HANGZHOU, China, May 25, 2023
/PRNewswire/ -- NetEase, Inc. (NASDAQ: NTES and HKEX: 9999,
"NetEase" or the "Company"), one of China's leading internet and online game
services providers, today announced its unaudited financial results
for the first quarter ended March 31,
2023.
First Quarter 2023 Financial Highlights
- Net revenues were RMB25.0 billion
(US$3.6 billion), an increase of 6.3%
compared with the first quarter of 2022.
-
- Games and related value-added services net revenues were
RMB20.1 billion (US$2.9 billion), an increase of 7.6% compared
with the first quarter of 2022.
- Youdao net revenues were RMB1.2
billion (US$169.4 million), a
decrease of 3.1% compared with the first quarter of 2022.
- Cloud Music net revenues were RMB2.0
billion (US$285.4 million), a
decrease of 5.2% compared with the first quarter of 2022.
- Innovative businesses and others net revenues were RMB1.9 billion (US$270.5
million), an increase of 12.8% compared with the first
quarter of 2022.
- Gross profit was RMB14.9 billion
(US$2.2 billion), an increase of
16.0% compared with the first quarter of 2022.
- Total operating expenses were RMB7.7
billion (US$1.1 billion), an
increase of 4.7% compared with the first quarter of 2022.
- Net income attributable to the Company's shareholders was
RMB6.8 billion (US$983.6 million). Non-GAAP net income
attributable to the Company's shareholders was RMB7.6 billion (US$1.1
billion).[1]
- Basic net income per share was US$0.31 (US$1.53
per ADS). Non-GAAP basic net income per share was US$0.34 (US$1.71
per ADS).[1]
[1] As used
in this announcement, non-GAAP net income attributable to the
Company's shareholders and non-GAAP basic and diluted net income
per share and per ADS are defined to exclude share-based
compensation expenses. See "Unaudited Reconciliation of GAAP and
Non-GAAP Results" at the end of this announcement.
|
First Quarter 2023 and Recent Operational Highlights
- Extended the popularity of leading franchise titles including
both the Fantasy Westward Journey and Westward Journey
Online series, as well as other hit titles such as Identity
V, Justice and the mobile version of New
Ghost.
- Boosted user growth while further consolidating the ecosystem
of Eggy Party, which topped
China's iOS games download chart
in the first quarter.
- Announced release dates for exciting new titles, including
Justice mobile game slated for release on June 30, as
well as plans to bring Harry
Potter: Magic Awakened to international markets
this summer.
- Strengthened robust game pipeline through the development of
multiple upcoming titles including Badlanders, Racing
Master and Naraka: Bladepoint mobile game, as well as
Eggy Party for the
international markets.
- Continued to enrich the Cloud Music ecosystem and expand its
unique content offerings, while enlarging its thriving community
with high user engagement, improving its gross margin and
fortifying its foundation for future development.
- Resumed growth trajectory of STEAM courses and other key
business lines of Youdao despite a challenging macro environment in
January, positioning it for future development.
"We are off to a good start in 2023 with a stellar performance
from our games portfolio, which drove our total net revenues to
RMB25.0 billion in the first quarter,
up more than 6% year-over-year," said Mr. William Ding, Chief Executive Officer and
Director of NetEase. "Our flagship games have consistently
captivated and engaged our devoted players, while new games like
Eggy Party further broaden
our appeal and bring new player groups into our community. Looking
at the rest of the year, we are excited to unleash several highly
anticipated games, which span a variety of genres and geographies.
Our primary focus remains on developing games that resonate with
diverse demographics, and we're committed to delivering even more
exceptional, high-quality games to our global player base.
"In addition to gaming, Cloud Music and Youdao continue to
develop trailblazing content that drives their respective
industries forward. Across the NetEase family, we strive to raise
the bar with dynamic, premium content that increases the value we
provide to our growing user community and all of our stakeholders,"
Mr. Ding concluded.
First Quarter 2023 Financial Results
Net Revenues
Net revenues for the first quarter of 2023 were
RMB25,046.3 million
(US$3,647.0 million), compared
with RMB25,354.1 million and
RMB23,555.8 million for the
preceding quarter and the first quarter of 2022, respectively.
Net revenues from games and related value-added services were
RMB20,065.6 million
(US$2,921.8 million) for the
first quarter of 2023, compared with RMB19,085.7 million and RMB18,641.8 million for the preceding
quarter and the first quarter of 2022, respectively. Net revenues
from the operation of online games accounted for approximately
92.7% of the segment's net revenues for the first quarter of 2023,
compared with 91.8% and 92.7% for the
preceding quarter and the first quarter of 2022, respectively.
