BEIJING, Feb. 20, 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 fourth quarter and fiscal year ended December 31, 2018.
Fourth Quarter 2018 Financial Highlights
- Net revenues[1] were RMB19,844.3 million (US$2,886.2
million), an increase of 35.8% compared with the fourth quarter of 2017.
- Online game services net revenues were RMB11,019.6 million (US$1,602.7
million), an increase of 37.7% compared with the fourth quarter of 2017.
- E-commerce net revenues were RMB6,678.7 million (US$971.4
million), an increase of 43.5% compared with the fourth quarter of 2017.
- Advertising services net revenues were RMB760.5 million (US$110.6
million), an increase of 3.3% compared with the fourth quarter of 2017.
- Innovative businesses and others[2] net revenues were RMB1,385.5 million
(US$201.5 million), an increase of 14.2% compared with the fourth quarter of 2017.
- Gross profit was RMB7,657.5 million (US$1,113.7 million), an
increase of 33.3% compared with the fourth quarter of 2017.
- Total operating expenses were RMB5,412.3 million (US$787.2
million), an increase of 25.3% compared with the fourth quarter of 2017.
- Net income attributable to the Company's shareholders was RMB1,697.7 million (US$246.9 million). Non-GAAP net income attributable to the Company's shareholders was RMB2,359.6 million (US$343.2 million).[3]
- Diluted earnings per ADS were US$1.92; non-GAAP diluted earnings per ADS were US$2.66.
[1] The Company adopted ASC 606 as of January 1, 2018 on a
modified retrospective basis. The adoption did not have a significant impact on the Company's operating results for the
fourth quarter of 2018 and comparable periods. See "Impact of The Recently Adopted Major Accounting Pronouncements"
in this press release.
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[2] 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. See "Change in Segment Reporting" in this press release.
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[3] As used in this press release, non-GAAP net income
attributable to the Company's shareholders is defined to exclude share-based compensation expenses. See "Unaudited
Reconciliation of GAAP and Non-GAAP Results" at the end of this press release.
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Fourth Quarter 2018 and Recent 2019 Operational Highlights
- Introduced exciting new mobile titles including:
- Night Falls: Survival, which topped the China's iOS download chart in November and
ranked third in China's iOS game grossing chart for November and December;
- Ink, Mountains and Mystery, with its stunning display of classical Chinese arts, reached No.1 on China's iOS download chart on January 1, 2019, the day of its launch.
- Expanded footprint beyond mainland China and deepened global reach:
- Maintained Knives Out's position as China's top grossing mobile game in overseas
markets for five consecutive months since August 2018;
- Launched titles overseas in January 2019 including: Night Falls: Survival in
Hong Kong, Macau and Taiwan
and QwQ in Japan and South Korea;
- Furthered collaboration with leading game studios worldwide, including a joint development agreement with Codemasters, a UK
game studio, as well as made a minority investment in Quantic Dream, a French game studio, and announced an investment in
U.S.-based Second Dinner, a studio founded by ex-Blizzard veterans.
- Fortified strong performance of flagship titles, such as Fantasy Westward Journey and New Westward Journey
Online series with new expansion packs released (for PC-client and mobile users), which further promoted user engagement
and contributed to steady sequential quarterly revenue growth.
- Renewed 11-year partnership with Blizzard Entertainment in mainland China, extending the
publishing agreement between the two companies until January 2023.
- Advanced pipeline with upcoming titles including Fantasy Westward Journey 3D, Xuanyuan Sword, Ages of
Isle and Pokémon Quest.
- Opened Kaola's first flagship store and first brick-and-mortar store for Yanxuan, both located in
Hangzhou's West Lake business district.
"We finished the year with total annual net revenues of RMB67 billion, a 24% increase from 2017,
driven by a diverse portfolio of online games as well as healthy growth in our e-commerce, advertising services and other
internet product and service offerings," said Mr. William Ding, Chief Executive Officer and
Director of NetEase. "2018 was a very fruitful year of diversification for our online games. While our flagship titles remain
stronger than ever, we also introduced a number of highly successful titles for PC-client and mobile platforms. These
new titles span a wide variety of genres and led to rapid growth in our user base, gaining us access to new demographics and
instilling confidence in our ability to branch out beyond MMORPG categories.
"Throughout the year we also made a number of advancements to better position us on the world's stage, most notably in
Japan. Our world-class R&D capabilities, particularly in the mobile arena, afford us an
exciting opportunity to appeal to a global audience. We plan to continue to invest in global talent, IP and collaboration with
other elite game developers worldwide to further this momentum.
"While online games remain the cornerstone of our business, we also see huge potential in e-commerce, music and online
education. These will be the primary focus of our business strategy in 2019. Our relentless drive to create premium content has
paved the way for our success, and our highly focused investments in carefully-chosen new business categories have allowed
NetEase to stand the test of time in a rapidly evolving internet industry. Two decades after our inception, our focus on quality
remains at the heart of our Company, propelling the unique value proposition we offer to our community and driving our
growing success," Mr. Ding concluded.
Fourth Quarter 2018 Financial Results
Net Revenues
Net revenues for the fourth quarter of 2018 were RMB19,844.3 million
(US$2,886.2 million), compared to RMB16,855.3 million and
RMB14,607.6 million for the preceding quarter and the fourth quarter of 2017,
respectively.
Net revenues from online games were RMB11,019.6 million (US$1,602.7 million) for the fourth quarter of 2018, compared to RMB10,348.4 million and RMB8,004.4 million for the preceding quarter
and the fourth quarter of 2017, respectively. Mobile games accounted for approximately 69.7% of net revenues from online games
for the fourth quarter of 2018, compared to 68.0% each for the preceding quarter and the fourth quarter of
2017.
