News Release
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NetEase Reports Third Quarter 2017 Unaudited Financial Results
Third Quarter 2017 Financial Highlights
- Net revenues were
RMB12.5 billion (US$1.9 billion ), an increase of 35.5% compared with the third quarter of 2016.- Online game services net revenues were
RMB8.1 billion (US$1.2 billion ), an increase of 23.5% compared with the third quarter of 2016. - Advertising services net revenues were
RMB631.4 million (US$94.9 million ), an increase of 12.1% compared with the third quarter of 2016. - E-mail, e-commerce and others net revenues were
RMB3.7 billion (US$561.3 million ), an increase of 79.5% compared with the third quarter of 2016.
- Online game services net revenues were
- Gross profit was
RMB5.9 billion (US$893.9 million ), an increase of 11.5% compared with the third quarter of 2016. - Total operating expenses were
RMB3.4 billion (US$510.7 million ), an increase of 36.6% compared with the third quarter of 2016. - Net income attributable to the Company's shareholders was
RMB2.5 billion (US$379.9 million ). Non-GAAP net income attributable to the Company's shareholders wasRMB3.0 billion (US$454.6 million ). [1] - Diluted earnings per ADS were
US$2.86 ; non-GAAP diluted earnings per ADS wereUS$3.43 .
[1] As used in this press release, non-GAAP net income attributable to the Company's shareholders is defined to exclude share-based compensation expenses. See "Unaudited Reconciliation of GAAP and Non-GAAP Results" at the end of this press release. |
Third Quarter and Recent 2017 Operational Highlights
- Successfully launched Minecraft in
China for PC JAVA, Android and iOS platforms, accumulating nearly 30 million new registered users as of the end ofOctober 2017 . - Continued to expand international presence:
- Brought Onmyoji to
Korea and launched closed beta testing in the U.S. andCanada . - Crusaders of Light became one of the top-grossing games in more than 20 different countries since its launch.
- Brought Onmyoji to
- Increased the popularity of several legacy games, achieving record quarterly revenues for PC-client game Fantasy Westward Journey Online and mobile game Invincible.
- Progressed diversification strategy with the upcoming pipeline including MMORPG such as
Chu Liu Xiang and Tribes and Empires: Storm of Prophecy, Japanese-themed RPG Forever 7 and card game HAN-GYAKU-SEI Million Arthur, as well as a battle arena game based on Onmyoji IP.
"We continue to amass one of
"There remain ample growth opportunities in
Third Quarter 2017 Financial Results
Net Revenues
Net revenues for the third quarter of 2017 were
Net revenues from online games were
Net revenues from advertising services were
Net revenues from e-mail, e-commerce and others were
Gross Profit
Gross profit for the third quarter of 2017 was
The year-over-year increase in online games gross profit was primarily driven by revenue contribution from mobile games such as Onmyoji, the mobile version of New Ghost, Land of Glory, Invincible and Demon Seals mobile, as well as the legacy PC-client game Fantasy Westward Journey Online. The quarter-over-quarter decrease in online games gross profit was primarily due to decreased revenue contribution from mobile games.