Net revenues from mobile games accounted for approximately 72.3% of
net revenues from the operation of online games for the first
quarter of 2023, compared with 66.4% and 66.9% for the
preceding quarter and the first quarter of 2022,
respectively.
Net revenues from Youdao were RMB1,163.3
million (US$169.4 million) for the first quarter of
2023, compared with RMB1,454.0
million and RMB1,200.5 million for the preceding quarter
and the first quarter of 2022, respectively.
Net revenues from Cloud Music were RMB1,959.8 million (US$285.4 million) for the first quarter of 2023,
compared with RMB2,376.3 million and
RMB2,067.2 million for the preceding
quarter and the first quarter of 2022, respectively. In the first
quarter of 2023, Cloud Music introduced a number of measures to its
live streaming services to enhance the listening experience of more
dedicated music fans and reinforce its risk controls. These
included reducing the in-app exposure of certain live
streaming functions and lowering broadcasters' and agencies'
revenue sharing ratio. These measures led to a decrease in net
revenues from Cloud Music's social entertainment services in the
first quarter.
Net revenues from innovative businesses and others were
RMB1,857.6 million (US$270.5 million) for the first quarter of 2023,
compared with RMB2,438.2 million and
RMB1,646.3 million for the preceding
quarter and the first quarter of 2022, respectively.
Gross Profit
Gross profit for the first quarter of 2023 was RMB14,896.5 million (US$2,169.1 million), compared with
RMB13,244.4 million and RMB12,836.4 million for the preceding
quarter and the first quarter of 2022, respectively.
The quarter-over-quarter increase in games and related
value-added services' gross profit was primarily due to increased
net revenues from the operation of online games such as
Eggy Party, as well as the
one-off recognition of royalty fees related to certain
licensed games recorded under cost of revenues in the
preceding quarter. The year-over-year increase was primarily due to
increased net revenues from the operation of online games such as
Eggy Party, which was
launched in May 2022.
The quarter-over-quarter decrease in Youdao's gross profit
primarily resulted from decreased net revenues from smart devices
due to seasonality, as well as the adverse impact from the pandemic
in the first quarter of 2023. The year-over-year decrease
primarily resulted from decreased net revenues from learning
services.
The quarter-over-quarter and year-over-year increases in
Cloud Music's gross profit primarily resulted from continued
improvement in cost control measures.
The quarter-over-quarter decrease in innovative businesses
and others' gross profit was primarily due to decreased e-commerce
net revenues from Yanxuan and advertising services resulting from
seasonality. The year-over-year increase was primarily due to
increased e-commerce net revenues from Yanxuan.
Gross Profit Margin
Gross profit margin for games and related value-added services
for the first quarter of 2023 was 66.7%, compared with 59.1% and
62.2% for the preceding quarter and the first quarter of 2022,
respectively. The quarter-over-quarter increase was primarily
attributable to the one-off recognition of royalty fees related to
certain licensed games recorded under cost of revenues in the
preceding quarter, as well as changes in the revenue mix of
NetEase's self-developed, co-developed and licensed games. The
year-over-year increase was attributable to changes in the revenue
mix.
Gross profit margin for Youdao for the first quarter of 2023 was
51.7%, compared with 53.3% and 53.1% for the preceding quarter and
the first quarter of 2022, respectively. The quarter-over-quarter
decrease was mainly due to the reduction in net revenues from smart
devices, while the year-over-year decrease was mainly due to
decreased net revenues from learning services, as enumerated
above.
Gross profit margin for Cloud Music was 22.4% for the first
quarter of 2023, compared with 17.8% and 12.2% for the preceding
quarter and the first quarter of 2022, respectively. The
quarter-over-quarter and year-over-year improvements were mainly
due to the improvement in cost control measures.
Gross profit margin for innovative businesses and others for the
first quarter of 2023 was 25.4%, compared with 31.5% and 21.7%
for the preceding quarter and the first quarter of 2022,
respectively. The quarter-over-quarter and year-over-year
fluctuations were mainly due to the factors enumerated
above.
Operating Expenses
Total operating expenses for the first quarter of 2023 were
RMB7,676.5 million (US$1,117.8 million), compared with RMB8,810.9 million and RMB7,329.3 million for the preceding quarter and
the first quarter of 2022, respectively. The quarter-over-quarter
decrease was mainly due to decreased marketing and research and
development expenditures related to games and related value-added
services. The year-over-year increase was mainly due to higher
staff-related costs.
Other Income/ (Expenses)
Other income/ (expenses) consisted of investment (loss)/ income,
interest income, exchange losses and others. The
quarter-over-quarter and year-over-year increases in other income
were mainly due to higher investment income from fair value
changes of equity investments with readily determinable fair
value.
