BEIJING, Feb. 8, 2018 /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, 2017.
Fourth Quarter 2017 Financial Highlights
| [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 and impairment on long-term investment of available-for-sale securities. See "Unaudited Reconciliation of GAAP and Non-GAAP Results" at the end of this press release. |
Fourth Quarter 2017 and Recent 2018 Operational Highlights
"2017 marked another year of progress with growth across each of our core business segments year-over-year. Our total net revenues for the year increased by 41.7% as we brought a number of new blockbuster online games to audiences across the globe, considerably scaled our e-commerce business and further grew our landmark advertising services and e-mail and others business lines," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "For the fourth quarter, our total net revenues continued to grow year-over-year and quarter-over-quarter. Although a few mobile titles such as Onmyoji and the mobile version of New Ghost experienced a decline, we have introduced new content for these games to attract players. During the fourth quarter, we held substantial promotions to support the successful launch of our new battle arena games Knives Out, Terminator 2: Judgment Day and Rules of Survival. We also made additional investments to further scale our thriving e-commerce businesses. We believe these strategic investments provide us with extended reach and momentum to support our future long-term growth.
"Our business remains strong and our 2018 initiatives to bring exciting new titles to our robust and diverse portfolio of self-developed games are well underway. To expand our reach, we will also seek partnerships with other industry leaders to bring mobile and PC-client games to audiences worldwide. Our e-commerce businesses and advertising services are also thriving, with e-commerce accounting for approximately 22% of our total net revenues in 2017. We will continue to expand our Kaola.com and Yanxuan e-commerce platforms in 2018 along with our other business segments where we see opportunities to generate value for our shareholders, as well as serve and grow our community of users by providing best-in-class online content and services," Mr. Ding concluded.
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.com and Yanxuan, which were established in January 2015 and April 2016, respectively. The Company now reports four reporting segments: online game services, e-commerce, advertising services, and e-mail and others. This change in segment reporting aligns with the manner in which the Company's operating decision maker ("CODM") currently receives and uses financial information to allocate resources and evaluate the performance of reporting segments. This change in segment presentation does 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.
Fourth Quarter 2017 Financial Results
Net Revenues
Net revenues for the fourth quarter of 2017 were RMB14,607.6 million (US$2,245.2 million), compared to RMB12,477.8 million and RMB12,099.0 million for the preceding quarter and the fourth quarter of 2016, respectively.
Net revenues from online games were RMB8,004.4 million (US$1,230.2 million) for the fourth quarter of 2017, compared to RMB8,111.7 million and RMB8,959.1 million for the preceding quarter and the fourth quarter of 2016, respectively. Mobile games accounted for approximately 68.0% of net revenues from online games for the fourth quarter of 2017, compared to 68.3% and 64.4% for the preceding quarter and the fourth quarter of 2016, respectively.
Net revenues from e-commerce were RMB4,653.7 million (US$715.3 million) for the fourth quarter of 2017, compared to RMB2,667.5 million and RMB1,691.2 million for the preceding quarter and the fourth quarter of 2016, respectively.
Net revenues from advertising services were RMB736.6 million (US$113.2 million) for the fourth quarter of 2017, compared to RMB631.4 million and RMB664.8 million for the preceding quarter and the fourth quarter of 2016, respectively. The top performing advertising verticals in the fourth quarter of 2017 were automobile, internet services and real estate sectors.
Net revenues from e-mail and others were RMB1,213.0 million (US$186.4 million) for the fourth quarter of 2017, compared to RMB1,067.2 million and RMB783.8 million for the preceding quarter and the fourth quarter of 2016, respectively.
Gross Profit/ (Loss)
Gross profit for the fourth quarter of 2017 was RMB5,744.6 million (US$882.9 million), compared to RMB5,947.6 million and RMB6,463.3 million for the preceding quarter and the fourth quarter of 2016, respectively.
The year-over-year and quarter-over-quarter decreases in online game services gross profit were primarily due to decreased revenue contribution from self-developed mobile games such as Onmyoji.
The year-over-year and quarter-over-quarter increases in e-commerce gross profit were primarily due to the rapid development of Kaola.com and Yanxuan.
The year-over-year and quarter-over-quarter increases in advertising services gross profit were primarily due to NetEase's enhanced monetization efforts and better economies of scale.
The year-over-year and quarter-over-quarter decreases in e-mail and others gross profit were primarily due to decreased revenue contribution from certain online platform businesses, which have relatively higher margins, as well as the one-off recognition of expense related to certain copyrights in the fourth quarter of 2017.
Gross Profit/ (Loss) Margin
Gross profit margin for online game services for the fourth quarter of 2017 was 61.4%, compared to 62.5% and 60.7% for the preceding quarter and the fourth quarter of 2016, respectively. The year-over-year increase in gross profit margin was mainly due to the one-off recognition of certain royalty expenses related to licensed games in the fourth quarter of 2016, which was partially offset by increased staff-related costs. The quarter-over-quarter decrease in gross profit margins was mainly due to increased staff-related costs.