The year-over-year and quarter-over-quarter increases in advertising services gross profit were primarily due to
The year-over-year decrease in e-mail, e-commerce and others gross profit was primarily due to the increased revenue contribution from Kaola.com and Yanxuan, which have relatively lower margins, as a percentage of
Gross Profit Margin
Gross profit margin for the online games business for the third quarter of 2017 was 62.5%, compared to 63.1% and 65.0% for the preceding quarter and the third quarter of 2016, respectively. The year-over-year decrease in gross profit margin was mainly due to increased revenue contribution from mobile games, which have relatively lower gross profit margins, as a percentage of
Gross profit margin for the advertising services business for the third quarter of 2017 was 68.0%, compared to 67.6% and 65.3% for the preceding quarter and the third quarter of 2016, respectively. The year-over-year increase in gross profit margin was mainly due to
Gross profit margin for the e-mail, e-commerce and others businesses for the third quarter of 2017 was 11.9%, compared to 11.3% and 33.5% for the preceding quarter and the third quarter of 2016, respectively. The year-over-year decrease in gross profit margin for the e-mail, e-commerce and others businesses was primarily due to the increased revenue contribution from Kaola.com and Yanxuan, which have relatively lower gross margins, as a percentage of
Operating Expenses
Total operating expenses for the third quarter of 2017 were
Income Taxes
The Company recorded a net income tax charge of
Net Income After Tax
Net income attributable to the Company's shareholders for the third quarter of 2017 totaled
During the third quarter of 2017, the Company had a net foreign exchange loss of
Quarterly Dividend
The board of directors has approved a dividend of
Under the Company's quarterly dividend policy announced on
Other Information
As of
Share Repurchase Program
On
The Company also today announced that its board of directors has approved a new share repurchase program of up to
Under the terms of the approved program,
**
Conference Call
Interested parties may participate in the conference call by dialing 1-800-239-9838 (international: 1-323-794-2551), 10-15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-888-203-1112 (international: 1-719-457-0820), and entering passcode 4285607#. The replay will be available through
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
Non-GAAP Financial Measures
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
Contact for Media and Investors:
ir@service.netease.com
Tel: (+86) 571-8985-3378
Investor Relations
brandi@corp.netease.com
Tel: (+1) 212-481-2050
NETEASE, INC. |
||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
(RMB and USD in thousands) |
||||||
December 31, |
September 30, |
September 30, |
||||
2016 |
2017 |
2017 |
||||
RMB |
RMB |
USD (Note 1) |
||||
Assets |
||||||
Current assets: |
||||||
Cash and cash equivalents |
5,439,499 |
2,575,522 |
387,104 |
|||
Time deposits |
19,361,098 |
30,140,825 |
4,530,207 |
|||
Restricted cash |
3,473,273 |
6,286,905 |
944,930 |
|||
Accounts receivable, net |
4,251,297 |
3,259,524 |
489,911 |
|||
Prepayments and other current assets |
5,276,082 |
8,601,166 |
1,292,767 |
|||
Short-term investments |
11,582,116 |
7,963,448 |
1,196,917 |
|||
Total current assets |
49,383,365 |
58,827,390 |
8,841,836 |
|||
Non-current assets: |
||||||
Property, equipment and software, net |
2,419,510 |
3,356,472 |
504,482 |
|||
Land use right, net |
588,887 |
596,458 |
89,648 |
|||
Deferred tax assets * |
560,323 |
628,518 |
94,467 |
|||
Time deposits |