Income Taxes
The Company recorded a net income tax charge of RMB1,628.6 million (US$237.1 million) for the first quarter of 2023,
compared with RMB966.6 million and
RMB1,219.3 million for the preceding
quarter and the first quarter of 2022, respectively. The effective
tax rate for the first quarter of 2023 was 19.5%, compared with
20.2% and 22.0% for the preceding quarter and the first quarter of
2022, respectively. The effective tax rate represents certain
estimates by the Company as to the tax obligations and benefits
applicable to it in each quarter.
Net Income and Non-GAAP Net Income
Net income attributable to the Company's shareholders totaled
RMB6,754.6 million (US$983.6 million) for the first quarter of 2023,
compared with RMB3,952.7 million and
RMB4,394.0 million for the preceding
quarter and the first quarter of 2022, respectively.
NetEase reported basic net income of US$0.31 per share (US$1.53 per ADS) for the first quarter of 2023,
compared with US$0.18 per share
(US$0.89 per ADS) and US$0.20 per share (US$0.98 per ADS) for the preceding quarter and
the first quarter of 2022, respectively.
Non-GAAP net income attributable to the Company's shareholders
totaled RMB7,566.2 million
(US$1,101.7 million) for the first
quarter of 2023, compared with RMB4,811.4
million and RMB5,117.6 million
for the preceding quarter and the first quarter of 2022,
respectively.
NetEase reported non-GAAP basic net income of US$0.34 per share (US$1.71 per ADS) for the first quarter of 2023,
compared with US$0.22 per share
(US$1.08 per ADS) and US$0.23 per share (US$1.14 per ADS) for the preceding quarter and
the first quarter of 2022, respectively.
Quarterly Dividend
The board of directors has approved a dividend of US$0.0930 per share (US$0.4650 per ADS) for the first quarter of 2023
to holders of ordinary shares and holders of ADSs as of the close
of business on June 9, 2023,
Beijing/ Hong Kong Time and New
York Time, respectively, payable in U.S. dollars. For holders of
ordinary shares, in order to qualify for the dividend, all valid
documents for the transfer of shares accompanied by the relevant
share certificates must be lodged for registration with the
Company's Hong Kong branch share
registrar, Computershare Hong Kong Investor Services Limited, at
Shops 1712-1716, 17th Floor, Hopewell Centre, 183
Queen's Road East, Wanchai, Hong
Kong no later than 4:30 p.m.
on June 9, 2023 (Beijing/ Hong Kong Time). The payment date is
expected to be June 21, 2023 for
holders of ordinary shares, and on or around June 23, 2023 for holders of ADSs.
NetEase paid a dividend of US$0.0540 per share (US$0.2700 per ADS) for the fourth quarter of
2022 in March 2023.
Under the Company's current dividend policy, the determination
to make dividend distributions and the amount of such distribution
in any particular quarter will be made at the discretion of its
board of directors and will be based upon the Company's operations
and earnings, cash flow, financial condition and other relevant
factors.
Other Information
As of March 31, 2023, the
Company's total cash and cash equivalents, current and non-current
time deposits and restricted cash, as well as short-term
investments balance, minus short-term and long-term loans,
totaled RMB95.1 billion (US$13.9 billion), compared with RMB95.6 billion as of December 31, 2022. Cash flow generated from
operating activities was RMB6,000.7 million (US$873.8 million) for the first quarter of
2023, compared with RMB9,009.2
million and RMB4,582.6 million
for the preceding quarter and the first quarter of 2022,
respectively.
Share Repurchase Program
On February 25, 2021, the Company
announced that its board of directors had approved a share
repurchase program of up to US$2.0
billion of the Company's outstanding ADSs and ordinary
shares in open market transactions for a period not to exceed 24
months beginning on March 2, 2021.
This amount was subsequently increased to US$3.0 billion. This share repurchase program was
completed on January 9, 2023 with the
Company having purchased an aggregate of approximately 33.6 million
ADSs for nearly US$3.0 billion.
On November 17, 2022, the Company
announced that its board of directors had approved a new share
repurchase program of up to US$5.0
billion of the Company's ADSs and ordinary shares in open
market transactions. This new share repurchase program commenced on
January 10, 2023 following the
completion of the prior program, and will be in effect for a period
not to exceed 36 months from such date. As of March 31, 2023, approximately 3.1 million
ADSs had been repurchased under this program for a total cost of
US$267.1 million.
The extent to which NetEase repurchases its ADSs and its
ordinary shares depends upon a variety of factors, including market
conditions. These programs may be suspended or discontinued at any
time.
