
|
|
68,611
|
|
10,223
|
Repurchase of
shares
|
|
(2,328,028)
|
|
(61,574)
|
|
-
|
|
-
|
Dividends paid to
shareholders
|
|
(315,511)
|
|
(399,374)
|
|
(413,589)
|
|
(61,627)
|
Net cash (used)/ provided in financing
activities
|
|
(2,779)
|
|
2,796,327
|
|
411,135
|
|
61,260
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash
equivalents
|
|
|
|
|
|
|
|
|
and restricted cash held in foreign currencies
|
|
(35,862)
|
|
(14,517)
|
|
(17,894)
|
|
(2,666)
|
Net increase/ (decrease) in cash, cash equivalents and
restricted cash
|
|
798,117
|
|
485,031
|
|
(961,450)
|
|
(143,261)
|
Cash, cash
equivalents and restricted cash,
beginning of the period
|
|
8,691,246
|
|
9,721,507
|
|
10,206,538
|
|
1,520,822
|
Cash, cash
equivalents and restricted cash, end of the
period
|
|
9,489,363
|
|
10,206,538
|
|
9,245,088
|
|
1,377,561
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for income tax,
net
|
|
451,043
|
|
419,555
|
|
537,825
|
|
80,138
|
Cash paid for interest
expense
|
|
39,736
|
|
98,528
|
|
108,664
|
|
16,191
|
Supplemental
schedule of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Fixed asset purchases
financed by accounts payable and accrued
liabilities
|
|
327,030
|
|
409,222
|
|
318,078
|
|
47,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2018
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
8,761,247
|
|
11,019,553
|
|
11,850,184
|
|
1,765,732
|
E-commerce
|
|
3,732,474
|
|
6,678,673
|
|
4,789,330
|
|
713,632
|
Advertising
services
|
|
462,017
|
|
760,538
|
|
438,569
|
|
65,349
|
Innovative businesses
and others
|
|
1,217,252
|
|
1,385,511
|
|
1,278,074
|
|
190,439
|
Total net
revenues
|
|
14,172,990
|
|
19,844,275
|
|
18,356,157
|
|
2,735,152
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
(3,316,189)
|
|
(4,094,688)
|
|
(4,299,345)
|
|
(640,622)
|
E-commerce
|
|
(3,376,328)
|
|
(6,378,827)
|
|
(4,299,159)
|
|
(640,595)
|
Advertising
services
|
|
(189,543)
|
|
(256,014)
|
|
(221,268)
|
|
(32,970)
|
Innovative businesses
and others
|
|
(1,337,352)
|
|
(1,457,288)
|
|
(1,445,422)
|
|
(215,375)
|
Total cost of
revenues
|
|
(8,219,412)
|
|
(12,186,817)
|
|
(10,265,194)
|
|
(1,529,562)
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss):
|
|
|
|
|
|
|
|
|
Online game
services
|
|
5,445,058
|
|
6,924,865
|
|
7,550,839
|
|
1,125,110
|
E-commerce
|
|
356,146
|
|
299,846
|
|
490,171
|
|
73,037
|
Advertising
services
|
|
272,474
|
|
504,524
|
|
217,301
|
|
32,379
|
Innovative businesses
and others
|
|
(120,100)
|
|
(71,777)
|
|
(167,348)
|
|
(24,936)
|
Total gross
profit
|
|
5,953,578
|
|
7,657,458
|
|
8,090,963
|
|
1,205,590
|
|
|
|
|
|
|
|
|
|
Gross profit/
(loss) margin:
|
|
|
|
|
|
|
|
|
Online game
services
|
|
62.1%
|
|
62.8%
|
|
63.7%
|
|
63.7%
|
E-commerce
|
|
9.5%
|
|
4.5%
|
|
10.2%
|
|
10.2%
|
Advertising
services
|
|
59.0%
|
|
66.3%
|
|
49.5%
|
|
49.5%
|
Innovative businesses
and others
|
|
(9.9%)
|
|
(5.2%)
|
|
(13.1%)
|
|
(13.1%)
|
|
|
|
|
|
|
|
|
|
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 =
RMB6.7112 on the last trading day of
March 2019 (March 29, 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
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2018
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Share-based
compensation cost included in:
|
|
|
|
|
|
|
|
|
Cost of
revenue
|
|
188,563
|
|
207,158
|
|
200,696
|
|
29,905
|
Operating
expenses
|
|
|
|
|
|
|
|
|
- Selling and
marketing expenses
|
|
28,725
|
|
31,819
|
|
28,852
|
|
4,299
|
- General and
administrative expenses
|
|
199,128
|
|
201,404
|
|
203,725
|
|
30,356
|
- Research and
development expenses
|
|
169,239
|
|
221,899
|
|
201,925
|
|
30,088
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
NETEASE,
INC.
|
UNAUDITED
RECONCILIATION OF GAAP AND NON-GAAP RESULTS
|
(RMB and USD in
thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
Ended
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2018
|
|
2018
|
|
2019
|
|
2019
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Net income
attributable to the Company's shareholders
|
|
751,899
|
|
1,697,699
|
|
2,382,118
|
|
354,945
|
Add: Share-based
compensation
|
|
585,321
|
|
661,859
|
|
634,837
|
|
94,594
|
Non-GAAP net income
attributable to
the Company's shareholders
|
|
1,337,220
|
|
2,359,558
|
|
3,016,955
|
|
449,539
|
|
|
|
|
|
|
|
|
|
Non-GAAP basic
earnings per share
|
|
0.41
|
|
0.74
|
|
0.94
|
|
0.14
|
Non-GAAP basic
earnings per ADS
|
|
10.19
|
|
18.44
|
|
23.52
|
|
3.51
|
Non-GAAP diluted
earnings per share
|
|
0.40
|
|
0.73
|
|
0.93
|
|
0.14
|
Non-GAAP diluted
earnings per ADS
|
|
10.11
|
|
18.32
|
|
23.34
|
|
3.48
|
|
|
|
|
|
|
|
|
|
The accompanying
notes are an integral part of this press release.
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/netease-reports-first-quarter-2019-unaudited-financial-results-300850684.html
SOURCE NetEase, Inc.