Gross profit margin for e-commerce for the fourth quarter of 2017 was 7.4%, compared to 11.5% and 12.5% for the preceding quarter and the fourth quarter of 2016, respectively. The year-over-year and quarter-over-quarter decreases in e-commerce gross profit margin were primarily due to the larger-scale promotions and certain sales discounts in the fourth quarter of 2017, such as Singles Day on November 11, 2017.
Gross profit margin for advertising services for the fourth quarter of 2017 was 71.2%, compared to 68.0% and 66.5% for the preceding quarter and the fourth quarter of 2016, respectively. The year-over-year and quarter-over-quarter increases in gross profit margin were mainly due to NetEase's enhanced monetization efforts and better economies of scale.
Gross loss margin for e-mail and others for the fourth quarter of 2017 was 3.3%, compared to gross profit margin of 13.1% and 46.9% for the preceding quarter and the fourth quarter of 2016, respectively. The year-over-year and quarter-over-quarter decreases in gross margin were primarily due to the decreased revenue contribution from certain online platform businesses, which have relatively higher gross profit margins, as well as the one-off recognition of expense related to certain copyrights in the fourth quarter of 2017.
Operating Expenses
Total operating expenses for the fourth quarter of 2017 were RMB4,317.8 million (US$663.6 million), compared to RMB3,397.9 million and RMB2,596.6 million for the preceding quarter and the fourth quarter of 2016, respectively. The year-over-year and quarter-over-quarter increases in operating expenses were mainly due to increased selling and marketing expenses and research and development investments, and higher staff-related costs, as well as increased operating expenses related to NetEase's e-commerce businesses. Shipping and handling costs included in selling and marketing expenses for the fourth quarter of 2017 were RMB393.3 million (US$60.4 million), compared to RMB294.8 million and RMB177.2 million for the preceding quarter and the fourth quarter of 2016, respectively.
Income Taxes
The Company recorded a net income tax charge of RMB290.4 million (US$44.6 million) for the fourth quarter of 2017, compared to RMB225.5 million and RMB882.0 million for the preceding quarter and the fourth quarter of 2016, respectively. The effective tax rate for the fourth quarter of 2017 was 18.2%, compared to 8.1% and 19.2% for the preceding quarter and the fourth quarter of 2016, respectively. The changes in the effective tax rate were mainly due to the fact that certain subsidiaries of the Company were recognized as Key Software Enterprises in the third quarter and fourth quarter of 2017, and subject to a preferential tax rate of 10% for 2016. The Company recognized related tax credits in the third quarter and fourth quarter of 2017 accordingly.
Net Income After Tax
Net income attributable to the Company's shareholders for the fourth quarter of 2017 totaled RMB1.3 billion (US$197.6 million), compared to RMB2.5 billion and RMB3.7 billion for the preceding quarter and the fourth quarter of 2016, respectively. Non-GAAP net income attributable to the Company's shareholders for the fourth quarter of 2017 totaled RMB1.9 billion (US$288.8 million), compared to RMB3.0 billion and RMB4.0 billion for the preceding quarter and the fourth quarter of 2016, respectively.
During the fourth quarter of 2017, the Company had a net foreign exchange loss of RMB159.1 million (US$24.5 million), compared to a net foreign exchange loss of RMB109.9 million and a net foreign exchange gain of RMB90.5 million for the preceding quarter and the fourth quarter of 2016, respectively. The year-over-year and quarter-over-quarter changes in foreign exchange gains and losses were mainly due to unrealized exchange gains and losses arising from the Company's U.S. dollar-denominated bank deposits and short-term loan balances as the exchange rate of the U.S. dollar against the RMB fluctuated over the periods.
NetEase reported basic and diluted earnings per ADS of US$1.50 and US$1.49, respectively, for the fourth quarter of 2017. The Company reported basic and diluted earnings per ADS of US$2.95 and US$2.93, respectively, for the preceding quarter, and basic and diluted earnings per ADS of US$4.31 and US$4.28, respectively, for the fourth quarter of 2016. Non-GAAP basic and diluted earnings per ADS were US$2.20 and US$2.18, respectively, for the fourth quarter of 2017, compared to non-GAAP basic and diluted earnings per ADS of US$3.53 and US$3.50, respectively, for the preceding quarter, and non-GAAP basic and diluted earnings per ADS of US$4.63 and US$4.59, respectively, for the fourth quarter of 2016.
Fiscal Year 2017 Financial Results
Net Revenues
Total net revenues for fiscal year 2017 were RMB54.1 billion (US$8.3 billion), compared to RMB38.2 billion for the preceding fiscal year.
Net revenues from online games were RMB36.3 billion (US$5.6 billion) for fiscal year 2017, compared to RMB28.0 billion for the preceding fiscal year. Mobile games accounted for approximately 70.8% of net revenues from online games for fiscal year 2017, compared to 61.9% for the preceding fiscal year.