** The United States dollar
(US$) amounts disclosed in this announcement are presented solely
for the convenience of the reader. The percentages stated are
calculated based on RMB.
Conference Call
NetEase's management team will host a teleconference call with
simultaneous webcast at 8:00 a.m.
New York Time on Thursday, May 25,
2023 (Beijing/ Hong Kong
Time: 8:00 p.m., Thursday, May 25, 2023). 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 1-914-202-3258 and providing conference ID: 10030397,
15 minutes prior to the initiation of the call. A replay of the
call will be available by dialing 1-855-883-1031 and entering PIN:
10030397. The replay will be available through June 1, 2023.
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 and HKEX: 9999, "NetEase") is a
leading internet and game services provider centered around premium
content. With extensive offerings across its expanding gaming
ecosystem, the Company develops and operates some of the most
popular and longest running mobile and PC games available in
China and globally.
Powered by one of the largest in-house game R&D teams
focused on mobile, PC and console, NetEase creates superior gaming
experiences, inspires players, and passionately delivers value for
its thriving community worldwide. By infusing play with culture,
and education with technology, NetEase transforms gaming into a
meaningful vehicle to build a more entertaining and enlightened
world.
Beyond games, NetEase service offerings include its
majority-controlled subsidiaries Youdao (NYSE: DAO), an
intelligent learning company with industry-leading technology, and
Cloud Music (HKEX: 9899), a well-known online music platform
featuring a vibrant content community, as well as Yanxuan,
NetEase's private label consumer lifestyle brand.
NetEase's market-leading ESG initiatives are among the most
recognized in the global media and entertainment industry, earning
it inclusion in 2022 Dow Jones Sustainability World Index, 2022 Dow
Jones Sustainability Emerging Markets Index, and 2023 Bloomberg
Gender-Equality Index, as well as receiving an "A" rating from
MSCI. For more information, please visit:
http://ir.netease.com/.
Forward Looking Statements
This announcement 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.
In addition, statements that are not historical facts, including
statements about NetEase's strategies and business plans, its
expectations regarding the growth of its business and its revenue
and the quotations from management in this announcement are or
contain forward-looking statements. NetEase may also make
forward-looking statements in its periodic reports to the U.S.
Securities and Exchange Commission (the "SEC"), in announcements
made on the website of The Stock Exchange of Hong Kong Limited (the
"Hong Kong Stock Exchange"), in press releases and other written
materials and in oral statements made by its officers, directors or
employees to third parties. 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
games market will not continue to grow or that NetEase will not be
able to maintain its position in that market in China or globally; risks associated with
NetEase's business and operating strategies and its ability to
implement such strategies; NetEase's ability to develop and manage
its operations and business; competition for, among other things,
capital, technology and skilled personnel; potential changes
in government regulation that could adversely affect the industry
and geographical markets in which NetEase operates, including,
among others, initiatives to enhance supervision of companies
listed on an overseas stock exchange and tighten scrutiny over data
privacy and data security; the risk that NetEase may not be able to
continuously develop new and creative online services or that
NetEase will not be able to set, or follow in a timely manner,
trends in the market; the risk related to economic uncertainty and
capital market disruption; the risk related to the expansion of
NetEase's businesses and operations internationally; and the
risk that fluctuations in the value of the Renminbi with respect to
other currencies could adversely affect NetEase's business and
financial results. Further information regarding these and other
risks is included in NetEase's filings with the SEC and
announcements on the website of the Hong Kong Stock Exchange.
NetEase does not undertake any obligation to update this
forward-looking information, except as required under 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 net income per ADS and per share, 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.
NetEase believes that these non-GAAP financial measures provide
useful information to investors in understanding and evaluating the
Company's current operating performance and 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/ income that affect our operations. Share-based
compensation expenses have been and may continue to be incurred in
NetEase's 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
"Unaudited Reconciliation of GAAP and Non-GAAP Results" at the end
of this announcement. 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
Email: ir@service.netease.com
Tel: (+86) 571-8985-3378
Twitter: https://twitter.com/NetEase_Global
NETEASE,
INC.