Net revenues from e-commerce were RMB6,678.7 million (US$971.4 million) for the fourth quarter of 2018, compared to RMB4,458.8 million and RMB4,653.7 million for the preceding quarter and
the fourth quarter of 2017, respectively.
Net revenues from advertising services were RMB760.5 million (US$110.6 million) for the fourth quarter of 2018, compared to RMB644.2 million and RMB736.6 million for the preceding quarter and the
fourth quarter of 2017, respectively. The top performing advertising verticals in the fourth quarter of 2018 were automobile,
real estate and internet services sectors.
Net revenues from innovative businesses and others were RMB1,385.5 million (US$201.5 million) for the fourth quarter of 2018, compared to RMB1,403.8 million and RMB1,213.0 million for the preceding quarter and
the fourth quarter of 2017, respectively.
Gross Profit/ (Loss)
Gross profit for the fourth quarter of 2018 was RMB7,657.5 million (US$1,113.7 million), compared to RMB7,547.3 million and RMB5,744.6 million for the preceding quarter and the fourth quarter of 2017, respectively.
The quarter-over-quarter increase in online game services gross profit was primarily due to increased
revenue contribution from newer mobile games such as Night Falls: Survival and Ancient
Nocturne. The year-over-year increase in online game services gross profit was primarily due to increased
revenue contribution from mobile games including Knives Out, Chu Liu
Xiang and Identity V.
The quarter-over-quarter and year-over-year decreases in e-commerce gross profit were primarily due to the
larger-scale promotions and certain sales discounts in the fourth quarter of 2018.
The quarter-over-quarter increase in advertising services gross profit was primarily due to seasonality. The year-over-year
decrease in advertising services gross profit was primarily due to higher staff-related costs and content purchase
expenditures.
The quarter-over-quarter and year-over-year increases in innovative businesses and others gross loss were primarily due
to decreased revenue contribution from certain online platform businesses, which have relatively higher margins.
Gross Profit/ (Loss) Margin
Gross profit margin for online game services for the fourth quarter of 2018 was 62.8%, compared to 65.1% and 61.4% for the
preceding quarter and the fourth quarter of 2017, respectively. The quarter-over-quarter decrease in gross profit margin was
mainly due to increased revenue contribution from mobile games and licensed games, which have relatively lower profit margins
than self-developed PC-client games. The year-over-year increase in gross profit margin was mainly due to increased revenue while
certain costs related to the Company's online games segment were fixed.
Gross profit margin for e-commerce for the fourth quarter of 2018 was 4.5%, compared to 10.0% and 7.4% for the preceding
quarter and the fourth quarter of 2017, respectively. The quarter-over-quarter and year-over-year decreases in e-commerce gross
profit margin were primarily due to the larger-scale promotions and certain sales discounts in the fourth quarter of 2018.
Gross profit margin for advertising services for the fourth quarter of 2018 was 66.3%, compared to 63.6% and 71.2% for the
preceding quarter and the fourth quarter of 2017, respectively. The quarter-over-quarter increase 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 higher staff-related costs and content purchase expenditures.
Gross loss margin for innovative businesses and others for the fourth quarter of 2018 was 5.2%, compared to gross loss margin
of 3.3% each for the preceding quarter and the fourth quarter of 2017. The year-over-year and quarter-over-quarter increases
in gross loss margin were primarily due to decreased revenue contribution from certain online platform businesses which have
relatively higher gross profit margins.
Operating Expenses
Total operating expenses for the fourth quarter of 2018 were RMB5,412.3 million (US$787.2 million), compared to RMB5,440.1 million and RMB4,317.8 million for the preceding quarter and the fourth quarter of 2017, respectively. The year-over-year
increase in operating expenses was mainly due to increased
staff-related costs, research and development investments and shipping and handling costs. Shipping and handling costs included
in selling and marketing expenses for the fourth quarter of 2018 were RMB572.5 million
(US$83.3 million), compared to RMB385.5 million and RMB393.3 million for the preceding quarter and the fourth quarter of 2017, respectively.
Income Taxes
The Company recorded a net income tax charge of RMB919.7 million (US$133.8 million) for the fourth quarter of 2018, compared to RMB843.8 million
and RMB290.4 million for the preceding quarter and the fourth quarter of 2017, respectively. The
effective tax rate for the fourth quarter of 2018 was 34.0%, compared to 34.2% and 18.2% for the preceding quarter and the fourth
quarter of 2017, respectively. The higher effective tax rate for the fourth quarter of 2018 was due to the fact that certain
subsidiaries of the Company experienced higher operating losses compared with the fourth quarter of 2017.
Net Income After Tax
Net income attributable to the Company's shareholders for the fourth quarter of 2018 totaled RMB1,697.7
million (US$246.9 million), compared to RMB1,596.3 million and
RMB1,285.6 million for the preceding quarter and the fourth quarter of 2017, respectively. Non-GAAP
net income attributable to the Company's shareholders for the fourth quarter of 2018 totaled RMB2,359.6
million (US$343.2 million), compared to RMB2,258.8 million and
RMB1,878.9 million for the preceding quarter and the fourth quarter of 2017,
respectively.
During the fourth quarter of 2018, the Company had a net foreign exchange loss of RMB27.1
million (US$3.9 million), compared to a net foreign exchange gain of RMB56.1 million and a net foreign exchange loss of RMB159.1 million for the
preceding quarter and the fourth quarter of 2017, respectively. The changes in foreign exchange gains and losses were mainly
due to foreign currency transactions and unrealized exchange gains and losses arising from the Company's U.S. dollar-denominated
bank deposits and short-term loan balances as the exchange rate of the U.S. dollar against the RMB fluctuated over the
periods.