Net revenues from e-commerce were RMB11.7 billion (US$1.8 billion) for fiscal year 2017, compared to RMB4.5 billion for the preceding fiscal year.
Net revenues from advertising services were RMB2.4 billion (US$370.2 million) for fiscal year 2017, compared to RMB2.2 billion for the preceding fiscal year. The top performing advertising verticals in 2017 were automobile, internet services and real estate sectors.
Net revenues from e-mail and others were RMB3.7 billion (US$575.0 million) for fiscal year 2017, compared to RMB3.5 billion for the preceding fiscal year.
Gross Profit
Gross profit for fiscal year 2017 was RMB25.9 billion (US$4.0 billion), compared to RMB21.7 billion for the preceding fiscal year.
The increase in online game services gross profit in 2017 was primarily attributable to increased revenue contribution from the Company's self-developed mobile games such as Onmyoji and the mobile version of New Ghost.
The increase in e-commerce gross profit in 2017 was primarily due to business development of Kaola.com and Yanxuan.
The increase in advertising services gross profit in 2017 was due to NetEase's enhanced monetization efforts and better economies of scale.
The decrease in e-mail and others gross profit in 2017 was primarily due to the decreased revenue contribution from certain online platform businesses, which have relatively higher margins, as well as the one-off recognition of expense related to certain copyrights in the fourth quarter of 2017.
Operating Expenses
Total operating expenses for fiscal year 2017 were RMB13.8 billion (US$2.1 billion), compared to RMB9.0 billion for the preceding fiscal year. The increase in operating expenses in 2017 was primarily due to increased selling and marketing expenses and research and development investments, and higher staff-related costs, as well as increased operating expenses related to NetEase's e-commerce businesses. Shipping and handling costs included in selling and marketing expenses for fiscal year 2017 were RMB1,182.7 million (US$181.8 million), compared to RMB503.0 million for the preceding fiscal year.
Income Taxes
The Company recorded a net income tax charge of RMB2.2 billion (US$332.3 million) and RMB2.1 billion for fiscal years 2017 and 2016, respectively. The effective tax rate was 16.6% for fiscal year 2017, compared to 15.1% for fiscal year 2016. The changes in the effective tax rate were mainly due to the higher withholding tax recorded for fiscal year 2017.
Net Income After Tax
Net income attributable to the Company's shareholders for fiscal year 2017 totaled RMB10.7 billion (US$1.6 billion), compared to RMB11.6 billion for the preceding fiscal year. Non-GAAP net income attributable to the Company's shareholders for fiscal year 2017 totaled RMB12.7 billion (US$2.0 billion), compared to RMB12.9 billion for fiscal year 2016.
For fiscal year 2017, the Company reported a net foreign exchange loss of RMB448.8 million (US$69.0 million), compared to a net foreign exchange gain of RMB146.5 million for the preceding fiscal year. The changes in foreign exchange gains and losses were mainly due to unrealized exchange gains and losses arising from the Company's U.S. dollar-denominated bank deposits and short-term loan balances as the exchange rate of the U.S. dollar against the RMB fluctuated over these periods.
NetEase reported basic and diluted earnings per ADS of US$12.50 and US$12.41, respectively, for fiscal year 2017, and basic and diluted earnings per ADS of US$13.59 and US$13.48, respectively, for fiscal year 2016. Non-GAAP basic and diluted earnings per ADS were US$14.85 and US$14.73, respectively, for fiscal year 2017, compared to non-GAAP basic and diluted earnings per ADS of US$15.06 and US$14.94, respectively, for fiscal year 2016.
Quarterly Dividend
The board of directors has approved a dividend of US$0.38 per ADS for the fourth quarter of 2017, which is expected to be paid on March 2, 2018 to shareholders of record as of the close of business on February 23, 2018.
NetEase paid dividends of US$1.08 per ADS for the first quarter of 2017 on June 2, 2017, US$0.83 per ADS for the second quarter of 2017 on September 1, 2017 and US$0.72 per ADS for the third quarter of 2017 on December 8, 2017, respectively.
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, 2017, the Company's total cash and cash equivalents, current and non-current time deposits and short-term investments balance totaled RMB43.2 billion (US$6.6 billion), compared to RMB36.9 billion as of December 31, 2016. Cash flow generated from operating activities was RMB11.9 billion (US$1.8 billion) for fiscal year 2017, compared to RMB15.5 billion for the preceding fiscal year.
Share Repurchase Program
On November 15, 2016, the Company announced that its board of directors 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. As of November 14, 2017, the last day of such program, the Company had repurchased approximately 1.1 million ADSs for approximately US$306.1 million under this program.
On November 15, 2017, the Company announced that its board of directors has approved a new share repurchase program of up to US$1.0 billion of the Company's outstanding ADSs for a period not to exceed 12 months beginning on November 16, 2017. As of December 31, 2017, no ADS were repurchased under this program.