550,000 |
50,000 |
7,515 |
|||
Restricted cash |
2,060,000 |
200 |
30 |
|||
Other long-term assets |
2,469,775 |
3,040,485 |
456,990 |
|||
Total non-current assets |
8,648,495 |
7,672,133 |
1,153,132 |
|||
Total assets |
58,031,860 |
66,499,523 |
9,994,968 |
|||
Liabilities, Redeemable Noncontrolling Interests and |
||||||
Current liabilities: |
||||||
Accounts payable |
1,396,187 |
2,068,879 |
310,955 |
|||
Salary and welfare payables |
1,491,448 |
1,386,495 |
208,392 |
|||
Taxes payable |
1,722,501 |
970,515 |
145,870 |
|||
Short-term loans |
3,815,691 |
5,732,593 |
861,616 |
|||
Deferred revenue |
7,531,238 |
6,165,997 |
926,758 |
|||
Accrued liabilities and other payables |
3,219,419 |
3,771,389 |
566,845 |
|||
Total current liabilities |
19,176,484 |
20,095,868 |
3,020,436 |
|||
Long-term payable: |
||||||
Deferred tax liabilities * |
392,235 |
109,002 |
16,383 |
|||
Other long-term payable |
200 |
10,642 |
1,600 |
|||
Total liabilities |
19,568,919 |
20,215,512 |
3,038,419 |
|||
Redeemable noncontrolling interests |
- |
567,266 |
85,261 |
|||
Total NetEase, Inc.'s equity |
38,191,081 |
45,015,752 |
6,765,928 |
|||
Noncontrolling interests |
271,860 |
700,993 |
105,360 |
|||
Total shareholders' equity |
38,462,941 |
45,716,745 |
6,871,288 |
|||
Total liabilities, redeemable noncontrolling interests and |
58,031,860 |
66,499,523 |
9,994,968 |
|||
The accompanying notes are an integral part of this press release. |
||||||
*In 2017, the Company adopted the guidance of ASU 2015-17 issued by FASB in November 2015, which requires entities to |
NETEASE, INC. |
||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
||||||||
(RMB and USD in thousands, except per share data) |
||||||||
Quarter Ended |
||||||||
September 30, |
June 30, |
September 30, |
September 30, |
|||||
2016 |
2017 |
2017 |
2017 |
|||||
RMB |
RMB |
RMB |
USD (Note 1) |
|||||
Net revenues |
9,211,645 |
13,376,048 |
12,477,789 |
1,875,429 |
||||
Cost of revenues |
(3,878,071) |
(6,639,158) |
(6,530,214) |
(981,500) |
||||
Gross profit |
5,333,574 |
6,736,890 |
5,947,575 |
893,929 |
||||
Selling and marketing expenses |
(1,275,073) |
(1,685,699) |
(1,645,829) |
(247,370) |
||||
General and administrative expenses |
(391,655) |
(594,344) |
(599,116) |
(90,048) |
||||
Research and development expenses |
(820,246) |
(1,051,477) |
(1,152,941) |
(173,289) |
||||
Total operating expenses |
(2,486,974) |
(3,331,520) |
(3,397,886) |
(510,707) |
||||
Operating profit |
2,846,600 |
3,405,370 |
2,549,689 |
383,222 |
||||
Other income: |
||||||||
Investment income, net |
99,679 |
105,053 |
117,746 |
17,697 |
||||
Interest income, net |
162,145 |
162,078 |
164,684 |
24,752 |
||||
Exchange gains/ (losses), net |
14,807 |
(131,305) |
(109,891) |
(16,517) |
||||
Other, net |
99,387 |
156,703 |
44,876 |
6,745 |
||||
Net income before tax |
3,222,618 |
3,697,899 |
2,767,104 |
415,899 |
||||
Income tax |
(427,177) |
(703,465) |
(225,494) |
(33,892) |
||||
Net income after tax |
2,795,441 |
2,994,434 |
2,541,610 |
382,007 |
||||
Net income attributable to noncontrolling interests |
(55,423) |
(22,323) |
(14,161) |
(2,128) |
||||
Net income attributable to |
2,740,018 |
2,972,111 |
2,527,449 |
379,879 |
||||
Basic earnings per share |
0.84 |
0.90 |
0.77 |
0.12 |
||||
Basic earnings per ADS |
20.90 |
22.55 |
19.18 |
2.88 |
||||
Diluted earnings per share |
0.83 |
0.90 |
0.76 |
0.11 |
||||
Diluted earnings per ADS |
20.73 |
22.41 |
19.05 |
2.86 |
||||
Weighted average number of |
3,277,540 |
3,294,950 |
3,294,167 |
3,294,167 |
||||
Weighted average number of |
131,102 |
131,798 |
131,767 |
131,767 |
||||
Weighted average number of |