NetEase reported basic and diluted earnings per ADS of US$1.93 and US$1.92, respectively, for the fourth quarter of 2018. The Company reported basic and diluted earnings per ADS
of US$1.81 and US$1.80, respectively, for the preceding quarter, and
basic and diluted earnings per ADS of US$1.42 and US$1.41,
respectively, for the fourth quarter of 2017. Non-GAAP basic and diluted earnings per ADS were US$2.68 and US$2.66, respectively, for the fourth quarter of 2018, compared to
non-GAAP basic and diluted earnings per ADS of US$2.56 and US$2.55,
respectively, for the preceding quarter, and non-GAAP basic and diluted earnings per ADS of US$2.08
and US$2.06, respectively, for the fourth quarter of 2017.
Fiscal Year 2018 Financial Results
Net Revenues
Total net revenues for fiscal year 2018 were RMB67,156.5 million (US$9,767.5 million), compared to RMB54,102.0 million for fiscal year
2017.
Net revenues from online games were RMB40,190.1 million (US$5,845.4 million) for fiscal year 2018, compared to RMB36,281.6 million for fiscal year 2017. Mobile games accounted for approximately 71.0% of net revenues
from online games for fiscal year 2018, compared to 70.8% for fiscal year 2017.
Net revenues from e-commerce were RMB19,235.5 million (US$2,797.7
million) for fiscal year 2018, compared to RMB11,670.4 million for fiscal year 2017.
Net revenues from advertising services were RMB2,500.8 million (US$363.7 million) for fiscal year 2018, compared to RMB2,408.8 million
for fiscal year 2017. The top performing advertising verticals in 2018 were automobile, real estate and internet services
sectors.
Net revenues from innovative businesses and others were RMB5,230.1 million (US$760.7 million) for fiscal year 2018, compared to
RMB3,741.1 million for fiscal year 2017.
Gross Profit
Gross profit for fiscal year 2018 was RMB28,403.5 million (US$4,131.1 million), compared to RMB25,912.7 million for fiscal year
2017.
The increase in online game services gross profit in 2018 was primarily attributable to increased
revenue contribution from the Company's self-developed mobile games such as Knives Out and Chu Liu Xiang, as well as PC-client games such as Justice.
The increase in e-commerce gross profit in 2018 was primarily due to business development of
Kaola and Yanxuan.
The increase in advertising services gross profit in 2018 was due to NetEase's enhanced monetization efforts.
The decrease in innovative businesses and others gross profit in 2018 was primarily due to higher copyright costs related
to licensed music content and decreased revenue contribution from certain online platform businesses which have relatively higher
margins.
Operating Expenses
Total operating expenses for fiscal year 2018 were RMB20,510.6 million (US$2,983.1 million), compared to RMB13,758.9 million for fiscal year 2017.
The increase in operating expenses in 2018 was primarily due to increased selling and marketing expenses, research and
development investments and staff-related costs, as well as increased shipping and handling
costs. Shipping and handling costs included in selling and marketing expenses for fiscal year 2018 were RMB1,670.4 million (US$242.9 million), compared to RMB1,182.7 million for fiscal year 2017.
Income Taxes
The Company recorded a net income tax charge of RMB2,466.7 million (US$358.8 million) and RMB2,162.4 million for fiscal years 2018 and
2017, respectively. The effective tax rate was 27.6% for fiscal year 2018, compared to 16.6% for fiscal year 2017. The
higher effective tax rate for fiscal year 2018 was due to the fact that certain subsidiaries of the Company experienced higher
operating losses compared with fiscal year 2017.
Net Income After Tax
Net income attributable to the Company's shareholders for fiscal year 2018 totaled RMB6,152.4 million (US$894.8 million), compared to RMB10,707.9 million for fiscal year 2017. Non-GAAP net income attributable to the Company's
shareholders for fiscal year 2018 totaled RMB8,680.5 million (US$1,262.5 million), compared to RMB12,712.2 million for fiscal
year 2017.
For fiscal year 2018, the Company reported a net foreign exchange loss of RMB113.3 million
(US$16.5 million), compared to a net foreign exchange loss of RMB448.8 million for fiscal year 2017. The changes in foreign exchange gains and losses were mainly
due to foreign currency transactions and 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 these
years.
NetEase reported basic and diluted earnings per ADS of US$6.91 and US$6.87, respectively, for fiscal year 2018, and basic and diluted earnings per ADS of US$11.83 and US$11.74, respectively, for fiscal year 2017. Non-GAAP basic and diluted
earnings per ADS were US$9.76 and US$9.70, respectively, for
fiscal year 2018, compared to non-GAAP basic and diluted earnings per ADS of US$14.05 and
US$13.94, respectively, for fiscal year 2017.
Quarterly Dividend
The board of directors has approved a dividend of US$0.48 per ADS for the fourth quarter of
2018, which is expected to be paid on March 15, 2019 to shareholders of record as of the close of
business on March 8, 2019.
NetEase paid a dividend of US$0.38 per ADS for the fourth quarter of 2017 on March 2, 2018, a dividend of US$0.23 per ADS for the first quarter of 2018 on
June 8, 2018, a dividend of US$0.61 per ADS for the second quarter of
2018 on August 31, 2018 and a dividend of US$0.45 per ADS for the
third quarter of 2018 on December 7, 2018.
Under the Company's quarterly dividend policy announced on May 13, 2014, quarterly dividends
will be set at an amount equivalent to approximately 25% of the Company's anticipated net income after tax in each fiscal
quarter. The determination to make dividend distributions and the amount of such distributions in any particular quarter will be
made at the discretion of the board of directors and will be based upon the Company's operations and earnings, cash flow,
financial condition and other relevant factors.