Under the terms of the current approved program, NetEase may repurchase its issued and outstanding ADSs in open-market transactions on the NASDAQ Global Select Market. The timing and dollar amount of repurchase transactions will be subject to the Securities and Exchange Commission (SEC) Rule 10b-18 requirements. It is also expected that such repurchases will be effected pursuant to a plan in conformity with SEC Rule 10b5-1. The extent to which NetEase repurchases its ADSs will depend upon a variety of factors, including market conditions, regulatory requirements and other corporate considerations, as determined by NetEase's management team. The repurchase program may be suspended or discontinued at any time.
** The United States dollar (US$) 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$1.00 = RMB6.5063 on December 29, 2017 as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on December 29, 2017, or at any other certain date. The percentages stated are calculated based on RMB.
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, 2017 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 2017.
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 7, 2018 (Beijing/Hong Kong Time: 9:00 a.m., Thursday, February 8, 2018). 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 1-800-281-7973 (international: 1-323-794-2093), 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 3213566#. The replay will be available through February 21, 2018.
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, advertising services and e-mail services. 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 e-mail, mobile and e-commerce businesses and develop attractive mobile games; 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 and general competition and price pressures in the marketplace); 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 and impairment on long-term investment of available-for-sale securities. 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 and impairment on long-term investment of available-for-sale securities, 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 and impairment on long-term investment of available-for-sale securities 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) 571-8985-5201
Brandi Piacente
Investor Relations
brandi@corp.netease.com
Tel: (+1) 212-481-2050
| NETEASE, INC. |
||||||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
| (RMB and USD in thousands) |
||||||
| December 31, |
December 31, |
December 31, |
||||
| 2016 |
2017 |
2017 |
||||
| RMB |
RMB |
USD (Note 1) |
||||
| Assets |
||||||
| Current assets: |
||||||
| Cash and cash equivalents |
5,439,499 |
2,764,140 |
424,841 |
|||
| Time deposits |
19,361,098 |
30,603,369 |
4,703,652 |
|||
| Restricted cash |
3,473,273 |
5,926,906 |
910,949 |
|||
| Accounts receivable, net |
4,251,297 |
3,619,725 |
556,342 |
|||
| Inventories,net |
1,578,130 |
5,474,929 |
841,481 |
|||
| Prepayments and other current assets |
3,697,952 |
3,816,028 |
586,514 |
|||
| Short-term investments |
11,582,116 |
9,742,663 |
1,497,420 |
|||
| Total current assets |
49,383,365 |
61,947,760 |
9,521,199 |
|||
| Non-current assets: |
||||||
| Property, equipment and software, net |
2,419,510 |
3,769,326 |
579,335 |
|||
| Land use right, net |
588,887 |
593,279 |
91,185 |
|||
| Deferred tax assets * |
560,323 |
823,495 |
126,569 |
|||
| Time deposits |
550,000 |
100,000 |
15,370 |
|||
| Restricted cash |
2,060,000 |
200 |
31 |
|||
| Other long-term assets |
2,469,775 |
3,797,355 |
583,641 |
|||
| Total non-current assets |
8,648,495 |
9,083,655 |
1,396,131 |
|||
| Total assets |
58,031,860 |
71,031,415 |
10,917,330 |
|||
| Liabilities, Redeemable Noncontrolling Interests and |
||||||
| Current liabilities: |
||||||
| Accounts payable |
1,396,187 |
2,442,531 |
375,410 |
|||
| Salary and welfare payables |
1,491,448 |