3,304,995 |
3,315,410 |
3,317,373 |
3,317,373 |
||||
Weighted average number of |
132,200 |
132,616 |
132,695 |
132,695 |
||||
The accompanying notes are an integral part of this press release. |
NETEASE, INC. |
||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||||||||||
(RMB and USD in thousands) |
||||||||||||||||
Quarter Ended |
||||||||||||||||
September 30, |
March 31, |
June 30, |
September 30, |
September 30, |
||||||||||||
2016 |
2017 |
2017 |
2017 |
2017 |
||||||||||||
RMB |
RMB |
RMB |
RMB |
USD (Note 1) |
||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net income |
2,795,441 |
4,011,180 |
2,994,434 |
2,541,610 |
382,007 |
|||||||||||
Adjustments to reconcile net income to net |
||||||||||||||||
Depreciation and amortization |
89,905 |
146,144 |
170,571 |
210,791 |
31,682 |
|||||||||||
Impairment loss for investments |
- |
22,200 |
4,000 |
18,337 |
2,756 |
|||||||||||
Share-based compensation cost |
277,265 |
413,420 |
500,082 |
497,460 |
74,769 |
|||||||||||
Allowance for provision for doubtful debts |
10,329 |
3,188 |
10,940 |
17,784 |
2,673 |
|||||||||||
(Gains)/ losses on disposal of property, |
(404) |
(316) |
444 |
(174) |
(26) |
|||||||||||
Unrealized exchange (gains)/ losses |
(22,477) |
42,125 |
121,586 |
118,646 |
17,833 |
|||||||||||
Gain on disposal of long-term investments |
- |
- |
(9,595) |
- |
- |
|||||||||||
Deferred income taxes |
49,766 |
(279,046) |
105,717 |
(180,849) |
(27,182) |
|||||||||||
Net equity share of loss/ (gains) from associated companies |
2,917 |
27,074 |
8,187 |
(2,180) |
(328) |
|||||||||||
Fair value changes of short-term investments |
(85,413) |
(89,505) |
(105,746) |
(112,996) |
(16,983) |
|||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||
Accounts receivable |
(181,029) |
564,743 |
266,928 |
125,160 |
18,812 |
|||||||||||
Prepayments and other current assets |
71,458 |
(1,302,870) |
(913,656) |
(1,141,181) |
(171,521) |
|||||||||||
Accounts payable |
13,156 |
170,289 |
334,678 |
191,847 |
28,835 |
|||||||||||
Salary and welfare payables |
(139,693) |
(160,858) |
233,427 |
(177,525) |
(26,682) |
|||||||||||
Taxes payable |
120,128 |
779,410 |
(952,134) |
(577,588) |
(86,812) |
|||||||||||
Deferred revenue |
592,143 |
(573,805) |
(844,471) |
53,034 |
7,971 |
|||||||||||
Accrued liabilities and other payables |
136,456 |
257,788 |
395,975 |
73,080 |
10,984 |
|||||||||||
Net cash provided by operating activities |
3,729,948 |
4,031,161 |
2,321,367 |
1,655,256 |
248,788 |
|||||||||||
Cash flows from investing activities: |
||||||||||||||||
Purchase of property, equipment and software |
(165,535) |
(325,438) |
(433,021) |
(512,359) |
(77,008) |
|||||||||||
Proceeds from sale of property, equipment and software |
552 |
852 |
1,921 |
465 |
70 |
|||||||||||
Purchase of other intangible assets |
(2,429) |
- |
(25) |
- |
- |
|||||||||||
Purchase of land use right |
- |
- |
- |
(6,488) |
(975) |
|||||||||||
Net change in short-term investments |
(365,269) |
1,839,344 |
(1,558,339) |
1,943,208 |
292,067 |
|||||||||||
Purchase of short-term investments |
(3,440,000) |
(4,465,000) |
(4,926,000) |
(1,865,000) |
(280,312) |
|||||||||||
Proceeds from maturities of short-term investments |
1,657,273 |
3,229,235 |
4,877,695 |
4,851,772 |
729,228 |
|||||||||||
Investment in associated companies |
(363,586) |
- |
- |
(81,293) |
(12,218) |
|||||||||||
Proceeds from disposal of investment in associated company |
- |
- |
9,983 |
340,435 |
51,168 |
|||||||||||
Transfer to restricted cash |
(845,328) |
(13,822) |
(717,855) |
(22,341) |
(3,358) |
|||||||||||
Placement/rollover of matured time deposits |
(6,750,017) |
(8,856,849) |
(3,859,217) |