Other Information
As of December 31, 2018, the Company's total cash and cash equivalents, current and non-current
time deposits and short-term investments balance totaled RMB50,064.3 million (US$7,281.5 million), compared to RMB43,210.2 million as of December 31, 2017. Cash flow generated from operating activities was RMB13,415.9
million (US$1,951.3 million) for fiscal year 2018, compared to RMB11,889.2 million for fiscal year 2017.
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$1.0 billion of the Company's outstanding ADSs for a period not
to exceed 12 months beginning on November 16, 2018. As of December 31,
2018, no ADS was repurchased under this program.
Under the terms of the current approved program, NetEase may repurchase its issued and outstanding ADSs in open-market
transactions on the NASDAQ Global Select Market. The timing and dollar amount of repurchase transactions will be subject to the
Securities and Exchange Commission (SEC) Rule 10b-18 requirements. It is also expected that such
repurchases will be effected pursuant to a plan in conformity with SEC Rule 10b5-1. The
extent to which NetEase repurchases its ADSs will depend upon a variety of factors, including market conditions, regulatory
requirements and other corporate considerations, as determined by NetEase's management team. The repurchase program may be
suspended or discontinued at any time.
** The United States dollar (US$) 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$1.00 =
RMB6.8755 on December 31, 2018 as set forth in the H.10 statistical
release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted
into US$ at that rate on December 31, 2018, or at any other certain date. The percentages stated
are calculated based on RMB.
Change in Segment Reporting
Effective as of December 31, 2017, the Company changed its segment disclosure to separately
report the financial results of its e-commerce business in light of the significant growth of the revenue contribution from
e-commerce to the Company's total consolidated net revenues in 2017. This segment primarily reflects the results of NetEase's two
e-commerce platforms, Kaola and Yanxuan, which were established in January 2015 and April 2016, respectively. In addition, 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. The changes in segment reporting align with the manner
in which the Company's chief operating decision maker ("CODM") currently receives and uses financial information to allocate
resources and evaluate the performance of reporting segments. The changes in segment presentation do
not affect consolidated balance sheets, consolidated statements of income or consolidated statements of cash
flows. The Company retrospectively revised prior period segment information to conform to current period presentation. The
Company now reports four reporting segments: online game services, e-commerce, advertising services and innovative businesses and
others.
Impact of the Recently Adopted Major Accounting Pronouncements
On January 1, 2018, the Company adopted Topic 606 "Revenue from Contracts with Customers"
using the modified-retrospective transition approach and recorded a reduction of its deferred revenue of approximately
RMB81.7 million and a net increase to its retained earnings of approximately RMB27.4 million (net of tax) as a result of estimating game point breakage. The adoption of Topic 606 did
not have a significant impact on the Company's operating results for fiscal year 2018 and
comparable periods.
On January 1, 2018, the Company adopted ASU No. 2016-01 "Financial Instruments-Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and Financial Liabilities", and
reclassified RMB38.2 million of accumulated other comprehensive income for the Company's
available-for-sale equity securities that existed as of December 31, 2017 into retained earnings
upon the adoption. In addition, the Company recorded net investment losses of RMB215.8 million
related to the equity investments with readily determinable fair value for fiscal year 2018. Given that there were no
material observable price changes in orderly transactions for the identical or similar investments of the same issuer, the
Company did not record any changes to the carrying value of equity investments without readily determinable fair value
for fiscal year 2018.
The Company also adopted ASU 2016-18 "Statement of Cash Flows (Topic 230): Restricted Cash" starting from the first quarter of
2018. Pursuant to the new guidance, the Company's cash, cash equivalents and restricted cash increased by an aggregate of
RMB393.8 million for fiscal year 2017, compared to the amounts
presented under previous guidance.
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,
2018 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 2018.
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 8:00 p.m.
Eastern Time on Wednesday, February 20, 2019 (Beijing/Hong Kong Time: 9:00 a.m., Thursday, February 21, 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 1-800-458-4121 (international: 1-929-477-0324), 10-15
minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-888-203-1112 (international:
1-719-457-0820), and entering passcode 9925506#. The replay will be available through March 6,
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, World of Warcraft®,
StarCraft® II, Hearthstone®, Diablo® III: Reaper of Souls™, Heroes
of the Storm®, Overwatch® or other games licensed by it for a period of
time or permanently due to possible governmental actions or the risk that such games will not be popular with game players in
China; the risk that changes in Chinese government regulation of the online game market and the
market for NetEase's e-commerce businesses may limit future growth of NetEase's revenues or cause revenues to decline;
competition in the online advertising business and the risk that investments by NetEase in its content and services may not
increase the appeal of the NetEase websites among internet users or result in increased advertising revenues; the risk that
NetEase may not be able to continuously develop new and creative online services, including its ability to maintain and enhance
the popularity of its online game and e-commerce 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.
