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NetEase Reports Third Quarter 2013 Unaudited Financial Results
"We continue to broaden the platforms for our traditional and mobile Internet product and service offerings," said Mr.
"Our self-developed traditional and mobile game offerings are resonating well with our audiences. During the third quarter, one of our most popular games, Fantasy Westward Journey II, delivered an excellent performance following the early July launch of its comprehensive upgrade, along with the game's accompanying pocket mobile version. This pocket mobile version has extended the reach of our game from the PC to mobile platforms, and user feedback continues to be favorable. In addition, the exciting new version we launched for Westward Journey Online II in September -now known as New Westward Journey Online II- was a significant upgrade for this classic game, which is stimulating players' enthusiasm and demonstrating positive user trends."
"Our newer games are also performing in-line with our expectations. The expansion pack launched in June for Heroes of Tang Dynasty II was well received by players and contributed to our revenue growth for the period. For our other game titles, we expect heightened interest in the coming periods as we introduced new expansion packs for Ghost II and
"The upcoming open beta test in mainland
"Turning to our portal, our advertising services revenue increased both sequentially and year-over-year with the largest revenue contributions coming from the automobile, Internet services and fast moving consumer goods sectors. We now have a number of fast growing mobile applications, which provide an important platform for delivery of our value-added services and advertisements. YiChat has been one of our most exciting new additions, and we are extremely pleased to have partnered with
"We see a great opportunity to integrate and expand our traditional online games and services with complementary mobile Internet offerings that broaden our customer base. We will continue to develop our mobile social networking platform and introduce new products and games to support this strategy. As a pioneer in
Third Quarter 2013 Financial Results
Revenues
Total revenues for the third quarter of 2013 were
Revenues from online games were
Revenues from advertising services were
Revenues from e-mail, wireless value-added services and others ("E-mail, WVAS and others") were
Sales Taxes
Total sales taxes for the third quarter of 2013 were
Gross Profit
Gross profit for the third quarter of 2013 was
The year-over-year increase in gross profit was primarily attributable to increased gross profit from
The year-over-year increase in online game revenues was primarily driven by increased revenues from the Company's self-developed games, primarily Fantasy Westward Journey II,
The year-over-year increase in advertising services revenues was primarily due to a rise in demand, mainly from sectors such as automobile, Internet services and real estate.
The quarter-over-quarter increase in gross profit was primarily attributable to increased gross profit from
Gross Profit (Loss) Margin
Gross profit margin for the online game business for the third quarter of 2013 was 79.7%, compared to 80.9% and 74.2% for the preceding quarter and the third quarter of 2012, respectively. The year-over-year increase in gross profit margin was mainly due to the changes in tax rules as mentioned above.
Gross profit margin for the advertising business for the third quarter of 2013 was 59.4%, compared to 55.5% and 36.2% for the preceding quarter and the third quarter of 2012, respectively. The increase in gross profit margin reflects the Company's ability to effectively scale its advertising business.
Gross profit margin for the E-mail, WVAS and others business for the third quarter of 2013 was 4.1%, compared to gross loss margin of 21.0% and gross profit margin of 6.0% for the preceding quarter and the third quarter of 2012, respectively. The increase in gross profit margin was mainly due to increased revenue contribution from sales of higher margin game accessories.