2,189,110 |
336,460 |
|||
| Taxes payable |
1,722,501 |
1,564,692 |
240,489 |
|||
| Short-term loans |
3,815,691 |
6,623,502 |
1,018,014 |
|||
| Deferred revenue |
7,531,238 |
6,237,969 |
958,758 |
|||
| Accrued liabilities and other payables |
3,219,419 |
4,692,310 |
721,195 |
|||
| Total current liabilities |
19,176,484 |
23,750,114 |
3,650,326 |
|||
| Long-term payable: |
||||||
| Deferred tax liabilities * |
392,235 |
213,215 |
32,771 |
|||
| Other long-term payable |
200 |
18,250 |
2,805 |
|||
| Total liabilities |
19,568,919 |
23,981,579 |
3,685,902 |
|||
| Redeemable noncontrolling interests |
- |
614,696 |
94,477 |
|||
| Total NetEase, Inc.'s equity |
38,191,081 |
45,732,007 |
7,028,881 |
|||
| Noncontrolling interests |
271,860 |
703,133 |
108,070 |
|||
| Total shareholders' equity |
38,462,941 |
46,435,140 |
7,136,951 |
|||
| Total liabilities, redeemable noncontrolling interests and |
58,031,860 |
71,031,415 |
10,917,330 |
|||
| 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 |
Year Ended |
||||||||||||||
| December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
December 31, |
December 31, |
|||||||||
| 2016 |
2017 |
2017 |
2017 |
2016 |
2017 |
2017 |
|||||||||
| RMB |
RMB |
RMB |
USD (Note 1) |
RMB |
RMB |
USD (Note 1) |
|||||||||
| Net revenues |
12,099,020 |
12,477,789 |
14,607,636 |
2,245,152 |
38,178,844 |
54,102,019 |
8,315,328 |
||||||||
| Cost of revenues |
(5,635,741) |
(6,530,214) |
(8,863,025) |
(1,362,223) |
(16,515,032) |
(28,189,326) |
(4,332,620) |
||||||||
| Gross profit |
6,463,279 |
5,947,575 |
5,744,611 |
882,929 |
21,663,812 |
25,912,693 |
3,982,708 |
||||||||
| Selling and marketing expenses |
(1,255,331) |
(1,645,829) |
(2,397,214) |
(368,444) |
(4,481,815) |
(6,957,596) |
(1,069,362) |
||||||||
| General and administrative expenses |
(464,149) |
(599,116) |
(678,370) |
(104,264) |
(1,506,154) |
(2,429,858) |
(373,462) |
||||||||
| Research and development expenses |
(877,119) |
(1,152,941) |
(1,242,213) |
(190,925) |
(3,046,979) |
(4,371,428) |
(671,876) |
||||||||
| Total operating expenses |
(2,596,599) |
(3,397,886) |
(4,317,797) |
(663,633) |
(9,034,948) |
(13,758,882) |
(2,114,700) |
||||||||
| Operating profit |
3,866,680 |
2,549,689 |
1,426,814 |
219,296 |
12,628,864 |
12,153,811 |
1,868,008 |
||||||||
| Other income: |
|||||||||||||||
| Investment income, net |
291,960 |
117,746 |
96,030 |
14,760 |
200,333 |
362,113 |
55,656 |
||||||||
| Interest income, net |
125,335 |
164,684 |
190,733 |
29,315 |
541,969 |
667,323 |
102,566 |
||||||||
| Exchange gains/ (losses), net |
90,461 |
(109,891) |
(159,106) |
(24,454) |
146,510 |
(448,827) |
(68,983) |
||||||||
| Other, net |
219,188 |
44,876 |
37,814 |
5,812 |
377,685 |
277,080 |
42,586 |
||||||||
| Net income before tax |
4,593,624 |
2,767,104 |
1,592,285 |
244,729 |
13,895,361 |
13,011,500 |
1,999,833 |
||||||||
| Income tax |
(882,018) |
(225,494) |
(290,372) |
(44,629) |
(2,102,498) |
(2,162,363) |
(332,349) |
||||||||
| Net income after tax |
3,711,606 |
2,541,610 |
1,301,913 |
200,100 |
11,792,863 |
10,849,137 |
1,667,484 |
||||||||
| Net income attributable to noncontrolling interests |
(28,506) |
(14,161) |
(16,300) |
(2,505) |
(188,343) |
(141,198) |
(21,702) |
||||||||
| Net income attributable to |
3,683,100 |
2,527,449 |
1,285,613 |
197,595 |
11,604,520 |
10,707,939 |
1,645,782 |
||||||||
| Basic earnings per share |
1.12 |
0.77 |
0.39 |
0.06 |
3.54 |
3.25 |
0.50 |
||||||||
| Basic earnings per ADS |
28.06 |
19.18 |
9.79 |
1.50 |
88.40 |
81.36 |
12.50 |
||||||||
| Diluted earnings per share |
1.11 |
0.76 |
0.39 |
0.06 |
3.51 |
3.23 |
0.50 |
||||||||
| Diluted earnings per ADS |
27.82 |
19.05 |
9.71 |
1.49 |
87.72 |
80.74 |
12.41 |
||||||||
| Weighted average number of |
3,281,411 |
3,294,167 |
3,284,028 |
3,284,028 |
3,281,729 |
3,290,312 |
3,290,312 |
||||||||
| Weighted average number of |
131,256 |