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|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
2,764,140
|
|
5,389,198
|
|
783,827
|
Time deposits
|
|
30,603,369
|
|
32,900,287
|
|
4,785,148
|
Restricted cash
|
|
5,926,906
|
|
4,817,340
|
|
700,653
|
Accounts receivable, net
|
|
3,619,725
|
|
4,288,500
|
|
623,736
|
Inventories, net
|
|
5,474,929
|
|
5,017,823
|
|
729,812
|
Prepayments and other current assets
|
|
3,816,028
|
|
4,627,797
|
|
673,085
|
Short-term investments
|
|
9,742,663
|
|
11,674,775
|
|
1,698,026
|
Total current assets
|
|
61,947,760
|
|
68,715,720
|
|
9,994,287
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
Property, equipment and software, net
|
|
3,769,326
|
|
5,378,560
|
|
782,280
|
Land use right, net
|
|
593,279
|
|
3,502,569
|
|
509,428
|
Deferred tax assets
|
|
823,495
|
|
1,064,295
|
|
154,795
|
Time deposits
|
|
100,000
|
|
100,000
|
|
14,544
|
Restricted cash
|
|
200
|
|
-
|
|
-
|
Other long-term assets
|
|
3,797,355
|
|
8,206,784
|
|
1,193,627
|
Total non-current assets
|
|
9,083,655
|
|
18,252,208
|
|
2,654,674
|
Total assets
|
|
71,031,415
|
|
86,967,928
|
|
12,648,961
|
|
|
|
|
|
|
|
Liabilities, Redeemable Noncontrolling Interests and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
2,442,531
|
|
2,384,818
|
|
346,857
|
Salary and welfare payables
|
|
2,189,110
|
|
2,991,897
|
|
435,153
|
Taxes payable
|
|
1,564,692
|
|
2,272,023
|
|
330,452
|
Short-term loans
|
|
6,623,502
|
|
13,658,554
|
|
1,986,554
|
Deferred revenue
|
|
6,237,969
|
|
7,953,255
|
|
1,156,753
|
Accrued liabilities and other payables
|
|
4,692,310
|
|
5,848,463
|
|
850,624
|
Total current liabilities
|
|
23,750,114
|
|
35,109,010
|
|
5,106,393
|
|
|
|
|
|
|
|
Long-term payable:
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
213,215
|
|
393,681
|
|
57,259
|
Other long-term payable
|
|
18,250
|
|
53,656
|
|
7,804
|
Total liabilities
|
|
23,981,579
|
|
35,556,347
|
|
5,171,456
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
614,696
|
|
5,385,736
|
|
783,323
|
|
|
|
|
|
|
|
Total NetEase, Inc.'s equity
|
|
45,732,007
|
|
45,231,636
|
|
6,578,669
|
Noncontrolling interests
|
|
703,133
|
|
794,209
|
|
115,513
|
Total shareholders' equity
|
|
46,435,140
|
|
46,025,845
|
|
6,694,182
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and
shareholders' equity
|
|
71,031,415
|
|
86,967,928
|
|
12,648,961
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this press
release.
|
NETEASE, INC.
|
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
(RMB and USD in thousands, except per share data)
|
|
|
Quarter Ended
|
|
|
Year Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
December 31,
|
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
14,607,636
|
|
16,855,303
|
|
19,844,275
|
|
2,886,229
|
|
|
54,102,019
|
|
67,156,453
|
|
9,767,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
(8,863,025)
|
|
(9,307,955)
|
|
(12,186,817)
|
|
(1,772,499)
|
|
|
(28,189,326)
|
|
(38,752,957)
|
|
(5,636,384)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
5,744,611
|
|
7,547,348
|
|
7,657,458
|
|
1,113,730
|
|
|
25,912,693
|
|
28,403,496
|
|
4,131,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and marketing expenses
|
|
(2,397,214)
|
|
(2,357,010)
|
|
(2,405,349)
|
|
(349,844)
|
|
|
(6,957,596)
|
|
(9,526,470)
|
|
(1,385,568)
|
General and administrative expenses
|
|
(678,370)
|
|
(822,292)
|
|
(851,573)
|
|
(123,856)
|
|
|
(2,429,858)
|
|
(3,191,537)
|
|
(464,190)
|
Research and development expenses
|
|
(1,242,213)
|
|
(2,260,768)
|
|
(2,155,409)
|
|
(313,491)
|
|
|
(4,371,428)
|
|
(7,792,550)
|
|
(1,133,379)
|
Total operating expenses
|
|
(4,317,797)
|
|
(5,440,070)
|
|
(5,412,331)
|
|
(787,191)
|
|
|
(13,758,882)
|
|
(20,510,557)
|
|
(2,983,137)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
1,426,814
|
|
2,107,278
|
|
2,245,127
|
|
326,539
|
|
|
12,153,811
|
|
7,892,939
|
|
1,147,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income/ (loss), net
|
|
96,030
|
|
(25,401)
|
|
46,484
|
|
6,761
|
|
|
362,113
|
|
(22,266)
|
|
(3,238)
|
Interest income, net
|
|
190,733
|
|
113,118
|
|
167,296
|
|
24,332
|
|
|
667,323
|
|
587,518
|
|
85,451
|
Exchange (losses)/ gains, net
|
|
(159,106)
|
|
56,097
|
|
(27,103)
|
|
(3,942)
|
|
|
(448,827)
|
|
(113,323)
|
|
(16,482)
|
Other, net
|
|
37,814
|
|
213,564
|
|
276,568
|
|
40,225
|
|
|
277,080
|
|
599,230
|
|
87,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before tax
|
|
1,592,285
|
|
2,464,656
|
|
2,708,372
|
|
393,915
|
|
|
13,011,500
|
|
8,944,098
|
|
1,300,865
|
Income tax
|
|
(290,372)
|
|
(843,795)
|
|
(919,674)
|
|