Operating Expenses
Total operating expenses for the third quarter of 2013 were
Income Taxes
The Company recorded a net income tax charge of
The Company's various principal subsidiaries renewed their qualifications as High and
Net Income after tax
Net profit for the third quarter of 2013 totaled
During the third quarter of 2013, the Company reported a net foreign exchange gain of
Other Information
As of
Share Repurchase Program
In
**
Conference Call
Interested parties may participate in the conference call by dialing 1-877-941-4774 (international: 1-480-629-9760), 10-15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-800-406-7325 (international 1-303-590-3030), and entering passcode 4647045#. The replay will be available through
This call will be webcast live and the replay will be available for 12 months. Both will be available on
About
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
Contact for Media and Investors:
cassia@corp.netease.com
Tel: (+86) 571-8985-2076
Investor Relations
brandi@corp.netease.com
Tel: (+1) 212-481-2050
NETEASE, INC. |
||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
(RMB and USD in thousands) |
||||||
December 31, |
September 30, |
September 30, |
||||
2012 |
2013 |
2013 |
||||
RMB |
RMB |
USD (Note 1) |
||||
Assets |
||||||
Current assets: |
||||||
Cash and cash equivalents |
1,590,769 |
917,302 |
149,886 |
|||
Time deposits |
13,098,661 |
15,851,527 |
2,590,119 |
|||
Restricted cash |
570,506 |
1,983,879 |
324,163 |
|||
Accounts receivable, net |
269,485 |
399,718 |
65,313 |
|||
Prepayments and other current assets |
1,121,784 |
1,112,194 |
181,731 |
|||
Short-term investments |
1,073,539 |
958,603 |
156,634 |
|||
Deferred tax assets |
143,929 |
154,997 |
25,326 |
|||
Total current assets |
17,868,673 |
21,378,220 |
3,493,172 |
|||
Non-current assets: |
||||||
Property, equipment and software, net |
815,026 |
814,110 |
133,025 |
|||
Land use right, net |
11,529 |
11,335 |
1,852 |
|||
Deferred tax assets |
2,215 |
3,383 |
553 |
|||
Time deposits |
490,000 |
450,000 |
73,529 |
|||
Other long-term assets |
90,513 |
329,286 |
53,805 |
|||
Total non-current assets |
1,409,283 |
1,608,114 |
262,764 |
|||
Total assets |
19,277,956 |
22,986,334 |
3,755,936 |
|||
Liabilities and Shareholders' Equity |
||||||
Current liabilities: |
||||||
Accounts payable |
157,764 |
163,445 |
26,707 |
|||
Salary and welfare payables |
289,848 |
222,715 |
36,391 |
|||
Dividend payable |
814,934 |
- |
- |
|||
Taxes payable |
389,465 |
336,712 |
55,018 |
|||
Short-term loan |
- |
983,680 |
160,732 |
|||
Deferred revenue |
1,160,018 |
1,319,884 |
215,667 |
|||
Accrued liabilities and other payables |
764,473 |
860,773 |
140,649 |
|||
Deferred tax liabilities |
- |
94,299 |
15,408 |
|||
Total current liabilities |
3,576,502 |
3,981,508 |
650,572 |
|||
Long-term payable: |
||||||
Other long-term payable |
99,968 |
116,242 |
18,994 |
|||
Total liabilities |
3,676,470 |
4,097,750 |
669,566 |
|||
Total NetEase, Inc.'s equity |
15,680,605 |
18,974,716 |
3,100,444 |
|||
Noncontrolling interests |
(79,119) |
(86,132) |
(14,074) |
|||
Total shareholders' equity |
15,601,486 |
18,888,584 |
3,086,370 |
|||
Total liabilities and shareholders' equity |
19,277,956 |
22,986,334 |
3,755,936 |
|||
The accompanying notes are an integral part of this press release. |
NETEASE, INC. |
||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
||||||||
(RMB and USD in thousands, except per share data) |
||||||||
Quarter Ended |