131,767 |
131,361 |
131,361 |
131,269 |
131,612 |
131,612 |
||||||||
| Weighted average number of |
3,310,275 |
3,317,373 |
3,310,586 |
3,310,586 |
3,307,109 |
3,315,478 |
3,315,478 |
||||||||
| Weighted average number of |
132,411 |
132,695 |
132,423 |
132,423 |
132,284 |
132,619 |
132,619 |
||||||||
| 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, |
||||||||
| 2016 |
2017 |
2017 |
2017 |
2016 |
2017 |
2017 |
||||||||
| RMB |
RMB |
RMB |
USD (Note 1) |
RMB |
RMB |
USD (Note 1) |
||||||||
| Cash flows from operating activities: |
||||||||||||||
| Net income |
3,711,606 |
2,541,610 |
1,301,913 |
200,100 |
11,792,863 |
10,849,137 |
1,667,484 |
|||||||
| Adjustments to reconcile net income to net |
||||||||||||||
| Depreciation and amortization |
96,653 |
210,791 |
274,298 |
42,159 |
327,515 |
801,804 |
123,235 |
|||||||
| Impairment loss for investments |
12,247 |
18,337 |
14,000 |
2,152 |
278,906 |
58,537 |
8,997 |
|||||||
| Share-based compensation cost |
273,975 |
497,460 |
593,301 |
91,188 |
990,131 |
2,004,263 |
308,050 |
|||||||
| (Reversal of)/ allowance for provision for doubtful debts |
(2,398) |
17,784 |
28,914 |
4,444 |
9,952 |
60,826 |
9,349 |
|||||||
| Losses/ (gains) on disposal of property, |
46 |
(174) |
5,118 |
787 |
1,276 |
5,072 |
780 |
|||||||
| Unrealized exchange (gains)/ losses |
(77,989) |
118,646 |
155,511 |
23,902 |
(166,638) |
437,868 |
67,299 |
|||||||
| Gain on disposal of long-term investments |
(234,050) |
- |
- |
- |
(234,050) |
(9,595) |
(1,475) |
|||||||
| Deferred income taxes |
(14,874) |
(180,849) |
(83,865) |
(12,890) |
66,676 |
(438,043) |
(67,326) |
|||||||
| Net equity share of loss/ (gains) from associated companies |
36,050 |
(2,180) |
(20,849) |
(3,204) |
85,813 |
12,232 |
1,880 |
|||||||
| Fair value changes of short-term investments |
(95,697) |
(112,996) |
(81,546) |
(12,533) |
(304,605) |
(389,793) |
(59,910) |
|||||||
| Changes in operating assets and liabilities: |
||||||||||||||
| Accounts receivable |
(1,586,524) |
125,160 |
(391,603) |
(60,188) |
(1,646,885) |
565,228 |
86,874 |
|||||||
| Prepayments and other current assets |
(968,609) |
(1,141,181) |
(655,332) |
(100,723) |
(1,824,362) |
(4,013,039) |
(616,793) |
|||||||
| Accounts payable |
517,861 |
191,847 |
403,973 |
62,090 |
604,089 |
1,100,787 |
169,188 |
|||||||
| Salary and welfare payables |
704,875 |
(177,525) |
805,435 |
123,793 |
570,466 |
700,479 |
107,662 |
|||||||
| Taxes payable |
667,002 |
(577,588) |
594,408 |
91,359 |
986,390 |
(155,904) |
(23,962) |
|||||||
| Deferred revenue |
2,004,605 |
53,034 |
73,352 |
11,274 |
2,879,489 |
(1,291,890) |
(198,560) |
|||||||
| Accrued liabilities and other payables |
333,967 |
73,080 |
864,426 |
132,860 |
1,071,240 |
1,591,269 |
244,574 |
|||||||
| Net cash provided by operating activities |
5,378,746 |
1,655,256 |
3,881,454 |
596,570 |
15,488,266 |
11,889,238 |
1,827,346 |
|||||||
| Cash flows from investing activities: |
||||||||||||||
| Purchase of property, equipment and software |
(463,794) |
(512,359) |
(572,115) |
(87,932) |
(1,135,533) |
(1,842,933) |
(283,254) |
|||||||
| Proceeds from sale of property, equipment and software |
83 |
465 |
1,187 |
182 |
2,064 |
4,425 |
680 |
|||||||
| Purchase of other intangible assets |
(2,005) |
- |
- |
- |
(4,434) |
(25) |
(4) |
|||||||
| Purchase of land use right |
- |
(6,488) |
- |
- |
(60) |
(6,488) |
(997) |
|||||||
| Net change in short-term investments |
(2,661,702) |
1,943,208 |
(3,119,511) |
(479,460) |
(3,704,332) |
(895,298) |
(137,605) |
|||||||
| Purchase of short-term investments |
(2,000,000) |
(1,865,000) |
(1,235,000) |
(189,816) |
(12,439,000) |
(12,491,000) |
(1,919,832) |
|||||||
| Proceeds from maturities of short-term investments |
3,890,560 |
4,851,772 |
2,656,842 |
408,349 |
9,879,319 |
15,615,544 |
2,400,065 |
|||||||
| Investment in associated companies |
(900) |