(133,761)
|
|
|
(2,162,363)
|
|
(2,466,681)
|
|
(358,764)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income after tax
|
|
1,301,913
|
|
1,620,861
|
|
1,788,698
|
|
260,154
|
|
|
10,849,137
|
|
6,477,417
|
|
942,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion and deemed dividends in connection with
repurchase of redeemable noncontrolling interests
|
|
-
|
|
(18,086)
|
|
(54,604)
|
|
(7,942)
|
|
|
-
|
|
(248,098)
|
|
(36,084)
|
Net income attributable to noncontrolling interests
and redeemable noncontrolling interests
|
|
(16,300)
|
|
(6,482)
|
|
(36,395)
|
|
(5,293)
|
|
|
(141,198)
|
|
(76,912)
|
|
(11,186)
|
Net income attributable to
the Company's shareholders
|
|
1,285,613
|
|
1,596,293
|
|
1,697,699
|
|
246,919
|
|
|
10,707,939
|
|
6,152,407
|
|
894,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
0.39
|
|
0.50
|
|
0.53
|
|
0.08
|
|
|
3.25
|
|
1.90
|
|
0.28
|
Basic earnings per ADS
|
|
9.79
|
|
12.43
|
|
13.27
|
|
1.93
|
|
|
81.36
|
|
47.54
|
|
6.91
|
Diluted earnings per share
|
|
0.39
|
|
0.49
|
|
0.53
|
|
0.08
|
|
|
3.23
|
|
1.89
|
|
0.27
|
Diluted earnings per ADS
|
|
9.71
|
|
12.37
|
|
13.18
|
|
1.92
|
|
|
80.74
|
|
47.26
|
|
6.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
ordinary shares outstanding, basic
|
|
3,284,028
|
|
3,210,940
|
|
3,199,277
|
|
3,199,277
|
|
|
3,290,312
|
|
3,235,324
|
|
3,235,324
|
Weighted average number of
ADS outstanding, basic
|
|
131,361
|
|
128,438
|
|
127,971
|
|
127,971
|
|
|
131,612
|
|
129,413
|
|
129,413
|
Weighted average number of
ordinary shares outstanding, diluted
|
|
3,310,586
|
|
3,226,763
|
|
3,220,724
|
|
3,220,724
|
|
|
3,315,478
|
|
3,254,689
|
|
3,254,689
|
Weighted average number of
ADS outstanding, diluted
|
|
132,423
|
|
129,071
|
|
128,829
|
|
128,829
|
|
|
132,619
|
|
130,188
|
|
130,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
1,301,913
|
|
1,620,861
|
|
1,788,698
|
|
260,154
|
|
10,849,137
|
|
6,477,417
|
|
942,101
|
Adjustments to reconcile net income to net
cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
274,298
|
|
570,232
|
|
676,020
|
|
98,323
|
|
801,804
|
|
2,083,501
|
|
303,033
|
Fair value changes and impairment losses of
short-term investments,
investments in associated companies, other long-term investments
and other financial instruments
|
|
(67,546)
|
|
6,233
|
|
(88,012)
|
|
(12,801)
|
|
(331,256)
|
|
(55,728)
|
|
(8,105)
|
Share-based compensation cost
|
|
593,301
|
|
663,031
|
|
662,280
|
|
96,325
|
|
2,004,263
|
|
2,529,650
|
|
367,922
|
Allowance for/ (reversal of) provision for
doubtful debts
|
|
28,914
|
|
38,424
|
|
(2,090)
|
|
(304)
|
|
60,826
|
|
50,954
|
|
7,411
|
Losses/ (gains) on disposal of property, equipment
and software
|
|
5,118
|
|
768
|
|
(640)
|
|
(93)
|
|
5,072
|
|
(1,385)
|
|
(201)
|
Unrealized exchange losses/
(gains)
|
|
155,511
|
|
(116,521)
|
|
1,675
|
|
243
|
|
437,868
|
|
39,427
|
|
5,735
|
Gains on disposal of long-term investments,
business and
subsidiaries
|
|
-
|
|
-
|
|
(175,957)
|
|
(25,592)
|
|
(9,595)
|
|
(213,339)
|
|
(31,029)
|
Deferred income taxes
|
|
(83,865)
|
|
(194,858)
|
|
(133,369)
|
|
(19,398)
|
|
(438,043)
|
|
(69,899)
|
|
(10,166)
|
Net equity share of (gains)/ losses from
associated companies
|
|
(20,849)
|
|
21,949
|
|
17,643
|
|
2,566
|
|
12,232
|
|
98,301
|
|
14,297
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(391,603)
|
|
(729,660)
|
|
283,044
|
|
41,167
|
|
565,228
|
|
(710,932)
|
|
(103,401)
|
Inventories
|
|
(806,556)
|
|
(614,998)
|
|
1,273,230
|
|
185,184
|
|
(3,896,799)
|
|
457,053
|
|
66,476
|
Prepayments and other
current assets
|
|
151,224
|
|
(447,543)
|
|
209,737
|
|
30,505
|
|
(116,240)
|
|
(722,711)
|
|
(105,114)
|
Accounts
payable
|
|
403,973
|
|
420,882
|
|
(188,464)
|
|
(27,411)
|
|
1,100,787
|
|
(85,195)
|
|
(12,391)
|
Salary and welfare
payables
|
|
805,435
|
|
596,723
|
|
310,915
|
|
45,221
|
|
700,479
|
|
806,401
|
|
117,286
|
Taxes
payable
|
|
594,408
|
|
702,261
|
|
430,123
|
|
62,559
|
|
(155,904)
|
|
693,639
|
|
100,886
|
Deferred
revenue
|
|
73,352
|
|
1,012,281
|
|
593,199
|
|
86,277
|
|
(1,291,890)
|
|
1,804,579
|
|
262,465
|
Accrued liabilities and
other payables
|
|
864,426
|
|
67,466
|
|
277,410
|
|
40,349
|
|
1,591,269
|
|
234,144
|
|
34,055
|
Net cash provided by operating activities
|
|
3,881,454
|
|
3,617,531
|
|
5,935,442
|
|
863,274
|
|
11,889,238
|
|
13,415,877
|
|
1,951,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and
software
|
|
(572,115)
|
|
(670,337)
|
|
(412,766)
|
|
(60,034)
|
|
(1,842,933)
|
|
(2,528,149)
|
|
(367,704)
|
Proceeds from sale of property, equipment and
software
|
|
1,187
|