||||||||
September 30, |
June 30, |
September 30, |
September 30, |
|||||
2012 |
2013 |
2013 |
2013 |
|||||
RMB |
RMB |
RMB |
USD (Note 1) |
|||||
Revenues: |
||||||||
Online game services |
1,739,922 |
2,066,540 |
2,105,451 |
344,028 |
||||
Advertising services |
243,027 |
272,236 |
298,783 |
48,821 |
||||
E-mail, WVAS and others |
61,916 |
75,068 |
110,080 |
17,987 |
||||
Total revenues |
2,044,865 |
2,413,844 |
2,514,314 |
410,836 |
||||
Sales taxes |
(42,901) |
(149,319) |
(157,675) |
(25,764) |
||||
Total net revenues |
2,001,964 |
2,264,525 |
2,356,639 |
385,072 |
||||
Total cost of revenues |
(640,049) |
(566,912) |
(609,884) |
(99,654) |
||||
Gross profit |
1,361,915 |
1,697,613 |
1,746,755 |
285,418 |
||||
Selling and marketing expenses |
(259,947) |
(314,761) |
(283,026) |
(46,246) |
||||
General and administrative expenses |
(75,851) |
(87,639) |
(94,795) |
(15,489) |
||||
Research and development expenses |
(201,661) |
(223,584) |
(257,345) |
(42,050) |
||||
Total operating expenses |
(537,459) |
(625,984) |
(635,166) |
(103,785) |
||||
Operating profit |
824,456 |
1,071,629 |
1,111,589 |
181,633 |
||||
Other income: |
||||||||
Investment income |
9,353 |
10,806 |
9,041 |
1,477 |
||||
Interest income |
115,459 |
126,067 |
123,567 |
20,191 |
||||
Exchange gains |
23,659 |
5,630 |
5,900 |
964 |
||||
Other, net |
5,087 |
3,103 |
1,025 |
167 |
||||
Net income before tax |
978,014 |
1,217,235 |
1,251,122 |
204,432 |
||||
Income tax |
(194,797) |
(131,808) |
(206,503) |
(33,742) |
||||
Net income after tax |
783,217 |
1,085,427 |
1,044,619 |
170,690 |
||||
Net loss attributable |
28,718 |
9,675 |
3,675 |
600 |
||||
Net income attributable to |
811,935 |
1,095,102 |
1,048,294 |
171,290 |
||||
Comprehensive income |
783,217 |
1,085,427 |
1,044,619 |
170,690 |
||||
Comprehensive loss attributable to |
28,718 |
9,675 |
3,675 |
600 |
||||
Comprehensive income attributable |
811,935 |
1,095,102 |
1,048,294 |
171,290 |
||||
Earnings per share, basic |
0.25 |
0.34 |
0.32 |
0.05 |
||||
Earnings per ADS, basic |
6.17 |
8.43 |
8.06 |
1.32 |
||||
Earnings per share, diluted |
0.25 |
0.34 |
0.32 |
0.05 |
||||
Earnings per ADS, diluted |
6.17 |
8.41 |
8.04 |
1.31 |
||||
Weighted average number of |
3,287,370 |
3,249,077 |
3,250,078 |
3,250,078 |
||||
Weighted average number of |
131,495 |
129,963 |
130,003 |
130,003 |
||||
Weighted average number of |
3,292,462 |
3,255,244 |
3,260,350 |
3,260,350 |
||||
Weighted average number of |
131,698 |
130,210 |
130,414 |
130,414 |
||||
The accompanying notes are an integral part of this press release. |
NETEASE, INC. |
||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||
(RMB and USD in thousands) |
||||||||||
Quarter Ended |
||||||||||
September 30, |
March 31, |
June 30, |
September 30, |
September 30, |
||||||
2012 |
2013 |
2013 |
2013 |
2013 |
||||||
RMB |
RMB |
RMB |
RMB |
USD (Note 1) |
||||||
Cash flows from operating activities: |
||||||||||
Net income |
783,217 |
1,068,920 |
1,085,427 |
1,044,619 |
170,690 |
|||||
Adjustments to reconcile net profit to net cash |
||||||||||
Depreciation and amortization |
52,310 |
38,289 |
39,806 |
39,890 |
6,518 |
|||||
Share-based compensation cost |
47,969 |
58,706 |
79,389 |
83,219 |
13,598 |
|||||
(Reversal of) allowance for provision |
(593) |
(190) |
947 |
2,616 |
427 |
|||||
Loss (gain) on disposal of property, |
90 |
(220) |
1 |
(268) |
(44) |
|||||
Unrealized exchange (gains) loss |
(27,330) |
7,763 |
(4,959) |
(8,308) |