(81,293) |
(154,476) |
(23,743) |
(364,486) |
(235,769) |
(36,237) |
|||||||
| Proceeds from disposal of investment in associated company |
249,569 |
340,435 |
- |
- |
249,569 |
350,418 |
53,858 |
|||||||
| Transfer (to)/ from restricted cash |
(713,162) |
(22,341) |
359,997 |
55,331 |
(2,140,421) |
(394,021) |
(60,560) |
|||||||
| Placement/rollover of matured time deposits |
(6,818,322) |
(13,084,711) |
(8,183,371) |
(1,257,761) |
(20,367,430) |
(33,984,148) |
(5,223,268) |
|||||||
| Proceeds from maturities of time deposits |
3,911,939 |
8,035,982 |
7,409,214 |
1,138,775 |
16,377,449 |
22,429,597 |
3,447,366 |
|||||||
| Net change in other assets |
515 |
(566,205) |
(797,504) |
(122,574) |
(354,519) |
(1,799,593) |
(276,594) |
|||||||
| Net cash used in investing activities |
(4,607,219) |
(966,535) |
(3,634,737) |
(558,649) |
(14,001,814) |
(13,249,291) |
(2,036,382) |
|||||||
| 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, |
|||||||||||||
| 2016 |
2017 |
2017 |
2017 |
2016 |
2017 |
2017 |
|||||||||||||
| RMB |
RMB |
RMB |
USD (Note 1) |
RMB |
RMB |
USD (Note 1) |
|||||||||||||
| Cash flows from financing activities: |
|||||||||||||||||||
| Proceeds of short-term bank loans |
3,815,678 |
16,590,069 |
18,172,348 |
2,793,039 |
11,354,866 |
61,333,209 |
9,426,742 |
||||||||||||
| Payment of short-term bank loans |
(3,005,010) |
(16,133,060) |
(17,197,778) |
(2,643,250) |
(9,860,110) |
(58,228,239) |
(8,949,516) |
||||||||||||
| Capital contribution from noncontrolling interests and |
- |
60,000 |
40,000 |
6,148 |
4 |
911,500 |
140,095 |
||||||||||||
| Repurchase of shares |
- |
(933,861) |
(436,630) |
(67,109) |
(1,199,102) |
(2,061,591) |
(316,862) |
||||||||||||
| Dividends paid to shareholders |
(692,524) |
(735,611) |
(624,395) |
(95,968) |
(2,546,165) |
(3,257,607) |
(500,685) |
||||||||||||
| Net cash provided by /(used in) financing activities |
118,144 |
(1,152,463) |
(46,455) |
(7,140) |
(2,250,507) |
(1,302,728) |
(200,226) |
||||||||||||
| Effect of exchange rate changes on cash |
|||||||||||||||||||
| held in foreign currencies |
68,025 |
26,764 |
(11,644) |
(1,790) |
132,067 |
(12,578) |
(1,933) |
||||||||||||
| Net increase/ (decrease) in cash and cash equivalents |
957,696 |
(436,978) |
188,618 |
28,991 |
(631,988) |
(2,675,359) |
(411,195) |
||||||||||||
| Cash and cash equivalents, beginning of the period |
4,481,803 |
3,012,500 |
2,575,522 |
395,850 |
6,071,487 |
5,439,499 |
836,036 |
||||||||||||
| Cash and cash equivalents, end of the period |
5,439,499 |
2,575,522 |
2,764,140 |
424,841 |
5,439,499 |
2,764,140 |
424,841 |
||||||||||||
| Supplemental disclosures of cash flow information: |
|||||||||||||||||||
| Cash paid for income tax, net of tax refund |
119,585 |
1,212,178 |
(238,447) |
(36,649) |
1,097,178 |
2,712,875 |
416,961 |
||||||||||||
| Supplemental schedule of non-cash investing |
|||||||||||||||||||
| and financing activities: |
|||||||||||||||||||
| Fixed asset purchases financed by |
260,277 |
259,593 |
293,194 |
45,063 |
260,277 |
293,194 |
45,063 |
||||||||||||
| 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, |
||||||||
| 2016 |
2017 |
2017 |
2017 |
2016 |
2017 |
2017 |
||||||||
| RMB |
RMB |
RMB |
USD (Note 1) |
RMB |
RMB |
USD (Note 1) |
||||||||
| Net revenues: |
||||||||||||||
| Online game services |
8,959,140 |
8,111,652 |
8,004,352 |
1,230,246 |
27,980,491 |
36,281,642 |
5,576,386 |
|||||||
| E-commerce |
1,691,235 |
2,667,450 |
4,653,652 |
715,253 |
4,541,744 |
11,670,416 |
1,793,710 |
|||||||
| Advertising services |
664,815 |
631,446 |
736,597 |
113,213 |
2,152,379 |
2,408,823 |
370,230 |
|||||||
| E-mail and others |
783,830 |
1,067,241 |
1,213,035 |
186,440 |
3,504,230 |
3,741,138 |
575,002 |
|||||||
| Total net revenues |
12,099,020 |
12,477,789 |
14,607,636 |
2,245,152 |
38,178,844 |
54,102,019 |
8,315,328 |
|||||||
| Cost of revenues: |