|
|
|
|
|
|
|
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2022
|
|
2023
|
|
2023
|
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and
cash equivalents
|
|
24,889,000
|
|
13,700,778
|
|
1,994,988
|
Time
deposits
|
|
84,947,679
|
|
98,364,645
|
|
14,323,001
|
Restricted
cash
|
|
2,699,055
|
|
3,083,493
|
|
448,991
|
Accounts
receivable, net
|
|
5,002,872
|
|
6,091,593
|
|
887,005
|
Inventories
|
|
993,636
|
|
876,303
|
|
127,600
|
Prepayments and other current assets, net
|
|
5,448,284
|
|
5,051,010
|
|
735,484
|
Short-term
investments
|
|
7,622,673
|
|
8,379,470
|
|
1,220,145
|
Total current
assets
|
|
131,603,199
|
|
135,547,292
|
|
19,737,214
|
|
|
|
|
|
|
|
Non-current
assets:
|
|
|
|
|
|
|
Property,
equipment and software, net
|
|
6,342,330
|
|
6,617,950
|
|
963,648
|
Land use
rights, net
|
|
4,121,767
|
|
4,122,407
|
|
600,269
|
Deferred
tax assets
|
|
1,480,789
|
|
1,269,291
|
|
184,823
|
Time
deposits
|
|
2,973,840
|
|
2,731,840
|
|
397,787
|
Restricted
cash
|
|
270
|
|
290
|
|
42
|
Other
long-term assets
|
|
26,238,790
|
|
27,952,374
|
|
4,070,181
|
Total non-current
assets
|
|
41,157,786
|
|
42,694,152
|
|
6,216,750
|
Total
assets
|
|
172,760,985
|
|
178,241,444
|
|
25,953,964
|
|
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests
and Shareholders' Equity
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
|
1,507,141
|
|
831,118
|
|
121,020
|
Salary and
welfare payables
|
|
4,732,941
|
|
2,572,177
|
|
374,538
|
Taxes
payable
|
|
2,813,096
|
|
3,547,553
|
|
516,564
|
Short-term
loans
|
|
23,875,704
|
|
27,392,771
|
|
3,988,696
|
Contract
liabilities
|
|
12,518,890
|
|
12,997,793
|
|
1,892,625
|
Accrued
liabilities and other payables
|
|
11,381,075
|
|
10,839,222
|
|
1,578,313
|
Total current
liabilities
|
|
56,828,847
|
|
58,180,634
|
|
8,471,756
|
|
|
|
|
|
|
|
Non-current
liabilities:
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
2,126,120
|
|
2,492,242
|
|
362,899
|
Long-term
loans
|
|
3,654,964
|
|
3,730,073
|
|
543,141
|
Other
long-term liabilities
|
|
1,277,574
|
|
1,165,017
|
|
169,640
|
Total non-current
liabilities
|
|
7,058,658
|
|
7,387,332
|
|
1,075,680
|
Total
liabilities
|
|
63,887,505
|
|
65,567,966
|
|
9,547,436
|
|
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
|
136,440
|
|
136,860
|
|
19,928
|
|
|
|
|
|
|
|
NetEase, Inc.'s
shareholders' equity
|
|
104,731,317
|
|
108,642,145
|
|
15,819,521
|
Noncontrolling
interests
|
|
4,005,723
|
|
3,894,473
|
|
567,079
|
Total equity
|
|
108,737,040
|
|
112,536,618
|
|
16,386,600
|
|
|
|
|
|
|
|
Total liabilities,
redeemable noncontrolling
interests and shareholders'
equity
|
|
172,760,985
|
|
178,241,444
|
|
25,953,964
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of this announcement.
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
|
|
|
(in thousands,
except per share data or per ADS data)
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2022
|
|
2022
|
|
2023
|
|
2023
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
23,555,842
|
|
25,354,129
|
|
25,046,287
|
|
3,647,022
|
Cost of
revenues
|
|
(10,719,463)
|
|
(12,109,765)
|
|
(10,149,741)
|
|
(1,477,917)
|
Gross
profit
|
|
12,836,379
|
|
13,244,364
|
|
14,896,546
|
|
2,169,105
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
Selling and marketing
expenses
|
|
(2,915,489)
|
|
(3,417,909)
|
|
(2,905,046)
|
|
(423,007)
|
General and
administrative expenses
|
|
(1,015,769)
|
|
(1,302,932)
|
|
(1,021,678)
|
|
(148,768)
|
Research and
development expenses
|
|
(3,398,082)
|
|
(4,090,076)
|
|
(3,749,732)
|
|
(546,003)
|
Total operating
expenses
|
|
(7,329,340)
|
|
(8,810,917)
|
|
(7,676,456)
|
|
(1,117,778)
|
Operating
profit
|
|
5,507,039
|
|
4,433,447
|
|
7,220,090
|
|
1,051,327
|
|
|
|
|
|
|