(1,358) |
|||||
Deferred income taxes |
7,894 |
261,550 |
10,525 |
(50,011) |
(8,172) |
|||||
Net equity share of (gain) loss from |
(389) |
339 |
(430) |
1,938 |
317 |
|||||
Amortization of premium (discount) of |
18,739 |
(3,280) |
(2,425) |
641 |
105 |
|||||
Changes in operating assets and liabilities: |
||||||||||
Accounts receivable |
(31,834) |
72,418 |
(131,097) |
(74,931) |
(12,244) |
|||||
Prepayments and other current assets |
(253,134) |
(105,062) |
65,962 |
50,116 |
8,189 |
|||||
Accounts payable |
26,755 |
(26,612) |
40,378 |
1,626 |
266 |
|||||
Salary and welfare payables |
(29,563) |
(60,697) |
39,845 |
(46,280) |
(7,562) |
|||||
Taxes payable |
18,096 |
(4,545) |
(58,637) |
(129,572) |
(21,172) |
|||||
Deferred revenue |
17,241 |
51,554 |
9,422 |
98,890 |
16,158 |
|||||
Accrued liabilities and other payables |
40,631 |
188,959 |
(124,342) |
1,208 |
197 |
|||||
Net cash provided by operating activities |
670,099 |
1,547,892 |
1,049,812 |
1,015,393 |
165,913 |
|||||
Cash flows from investing activities: |
||||||||||
Purchase of property, equipment and software |
(65,430) |
(35,578) |
(33,883) |
(40,437) |
(6,607) |
|||||
Proceeds from sale of property, |
546 |
696 |
- |
276 |
45 |
|||||
Purchase of other intangible assets |
- |
- |
(650) |
(250) |
(41) |
|||||
Net change in short-term investments |
150,000 |
20,000 |
(650,000) |
330,000 |
53,922 |
|||||
Purchase of short-term investments |
(70,845) |
(20,000) |
(80,000) |
- |
- |
|||||
Proceeds from maturities of short-term investments |
330,000 |
150,000 |
220,000 |
150,000 |
24,510 |
|||||
Investment in an associated company |
(7,915) |
- |
- |
(200,000) |
(32,680) |
|||||
Transfer from (to) restricted cash |
51,899 |
(1,432,315) |
(8,276) |
27,218 |
4,447 |
|||||
Placement/rollover of matured time deposits |
(4,626,840) |
(4,908,848) |
(4,668,529) |
(7,803,312) |
(1,275,051) |
|||||
Proceeds from maturities of time deposits |
3,686,192 |
4,817,487 |
3,734,349 |
6,096,194 |
996,110 |
|||||
Net change in other assets |
(11,094) |
2,613 |
(5,508) |
(36,674) |
(5,992) |
|||||
Net cash used in investing activities |
(563,487) |
(1,405,945) |
(1,492,497) |
(1,476,985) |
(241,337) |
NETEASE, INC. |
||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) |
||||||||||
(RMB and USD in thousands) |
||||||||||
Quarter Ended |
||||||||||
September 30, |
March 31, |
June 30, |
September 30, |
September 30, |
||||||
2012 |
2013 |
2013 |
2013 |
2013 |
||||||
RMB |
RMB |
RMB |
RMB |
USD (Note 1) |
||||||
Cash flows from financing activities: |
||||||||||
Proceeds of short-term bank loan |
- |
1,005,680 |
- |
- |
- |
|||||
Proceeds from employees exercising stock options |
- |
- |
1,961 |
513 |
84 |
|||||
Capital contribution from non-controlling interests |
- |
- |
- |
916 |
150 |
|||||
Purchase of shares |
- |
(106,809) |
- |
- |
- |
|||||
Dividends paid to shareholders |
- |
(815,413) |
- |
- |
- |
|||||
Net cash provided by financing activities |
- |
83,458 |
1,961 |
1,429 |
234 |
|||||
Effect of exchange rate changes on cash |
||||||||||
held in foreign currencies |
2,200 |
(11,158) |
(812) |
13,985 |
2,285 |
|||||
Net increase (decrease) in cash and cash equivalents |
108,812 |
214,247 |
(441,536) |
(446,178) |
(72,905) |
|||||
Cash and cash equivalents, beginning of the period |
1,075,734 |
1,590,769 |
1,805,016 |
1,363,480 |
222,791 |
|||||
Cash and cash equivalents, end of the period |
1,184,546 |
1,805,016 |
1,363,480 |
917,302 |
149,886 |
|||||