|
1,616
|
|
973
|
|
142
|
|
4,425
|
|
6,691
|
|
973
|
Purchase of intangible assets and licensed
copyrights
of music content
|
|
(351,378)
|
|
(287,867)
|
|
(389,870)
|
|
(56,704)
|
|
(674,803)
|
|
(1,349,905)
|
|
(196,336)
|
Purchase of land use right
|
|
-
|
|
(2,420,029)
|
|
(31,759)
|
|
(4,619)
|
|
(6,488)
|
|
(3,007,959)
|
|
(437,489)
|
Net change in short-term investments with terms of
three
months or less
|
|
(3,119,511)
|
|
865,824
|
|
(2,619,634)
|
|
(381,010)
|
|
(895,298)
|
|
(1,172,326)
|
|
(170,508)
|
Purchase of short-term
investments
|
|
(1,235,000)
|
|
(2,460,000)
|
|
(2,940,000)
|
|
(427,605)
|
|
(12,491,000)
|
|
(13,423,000)
|
|
(1,952,294)
|
Proceeds from maturities of short-term
investments
|
|
2,656,842
|
|
2,778,151
|
|
5,333,016
|
|
775,655
|
|
15,615,544
|
|
13,101,476
|
|
1,905,531
|
Investment in associated companies and long-term
investments
|
(572,842)
|
|
(1,031,594)
|
|
(393,801)
|
|
(57,276)
|
|
(1,136,481)
|
|
(3,023,491)
|
|
(439,749)
|
Proceeds from disposal of investment in associated
company
and long-term investments
|
|
-
|
|
-
|
|
-
|
|
-
|
|
350,418
|
|
-
|
|
-
|
Placement/rollover of matured time
deposits
|
|
(8,183,371)
|
|
(11,405,346)
|
|
(19,933,370)
|
|
(2,899,188)
|
|
(33,984,148)
|
|
(41,553,428)
|
|
(6,043,695)
|
Proceeds from maturities of time
deposits
|
|
7,409,214
|
|
14,306,245
|
|
13,349,755
|
|
1,941,641
|
|
22,429,597
|
|
39,924,525
|
|
5,806,781
|
Net change in other assets
|
|
(27,760)
|
|
(75,563)
|
|
(194,765)
|
|
(28,328)
|
|
(224,103)
|
|
(543,949)
|
|
(79,114)
|
Net cash used in investing activities
|
|
(3,994,734)
|
|
(398,900)
|
|
(8,232,221)
|
|
(1,197,326)
|
|
(12,855,270)
|
|
(13,569,515)
|
|
(1,973,604)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds in short-term loan with terms of
three months or less
|
|
974,570
|
|
265,422
|
|
41,163
|
|
5,987
|
|
3,104,970
|
|
6,209,608
|
|
903,150
|
Capital contribution from noncontrolling
interests and redeemable
noncontrolling interests shareholders, net
|
|
40,000
|
|
1,139,700
|
|
3,216,112
|
|
467,764
|
|
911,500
|
|
4,334,684
|
|
630,454
|
Repurchase of shares
|
|
(436,630)
|
|
(1,785,572)
|
|
(61,574)
|
|
(8,956)
|
|
(2,061,591)
|
|
(7,516,679)
|
|
(1,093,256)
|
Dividends paid to shareholders
|
|
(624,395)
|
|
(533,726)
|
|
(399,374)
|
|
(58,087)
|
|
(3,257,607)
|
|
(1,440,194)
|
|
(209,468)
|
Net cash (used)/ provided in financing activities
|
|
(46,455)
|
|
(914,176)
|
|
2,796,327
|
|
406,708
|
|
(1,302,728)
|
|
1,587,419
|
|
230,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
restricted cash held in foreign currencies
|
|
(11,646)
|
|
54,007
|
|
(14,517)
|
|
(2,111)
|
|
(12,766)
|
|
81,511
|
|
11,855
|
Net (decrease)/ increase in
cash, cash equivalents and
restricted
cash
|
|
(171,381)
|
|
2,358,462
|
|
485,031
|
|
70,545
|
|
(2,281,526)
|
|
1,515,292
|
|
220,391
|
Cash, cash equivalents and restricted cash,
beginning of the period *
|
|
8,862,627
|
|
7,363,045
|
|
9,721,507
|
|
1,413,935
|
|
10,972,772
|
|
8,691,246
|
|
1,264,089
|
Cash, cash equivalents and restricted cash, end of the period
*
|
8,691,246
|
|
9,721,507
|
|
10,206,538
|
|
1,484,480
|
|
8,691,246
|
|
10,206,538
|
|
1,484,480
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash (received)/ paid for income tax,
net
|
|
(238,447)
|
|
600,115
|
|
419,555
|
|
61,022
|
|
2,712,875
|
|
2,006,657
|
|
291,856
|
Supplemental schedule of non-cash investing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed asset purchases financed by
accounts payable and accrued liabilities
|
|
293,194
|
|
382,176
|
|
409,222
|
|
59,519
|
|
293,194
|
|
409,222
|
|
59,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*In 2018, the Company adopted the guidance of ASU 2016-18 issued by FASB in
November 2016, which requires that a statement of cash flows explain the change during the period in the total of
cash, cash
equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, the Company
included restricted cash with cash and cash equivalents when reconciling the beginning-of-period
and end-of-period total amounts shown in the statement of cash flows. Pursuant to the guidance, the Company
retropsectively restated the statement of cash flows in the comparative periods.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
Net revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game services
|
|
8,004,352
|
|
10,348,430
|
|
11,019,553
|
|
1,602,728
|
|
36,281,642
|
|
40,190,057
|
|
5,845,402
|
E-commerce
|
|
4,653,652
|
|
4,458,828
|
|
6,678,673
|
|
971,372
|
|
11,670,416
|
|
19,235,476
|
|
2,797,684
|
Advertising services
|
|
736,597
|
|
644,207