|
|
|
Other income/
(expenses):
|
|
|
|
|
|
|
|
|
Investment (loss)/
income, net
|
|
(548,702)
|
|
(37,102)
|
|
471,368
|
|
68,636
|
Interest income,
net
|
|
458,244
|
|
629,290
|
|
776,030
|
|
112,999
|
Exchange losses,
net
|
|
(97,880)
|
|
(594,241)
|
|
(386,568)
|
|
(56,289)
|
Other, net
|
|
216,330
|
|
344,875
|
|
258,033
|
|
37,573
|
Income before
tax
|
|
5,535,031
|
|
4,776,269
|
|
8,338,953
|
|
1,214,246
|
Income tax
|
|
(1,219,271)
|
|
(966,574)
|
|
(1,628,559)
|
|
(237,137)
|
Net
income
|
|
4,315,760
|
|
3,809,695
|
|
6,710,394
|
|
977,109
|
|
|
|
|
|
|
|
|
|
Accretion of redeemable
noncontrolling
interests
|
|
(733)
|
|
(710)
|
|
(860)
|
|
(125)
|
Net loss attributable
to noncontrolling
interests
|
|
78,996
|
|
143,752
|
|
45,100
|
|
6,567
|
Net income
attributable to the
Company's shareholders
|
|
4,394,023
|
|
3,952,737
|
|
6,754,634
|
|
983,551
|
|
|
|
|
|
|
|
|
|
Net income per share
*
|
|
|
|
|
|
|
|
|
Basic
|
|
1.34
|
|
1.22
|
|
2.10
|
|
0.31
|
Diluted
|
|
1.33
|
|
1.21
|
|
2.07
|
|
0.30
|
|
|
|
|
|
|
|
|
|
Net income per ADS
*
|
|
|
|
|
|
|
|
|
Basic
|
|
6.70
|
|
6.10
|
|
10.49
|
|
1.53
|
Diluted
|
|
6.63
|
|
6.05
|
|
10.37
|
|
1.51
|
|
|
|
|
|
|
|
|
|
Weighted average
number of ordinary
shares used in calculating net income
per share *
|
|
|
|
|
|
|
|
|
Basic
|
|
3,277,280
|
|
3,239,282
|
|
3,221,083
|
|
3,221,083
|
Diluted
|
|
3,316,129
|
|
3,269,082
|
|
3,256,511
|
|
3,256,511
|
|
|
|
|
|
|
|
|
|
* Each ADS
represents five ordinary shares.
|
|
|
|
|
|
|
The accompanying notes
are an integral part of this announcement.
|
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2022
|
|
2022
|
|
2023
|
|
2023
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note
1)
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net
income
|
|
4,315,760
|
|
3,809,695
|
|
6,710,394
|
|
977,109
|
Adjustments to reconcile net income to net cash provided
by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
766,180
|
|
769,141
|
|
1,082,269
|
|
157,590
|
Fair
value changes of equity security investments
|
|
1,541,002
|
|
148,156
|
|
(226,720)
|
|
(33,013)
|
Impairment losses of investments and other long-term
assets
|
|
5,000
|
|
45,401
|
|
-
|
|
-
|
Fair
value changes of short-term investments
|
|
(79,776)
|
|
(23,364)
|
|
(137,916)
|
|
(20,082)
|
Share-based compensation cost
|
|
746,154
|
|
876,560
|
|
822,413
|
|
119,753
|
(Reversal of)/ allowance for expected credit losses
|
|
(313)
|
|
6,615
|
|
20,720
|
|
3,017
|
Losses/ (gains) on disposal of property, equipment and
software
|
1,445
|
|
1,166
|
|
(610)
|
|
(89)
|
Unrealized exchange losses
|
|
98,034
|
|
589,665
|
|
385,961
|
|
56,200
|
Gains on disposal of long-term investments
|
|
(4,000)
|
|
(62,922)
|
|
(5,768)
|
|
(840)
|
Deferred income taxes
|
|
315,228
|
|
578,317
|
|
577,666
|
|
84,115
|
Share of results on equity method investees and revaluation
results from previously
held equity interest
|
|
(911,498)
|
|
(54,746)
|
|
(95,808)
|
|
(13,951)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
212,075
|
|
224,197
|
|
(1,116,282)
|
|
(162,543)
|
Inventories
|
|
103,591
|
|
(60,695)
|
|
117,330
|
|
17,085
|
Prepayments and other assets
|
|
(569,843)
|
|
1,095,882
|
|
125,827
|
|
18,322
|
Accounts
payable
|
|
(92,373)
|
|
576,021
|
|
(612,939)
|
|
(89,251)
|
Salary and
welfare payables
|
|
(1,756,224)
|
|
1,965,624
|
|
(2,225,737)
|
|
(324,092)
|
Taxes
payable
|
|
73,446
|
|
(928,071)
|
|
733,716
|
|
106,837
|
Contract
liabilities
|
|
(78,200)
|
|
(1,396,523)
|
|
489,991
|
|
71,348
|
Accrued
liabilities and other payables
|
|
(103,136)
|
|
849,094
|
|
(643,836)
|
|
(93,750)
|
Net
cash provided by operating activities
|
|
4,582,552
|
|
9,009,213
|
|
6,000,671
|
|
873,765