(13,084,711) |
(1,966,650) |
|||||||||||
Proceeds from maturities of time deposits |
5,966,100 |
3,109,265 |
3,875,136 |
8,035,982 |
1,207,819 |
|||||||||||
Net change in other assets |
(222,456) |
(134,573) |
(301,311) |
(566,205) |
(85,104) |
|||||||||||
Net cash used in investing activities |
(4,530,695) |
(5,616,986) |
(3,031,033) |
(966,535) |
(145,273) |
|||||||||||
The accompanying notes are an integral part of this press release. |
NETEASE, INC. |
|||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) |
|||||||||||||||||
(RMB and USD in thousands) |
|||||||||||||||||
Quarter Ended |
|||||||||||||||||
September 30, |
March 31, |
June 30, |
September 30, |
September 30, |
|||||||||||||
2016 |
2017 |
2017 |
2017 |
2017 |
|||||||||||||
RMB |
RMB |
RMB |
RMB |
USD (Note 1) |
|||||||||||||
Cash flows from financing activities: |
|||||||||||||||||
Proceeds of short-term bank loans |
3,005,008 |
12,137,004 |
14,433,788 |
16,590,069 |
2,493,510 |
||||||||||||
Payment of short-term bank loans |
(2,320,920) |
(11,447,074) |
(13,450,327) |
(16,133,060) |
(2,424,821) |
||||||||||||
Capital contribution from noncontrolling interests and redeemable |
- |
500,000 |
311,500 |
60,000 |
9,018 |
||||||||||||
Repurchase of shares |
- |
(163,279) |
(527,821) |
(933,861) |
(140,361) |
||||||||||||
Dividends paid to shareholders |
(683,826) |
(917,088) |
(980,513) |
(735,611) |
(110,563) |
||||||||||||
Net cash provided by /(used in) financing activities |
262 |
109,563 |
(213,373) |
(1,152,463) |
(173,217) |
||||||||||||
Effect of exchange rate changes on cash |
|||||||||||||||||
held in foreign currencies |
25,128 |
(3,986) |
(23,712) |
26,764 |
4,023 |
||||||||||||
Net decrease in cash and cash equivalents |
(775,357) |
(1,480,248) |
(946,751) |
(436,978) |
(65,679) |
||||||||||||
Cash and cash equivalents, beginning of the period |
5,257,160 |
5,439,499 |
3,959,251 |
3,012,500 |
452,783 |
||||||||||||
Cash and cash equivalents, end of the period |
4,481,803 |
3,959,251 |
3,012,500 |
2,575,522 |
387,104 |
||||||||||||
Supplemental disclosures of cash flow information: |
|||||||||||||||||
Cash paid for income tax, net |
417,623 |
1,003,426 |
735,718 |
1,212,178 |
182,192 |
||||||||||||
Supplemental schedule of non-cash investing |
|||||||||||||||||
and financing activities: |
|||||||||||||||||
Fixed asset purchases financed by |
179,662 |
282,753 |
259,657 |
259,593 |
39,017 |
||||||||||||
The accompanying notes are an integral part of this press release. |
NETEASE, INC. |
||||||||
UNAUDITED SEGMENT INFORMATION |
||||||||
(RMB and USD in thousands, except percentages) |
||||||||
Quarter Ended |
||||||||
September 30, |
June 30, |
September 30, |
September 30, |
|||||
2016 |
2017 |
2017 |
2017 |
|||||
RMB |
RMB |
RMB |
USD (Note 1) |
|||||
Net revenues: |
||||||||
Online game services |
6,568,016 |
9,430,175 |
8,111,652 |
1,219,192 |
||||
Advertising services |
563,271 |
595,593 |
631,446 |
94,907 |
||||
E-mail, e-commerce and others |
2,080,358 |
3,350,280 |
3,734,691 |
561,330 |
||||
Total net revenues |
9,211,645 |
13,376,048 |
12,477,789 |
1,875,429 |
||||
Cost of revenues: |
||||||||
Online game services |
(2,299,455) |
(3,475,188) |
(3,039,004) |
(456,766) |
||||
Advertising services |
(195,376) |
(192,955) |
(202,208) |
(30,392) |
||||
E-mail, e-commerce and others |
(1,383,240) |
(2,971,015) |
(3,289,002) |
(494,342) |
||||
Total cost of revenues |
(3,878,071) |
(6,639,158) |
(6,530,214) |
(981,500) |
||||
Gross profit: |
||||||||
Online game services |
4,268,561 |
5,954,987 |
5,072,648 |
762,426 |
||||
Advertising services |
367,895 |
402,638 |
429,238 |
64,515 |
||||
E-mail, e-commerce and others |