|
|
760,538
|
|
110,615
|
|
2,408,823
|
|
2,500,833
|
|
363,731
|
Innovative businesses and others
|
|
1,213,035
|
|
1,403,838
|
|
1,385,511
|
|
201,514
|
|
3,741,138
|
|
5,230,087
|
|
760,684
|
Total net revenues
|
|
14,607,636
|
|
16,855,303
|
|
19,844,275
|
|
2,886,229
|
|
54,102,019
|
|
67,156,453
|
|
9,767,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game services
|
|
(3,087,192)
|
|
(3,611,946)
|
|
(4,094,688)
|
|
(595,548)
|
|
(13,473,339)
|
|
(14,617,656)
|
|
(2,126,050)
|
E-commerce
|
|
(4,310,338)
|
|
(4,011,132)
|
|
(6,378,827)
|
|
(927,762)
|
|
(10,464,714)
|
|
(17,688,717)
|
|
(2,572,717)
|
Advertising services
|
|
(212,488)
|
|
(234,800)
|
|
(256,014)
|
|
(37,236)
|
|
(797,892)
|
|
(889,677)
|
|
(129,398)
|
Innovative businesses and others
|
|
(1,253,007)
|
|
(1,450,077)
|
|
(1,457,288)
|
|
(211,953)
|
|
(3,453,381)
|
|
(5,556,907)
|
|
(808,219)
|
Total cost of revenues
|
|
(8,863,025)
|
|
(9,307,955)
|
|
(12,186,817)
|
|
(1,772,499)
|
|
(28,189,326)
|
|
(38,752,957)
|
|
(5,636,384)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit/ (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game services
|
|
4,917,160
|
|
6,736,484
|
|
6,924,865
|
|
1,007,180
|
|
22,808,303
|
|
25,572,401
|
|
3,719,352
|
E-commerce
|
|
343,314
|
|
447,696
|
|
299,846
|
|
43,610
|
|
1,205,702
|
|
1,546,759
|
|
224,967
|
Advertising services
|
|
524,109
|
|
409,407
|
|
504,524
|
|
73,379
|
|
1,610,931
|
|
1,611,156
|
|
234,333
|
Innovative businesses and others
|
|
(39,972)
|
|
(46,239)
|
|
(71,777)
|
|
(10,439)
|
|
287,757
|
|
(326,820)
|
|
(47,535)
|
Total gross profit
|
|
5,744,611
|
|
7,547,348
|
|
7,657,458
|
|
1,113,730
|
|
25,912,693
|
|
28,403,496
|
|
4,131,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit/ (loss) margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Online game services
|
|
61.4%
|
|
65.1%
|
|
62.8%
|
|
62.8%
|
|
62.9%
|
|
63.6%
|
|
63.6%
|
E-commerce
|
|
7.4%
|
|
10.0%
|
|
4.5%
|
|
4.5%
|
|
10.3%
|
|
8.0%
|
|
8.0%
|
Advertising services
|
|
71.2%
|
|
63.6%
|
|
66.3%
|
|
66.3%
|
|
66.9%
|
|
64.4%
|
|
64.4%
|
Innovative businesses and others
|
|
(3.3%)
|
|
(3.3%)
|
|
(5.2%)
|
|
(5.2%)
|
|
7.7%
|
|
(6.2%)
|
|
(6.2%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 = RMB6.8755 on the last trading day of
December 2018 (December 31, 2018) as set forth in the H.10 statistical release of the U.S.
Federal Reserve Board.
Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive
income is set out as follows in RMB and USD (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
Year Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
Share-based compensation cost included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
248,433
|
|
198,269
|
|
207,158
|
|
30,130
|
|
820,281
|
|
764,972
|
|
111,261
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Selling and marketing expenses
|
|
29,925
|
|
26,779
|
|
31,819
|
|
4,628
|
|
95,382
|
|
116,611
|
|
16,960
|
- General and administrative expenses
|
|
165,827
|
|
206,483
|
|
201,404
|
|
29,293
|
|
581,337
|
|
804,565
|
|
117,019
|
- Research and development expenses
|
|
149,116
|
|
231,500
|
|
221,899
|
|
32,274
|
|
507,263
|
|
843,502
|
|
122,682
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Year Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
December 31,
|
|
|
2017
|
|
2018
|
|
2018
|
|
2018
|
|
2017
|
|
2018
|
|
2018
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
Net income attributable to the Company's shareholders
|
|
1,285,613
|
|
1,596,293
|
|
1,697,699
|
|
246,919
|
|
10,707,939
|
|
6,152,407
|
|
894,831
|
Add: Share-based compensation
|
|
593,301
|
|
662,551
|
|
661,859
|
|
96,263
|
|
2,004,263
|
|
2,528,098
|
|
367,697
|
Non-GAAP net income attributable to
the Company's shareholders
|
|
1,878,914
|
|
2,258,844
|
|
2,359,558
|
|
343,182
|
|
12,712,202
|
|
8,680,505
|
|
1,262,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP basic earnings per share
|
|
0.57
|
|
0.70
|
|
0.74
|
|
0.11
|
|
3.86
|
|
2.68
|
|
0.39
|
Non-GAAP basic earnings per ADS
|
|
14.30
|
|
17.59
|
|
18.44
|
|
2.68
|
|
96.59
|
|
67.08
|
|
9.76
|
Non-GAAP diluted earnings per share
|
|
0.57
|
|
0.70
|
|
0.73
|
|
0.11
|
|
3.83
|
|
2.67
|
|
0.39
|
Non-GAAP diluted earnings per ADS
|
|
14.19
|
|
17.50
|
|
18.32
|
|
2.66
|
|
95.86
|
|
66.68
|
|
9.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of this press
release.
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View original content:http://www.prnewswire.com/news-releases/netease-reports-fourth-quarter-and-fiscal-year-2018-unaudited-financial-results-300798790.html
SOURCE NetEase, Inc.