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Purchase of property, equipment and software
|
|
(749,361)
|
|
(348,821)
|
|
(652,939)
|
|
(95,075)
|
Proceeds from sale of property, equipment and software
|
|
12,565
|
|
2,257
|
|
2,504
|
|
365
|
Purchase of intangible assets, content and licensed
copyrights
|
|
(143,836)
|
|
(161,987)
|
|
(826,682)
|
|
(120,374)
|
Net
change in short-term investments with terms of three
months or
less
|
|
1,710,845
|
|
(931,790)
|
|
(723,151)
|
|
(105,299)
|
Purchase of short-term investments with terms over three
months
|
|
(1,250,000)
|
|
(4,700,000)
|
|
-
|
|
-
|
Proceeds from maturities of short-term investments with terms
over three
months
|
|
553,831
|
|
6,966,682
|
|
104,269
|
|
15,183
|
Investment in long-term investments and acquisition of
subsidiaries
|
|
(1,690,271)
|
|
(1,694,928)
|
|
(1,229,048)
|
|
(178,963)
|
Proceeds from disposal of long-term investments
|
|
34,237
|
|
92,795
|
|
41,280
|
|
6,011
|
Placement/ rollover of matured time deposits
|
|
(24,045,997)
|
|
(22,975,014)
|
|
(36,320,103)
|
|
(5,288,617)
|
Proceeds from maturities of time deposits
|
|
14,699,795
|
|
27,676,529
|
|
22,332,349
|
|
3,251,842
|
Change in other long-term assets
|
|
(169,545)
|
|
(61,552)
|
|
(120,841)
|
|
(17,596)
|
Net
cash (used in)/ provided by investing activities
|
|
(11,037,737)
|
|
3,864,171
|
|
(17,392,362)
|
|
(2,532,523)
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of this announcement.
|
|
|
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
2022
|
|
2023
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
changes from loans with terms of three months or
less
|
|
3,403,195
|
|
(3,753,493)
|
|
2,638,040
|
|
384,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceed of loans with terms over three months
|
|
1,915,210
|
|
2,765,086
|
|
1,279,559
|
|
186,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of loans with terms over three months
|
|
-
|
|
(191,158)
|
|
(40,422)
|
|
(5,886)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
amounts (paid)/ received related to repurchase of or capital
contribution from
noncontrolling interests and redeemable
noncontrolling interests
shareholders
|
|
(102,042)
|
|
23,616
|
|
24,349
|
|
3,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for repurchase of NetEase's ADSs/ purchase of
subsidiaries' ADSs and
shares
|
|
(1,243,917)
|
|
(3,007,765)
|
|
(2,116,757)
|
|
(308,224)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid to NetEase's shareholders
|
|
(1,683,472)
|
|
(2,018,984)
|
|
(1,212,340)
|
|
(176,530)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by/ (used in) financing
activities
|
|
2,288,974
|
|
(6,182,698)
|
|
572,429
|
|
83,351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash, cash equivalents and
restricted cash held in
foreign currencies
|
|
(21,202)
|
|
53,237
|
|
15,498
|
|
2,257
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease)/
increase in cash, cash equivalents and restricted
cash
|
(4,187,413)
|
|
6,743,923
|
|
(10,803,764)
|
|
(1,573,150)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash
equivalents and restricted cash, at the beginning
of the period
|
|
17,376,115
|
|
20,844,402
|
|
27,588,325
|
|
4,017,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash
equivalents and restricted cash, at end of the
period
|
|
13,188,702
|
|
27,588,325
|
|
16,784,561
|
|
2,444,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income tax, net
|
|
1,515,330
|
|
971,217
|
|
1,074,579
|
|
156,471
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for interest expense
|
|
37,741
|
|
264,232
|
|
275,714
|
|
40,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of this announcement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NETEASE,
INC.