Supplemental disclosures of cash flow information: |
||||||||||
Cash paid (received) for income tax, net |
148,758 |
192,134 |
176,728 |
(121,033) |
(19,777) |
|||||
Withholding income tax paid associated with |
||||||||||
the repatriation of cash for a special dividend |
- |
5,000 |
- |
196,201 |
32,059 |
|||||
Supplemental schedule of non-cash investing |
||||||||||
and financing activities: |
||||||||||
Fixed asset purchases financed by |
14,096 |
13,894 |
18,410 |
15,299 |
2,500 |
|||||
The accompanying notes are an integral part of this press release. |
NETEASE, INC. |
||||||||
UNAUDITED SEGMENT INFORMATION |
||||||||
(RMB and USD in thousands, except percentages) |
||||||||
Quarter Ended |
||||||||
September 30, |
June 30, |
September 30, |
September 30, |
|||||
2012 |
2013 |
2013 |
2013 |
|||||
RMB |
RMB |
RMB |
USD (Note 1) |
|||||
Revenues: |
||||||||
Online game services |
1,739,922 |
2,066,540 |
2,105,451 |
344,028 |
||||
Advertising services |
243,027 |
272,236 |
298,783 |
48,821 |
||||
E-mail, WVAS and others |
61,916 |
75,068 |
110,080 |
17,987 |
||||
Total revenues |
2,044,865 |
2,413,844 |
2,514,314 |
410,836 |
||||
Sales taxes: |
||||||||
Online game services |
(17,053) |
(117,479) |
(119,994) |
(19,607) |
||||
Advertising services |
(24,562) |
(27,405) |
(29,421) |
(4,807) |
||||
E-mail, WVAS and others |
(1,286) |
(4,435) |
(8,260) |
(1,350) |
||||
Total sales taxes |
(42,901) |
(149,319) |
(157,675) |
(25,764) |
||||
Net revenues: |
||||||||
Online game services |
1,722,869 |
1,949,061 |
1,985,457 |
324,421 |
||||
Advertising services |
218,465 |
244,831 |
269,362 |
44,014 |
||||
E-mail, WVAS and others |
60,630 |
70,633 |
101,820 |
16,637 |
||||
Total net revenues |
2,001,964 |
2,264,525 |
2,356,639 |
385,072 |
||||
Cost of revenues: |
||||||||
Online game services |
(443,789) |
(372,543) |
(402,732) |
(65,806) |
||||
Advertising services |
(139,296) |
(108,892) |
(109,466) |
(17,887) |
||||
E-mail, WVAS and others |
(56,964) |
(85,477) |
(97,686) |
(15,961) |
||||
Total cost of revenues |
(640,049) |
(566,912) |
(609,884) |
(99,654) |
||||
Gross profit (loss): |
||||||||
Online game services |
1,279,080 |
1,576,518 |
1,582,725 |
258,615 |
||||
Advertising services |
79,169 |
135,939 |
159,896 |
26,127 |
||||
E-mail, WVAS and others |
3,666 |
(14,844) |
4,134 |
676 |
||||
Total gross profit |
1,361,915 |
1,697,613 |
1,746,755 |
285,418 |
||||
Gross profit (loss) margin: |
||||||||
Online game services |
74.2% |
80.9% |
79.7% |
79.7% |
||||
Advertising services |
36.2% |
55.5% |
59.4% |
59.4% |
||||
E-mail, WVAS and others |
6.0% |
(21.0%) |
4.1% |
4.1% |
||||
The accompanying notes are an integral part of this press release. |
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 = RMB6.1200 on the last trading day of September 2013 (September 30, 2013)as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. |
Note 2: |
Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD (in thousands): |
Quarter Ended |
||||||||
September 30, |
June 30, |
September 30, |
September 30, |
|||||
2012 |
2013 |
2013 |
2013 |
|||||
RMB |
RMB |
RMB |
USD (Note 1) |
|||||
Share-based compensation cost included in: |
||||||||
Cost of revenue |
25,063 |
42,020 |
46,098 |
7,532 |
||||
Operating expenses |
||||||||
- Selling and marketing expenses |
2,933 |
4,432 |
4,759 |
778 |
||||
- General and administrative expenses |
7,830 |
12,358 |
13,144 |
2,148 |
||||
- Research and development expenses |
12,143 |
20,579 |
19,218 |
3,140 |
SOURCE