||||||||||||||
| Online game services |
(3,516,965) |
(3,039,004) |
(3,087,192) |
(474,493) |
(9,974,146) |
(13,473,339) |
(2,070,814) |
|||||||
| E-commerce |
(1,479,283) |
(2,361,429) |
(4,310,338) |
(662,487) |
(3,986,871) |
(10,464,714) |
(1,608,397) |
|||||||
| Advertising services |
(223,018) |
(202,208) |
(212,488) |
(32,659) |
(749,652) |
(797,892) |
(122,634) |
|||||||
| E-mail and others |
(416,475) |
(927,573) |
(1,253,007) |
(192,584) |
(1,804,363) |
(3,453,381) |
(530,775) |
|||||||
| Total cost of revenues |
(5,635,741) |
(6,530,214) |
(8,863,025) |
(1,362,223) |
(16,515,032) |
(28,189,326) |
(4,332,620) |
|||||||
| Gross profit/ (loss): |
||||||||||||||
| Online game services |
5,442,175 |
5,072,648 |
4,917,160 |
755,753 |
18,006,345 |
22,808,303 |
3,505,572 |
|||||||
| E-commerce |
211,952 |
306,021 |
343,314 |
52,766 |
554,873 |
1,205,702 |
185,313 |
|||||||
| Advertising services |
441,797 |
429,238 |
524,109 |
80,554 |
1,402,727 |
1,610,931 |
247,596 |
|||||||
| E-mail and others |
367,355 |
139,668 |
(39,972) |
(6,144) |
1,699,867 |
287,757 |
44,227 |
|||||||
| Total gross profit |
6,463,279 |
5,947,575 |
5,744,611 |
882,929 |
21,663,812 |
25,912,693 |
3,982,708 |
|||||||
| Gross profit/ (loss) margin: |
||||||||||||||
| Online game services |
60.7% |
62.5% |
61.4% |
61.4% |
64.4% |
62.9% |
62.9% |
|||||||
| E-commerce |
12.5% |
11.5% |
7.4% |
7.4% |
12.2% |
10.3% |
10.3% |
|||||||
| Advertising services |
66.5% |
68.0% |
71.2% |
71.2% |
65.2% |
66.9% |
66.9% |
|||||||
| E-mail and others |
46.9% |
13.1% |
(3.3%) |
(3.3%) |
48.5% |
7.7% |
7.7% |
|||||||
| 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 |
||||||||||||||
| Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated |
||||||||||||||
| Quarter Ended |
Year Ended |
|||||||||||||
| December 31, |
September 30, |
December 31, |
December 31, |
December 31, |
December 31, |
December 31, |
||||||||
| 2016 |
2017 |
2017 |
2017 |
2016 |
2017 |
2017 |
||||||||
| RMB |
RMB |
RMB |
USD (Note 1) |
RMB |
RMB |
USD (Note 1) |
||||||||
| Share-based compensation cost included in: |
||||||||||||||
| Cost of revenue |
114,539 |
202,887 |
248,433 |
38,183 |
444,187 |
820,281 |
126,075 |
|||||||
| Operating expenses |
||||||||||||||
| - Selling and marketing expenses |
14,724 |
22,949 |
29,925 |
4,599 |
52,689 |
95,382 |
14,660 |
|||||||
| - General and administrative expenses |
71,201 |
147,037 |
165,827 |
25,487 |
238,750 |
581,337 |
89,350 |
|||||||
| - Research and development expenses |
73,511 |
124,587 |
149,116 |
22,919 |
254,505 |
507,263 |
77,965 |
|||||||
| 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, |
||||||||
| 2016 |
2017 |
2017 |
2017 |
2016 |
2017 |
2017 |
||||||||
| RMB |
RMB |
RMB |
USD (Note 1) |
RMB |
RMB |
USD (Note 1) |
||||||||
| Net income attributable to the Company's shareholders |
3,683,100 |
2,527,449 |
1,285,613 |
197,595 |
11,604,520 |
10,707,939 |
1,645,782 |
|||||||
| Add: Share-based compensation |
273,975 |
497,460 |
593,301 |
91,188 |
990,131 |
2,004,263 |
308,050 |
|||||||
| Impairment on investment |
- |
- |
- |
- |
266,659 |
- |
- |
|||||||
| Non-GAAP net income attributable to |
3,957,075 |
3,024,909 |
1,878,914 |
288,783 |
12,861,310 |
12,712,202 |
1,953,832 |
|||||||
| Non-GAAP basic earnings per share |
1.21 |
0.92 |
0.57 |
0.09 |
3.92 |
3.86 |
0.59 |
|||||||
| Non-GAAP basic earnings per ADS |
30.15 |
22.96 |
14.30 |
2.20 |
97.98 |
96.59 |
14.85 |
|||||||
| Non-GAAP diluted earnings per share |
1.20 |
0.91 |
0.57 |
0.09 |
3.89 |
3.83 |
0.59 |
|||||||
| Non-GAAP diluted earnings per ADS |
29.88 |
22.80 |
14.19 |
2.18 |
97.22 |
95.86 |
14.73 |
|||||||
| The accompanying notes are an integral part of this press release. |
||||||||||||||
View original content:http://www.prnewswire.com/news-releases/netease-reports-fourth-quarter-and-fiscal-year-2017-unaudited-financial-results-300595056.html