|
|
|
|
|
|
|
|
|
UNAUDITED SEGMENT
INFORMATION
|
|
|
|
|
|
|
(in thousands,
except percentages)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
2022
|
|
2022
|
|
2023
|
|
2023
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
Net
revenues:
|
|
|
|
|
|
|
|
|
Games and related
value-added services
|
|
18,641,814
|
|
19,085,708
|
|
20,065,597
|
|
2,921,777
|
Youdao
|
|
1,200,541
|
|
1,453,982
|
|
1,163,270
|
|
169,385
|
Cloud Music
|
|
2,067,206
|
|
2,376,257
|
|
1,959,841
|
|
285,375
|
Innovative businesses
and others
|
|
1,646,281
|
|
2,438,182
|
|
1,857,579
|
|
270,485
|
Total net
revenues
|
|
23,555,842
|
|
25,354,129
|
|
25,046,287
|
|
3,647,022
|
|
|
|
|
|
|
|
|
|
Cost of
revenues:
|
|
|
|
|
|
|
|
|
Games and related
value-added services
|
|
(7,052,050)
|
|
(7,805,578)
|
|
(6,683,048)
|
|
(973,127)
|
Youdao
|
|
(562,691)
|
|
(679,295)
|
|
(561,420)
|
|
(81,749)
|
Cloud Music
|
|
(1,815,649)
|
|
(1,953,900)
|
|
(1,520,378)
|
|
(221,384)
|
Innovative businesses
and others
|
|
(1,289,073)
|
|
(1,670,992)
|
|
(1,384,895)
|
|
(201,657)
|
Total cost of
revenues
|
|
(10,719,463)
|
|
(12,109,765)
|
|
(10,149,741)
|
|
(1,477,917)
|
|
|
|
|
|
|
|
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
Games and related
value-added services
|
|
11,589,764
|
|
11,280,130
|
|
13,382,549
|
|
1,948,650
|
Youdao
|
|
637,850
|
|
774,687
|
|
601,850
|
|
87,636
|
Cloud Music
|
|
251,557
|
|
422,357
|
|
439,463
|
|
63,991
|
Innovative businesses
and others
|
|
357,208
|
|
767,190
|
|
472,684
|
|
68,828
|
Total gross
profit
|
|
12,836,379
|
|
13,244,364
|
|
14,896,546
|
|
2,169,105
|
|
|
|
|
|
|
|
|
|
Gross profit
margin:
|
|
|
|
|
|
|
|
|
Games and related
value-added services
|
|
62.2 %
|
|
59.1 %
|
|
66.7 %
|
|
66.7 %
|
Youdao
|
|
53.1 %
|
|
53.3 %
|
|
51.7 %
|
|
51.7 %
|
Cloud Music
|
|
12.2 %
|
|
17.8 %
|
|
22.4 %
|
|
22.4 %
|
Innovative businesses
and others
|
|
21.7 %
|
|
31.5 %
|
|
25.4 %
|
|
25.4 %
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of this announcement.
|
|
|
|
|
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 =
RMB6.8676 on the last trading day of
March 2023 (March 31, 2023) as set forth in the H.10
statistical release of the U.S. Federal Reserve Board. No
representation is made that the RMB amounts could have been, or
could be, converted into US$ at that rate on March 31, 2023, or at any other certain date.
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):
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
2022
|
|
2023
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based
compensation cost included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
198,135
|
|
195,793
|
|
203,514
|
|
29,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling and
marketing expenses
|
30,373
|
|
33,001
|
|
32,353
|
|
4,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and
administrative expenses
|
279,062
|
|
349,444
|
|
294,281
|
|
42,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and
development expenses
|
238,584
|
|
298,322
|
|
292,265
|
|
42,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of this announcement.
|
|
|
|
|
Note 3: The financial information prepared and presented in this
announcement might be different from those published and to be
published by NetEase's listed subsidiaries to meet the disclosure
requirements under U.S. GAAP or different accounting standards
requirement.
Note 4: The unaudited reconciliation of GAAP and non-GAAP
results is set out as follows in RMB and USD (in thousands, except
per share data or per ADS data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
December
31,
|
|
March
31,
|
|
March
31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022
|
|
2022
|
|
2023
|
|
2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RMB
|
|
RMB
|
|
RMB
|
|
USD (Note 1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable
to the Company's shareholders
|
|
4,394,023
|
|
3,952,737
|
|
6,754,634
|
|
983,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Share-based
compensation
|
|
723,603
|
|
858,637
|
|
811,600
|
|
118,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
attributable to the Company's shareholders
|
|
5,117,626
|
|
4,811,374
|
|
7,566,234
|
|
1,101,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
per share *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
1.56
|
|
1.49
|
|
2.35
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
1.54
|
|
1.47
|
|
2.32
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
per ADS *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
7.81
|
|
7.43
|
|
11.74
|
|
1.71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
7.72
|
|
7.36
|
|
11.62
|
|
1.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Each ADS
represents five ordinary shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of this announcement.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View original
content:https://www.prnewswire.com/news-releases/netease-announces-first-quarter-2023-unaudited-financial-results-301834458.html
SOURCE NetEase, Inc.