697,118 |
379,265 |
445,689 |
66,988 |
||||
Total gross profit |
5,333,574 |
6,736,890 |
5,947,575 |
893,929 |
||||
Gross profit margin: |
||||||||
Online game services |
65.0% |
63.1% |
62.5% |
62.5% |
||||
Advertising services |
65.3% |
67.6% |
68.0% |
68.0% |
||||
E-mail, e-commerce and others |
33.5% |
11.3% |
11.9% |
11.9% |
||||
The accompanying notes are an integral part of this press release. |
NETEASE, INC. |
|
NOTES TO UNAUDITED FINANCIAL INFORMATION |
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Note 1:
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The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate |
Note 2:
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Share-based compensation cost reported in the Company's unaudited condensed consolidated |
Quarter Ended |
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September 30, |
June 30, |
September 30, |
September 30, |
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2016 |
2017 |
2017 |
2017 |
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RMB |
RMB |
RMB |
USD (Note 1) |
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Share-based compensation cost included in: |
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Cost of revenue |
127,344 |
198,732 |
202,887 |
30,494 |
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Operating expenses |
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- Selling and marketing expenses |
13,743 |
22,899 |
22,949 |
3,449 |
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- General and administrative expenses |
67,613 |
147,515 |
147,037 |
22,100 |
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- Research and development expenses |
68,565 |
130,936 |
124,587 |
18,726 |
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The accompanying notes are an integral part of this press release. |
NETEASE, INC. |
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UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS |
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(RMB and USD in thousands, except per share data) |
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Quarter Ended |
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September 30, |
June 30, |
September 30, |
September 30, |
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2016 |
2017 |
2017 |
2017 |
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RMB |
RMB |
RMB |
USD (Note 1) |
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Net income attributable to the Company's shareholders |
2,740,018 |
2,972,111 |
2,527,449 |
379,879 |
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Add: Share-based compensation |
277,265 |
500,082 |
497,460 |
74,769 |
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Non-GAAP net income attributable to the Company's shareholders |
3,017,283 |
3,472,193 |
3,024,909 |
454,648 |
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Non-GAAP basic earnings per share |
0.92 |
1.05 |
0.92 |
0.14 |
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Non-GAAP basic earnings per ADS |
23.01 |
26.34 |
22.96 |
3.45 |
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Non-GAAP diluted earnings per share |
0.91 |
1.05 |
0.91 |
0.14 |
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Non-GAAP diluted earnings per ADS |
22.82 |
26.18 |
22.80 |
3.43 |
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The accompanying notes are an integral part of this press release. |
View original content:http://www.prnewswire.com/news-releases/netease-reports-third-quarter-2017-unaudited-financial-results-300556822.html
SOURCE