UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of May 2024
Commission File Number: 000-30666
NETEASE, INC.
NetEase Building, No. 599 Wangshang Road
Binjiang District, Hangzhou, 310052
People's Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annualreports
under cover of Form 20-F or Form 40-F.
Form 20-F
x
Form 40-F
..
Exhibits
Exhibit 99.1- NetEase Announces First Quarter 2024 Unaudited Financial Results
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NETEASE, INC.
By: /s/ William Lei Ding
Name: William Lei Ding
Title: Chief Executive Officer
Date:
May 23, 2024
Exhibit 99.1
Contact for Media and Investors:
Email: ir@service.netease.com
Tel: (+86) 571-8985-3378
NetEase Announces First Quarter 2024 UnauditedFinancial Results
Hangzhou, China, May 23, 2024 - NetEase, Inc.(NASDAQ: NTES and HKEX: 9999,
"NetEase" or the "Company"), a leading internet and game services provider,
todayannounced its unaudited financial results for the first quarter ended
March 31, 2024.
First Quarter 2024 Financial Highlights
. Net revenues were RMB26.9 billion (US$3.7 billion), an increase of 7.2% compared with the first quarterof 2023.
. Games and related value-added services net revenues were RMB21.5 billion
(US$3.0 billion), an increaseof 7.0% compared with the first quarter of 2023.
. Youdao net revenues were RMB1.4 billion (US$192.8 million), an increase of 19.7% compared with the firstquarter of 2023.
. Cloud Music net revenues were RMB2.0 billion (US$281.1 million), an increase of 3.6% compared with thefirst quarter of 2023.
. Innovative businesses and others net revenues were RMB2.0 billion (US$272.8
million), an increase of 6.1%compared with the first quarter of 2023.
. Gross profit was RMB17.0 billion (US$2.4 billion), an increase of 14.2% compared with the first quarterof 2023.
. Total operating expenses were RMB9.4 billion (US$1.3 billion), an increase of 22.4% compared with thefirst quarter of 2023.
1
. Net income attributable to the Company's shareholders was RMB7.6 billion (US$1.1 billion).
Non-GAAPnet income attributable to the Company's shareholders was RMB8.5 billion (US$1.2 billion).
[1]
. Basic net income per share was US$0.33 (US$1.65 per ADS). Non-GAAP basic net income per share was US$0.37(US$1.84 per ADS).
[1]
First Quarter 2024 and Recent Operational Highlights
. Our numerous established game franchises continued their overall high level of
popularity with their loyaluser bases, demonstrating ongoing sustainability.
. Hit games, including
Eggy Party, Identity V
and
Infinite Borders
, continued to generateplayer
community enthusiasm. Among them,
Identity V
achieved a strong performance in the first quarter with continued momentumduring
its sixth anniversary celebration event with record-high DAUs in May.
. Expanded recent hit title launches in more regions, bolstering our appeal in broader areas.
. Dunk City Dynasty
topped the iOS download charts in Hong Kong, Macau and Taiwan and ranked No. 1in Taiwan and No. 2 in
Hong Kong on the iOS grossing charts, respectively, following its local market introductions in April.
. Powered by seasonal updates in April,
Racing Master
once again ranked No. 1 on the iOS grossingchart in Taiwan and rose
to the No.1 and No. 2 positions in Macau and Hong Kong, respectively.
. Introduced more exciting new titles to
domestic players in the first quarter.
Shi Jie Zhi Wai
rankedNo. 1 on China's iOS download chart soon after its launch and ranked
No. 3 on China's iOS grossing chart after releasingnew content updates.
. Strengthened robust game pipeline with multiple highly anticipated games, including
Where Winds Meet
,an open-world action-adventure RPG slated for launch in the third quarter, and
Justice
mobile with planned introductions in moreregions, as well as other exciting titles across different genres, such as
Naraka: Bladepoint
mobile,
Once Human
and
MarvelRivals
.
. Renewed a publishing agreement with Blizzard Entertainment to bring beloved titles
back to China and enteredinto a broader collaboration with Microsoft Gaming.
[1]
As used in this announcement, non-GAAP net income attributableto the Company's
shareholders and non-GAAP basic and diluted net income per share and per ADS
are defined to exclude sharebasedcompensation expenses. See the unaudited
reconciliation of GAAP and non-GAAP results at the end of this announcement.
2
. Youdao strategically focused on digital content services, online marketing services and AI-driven
subscription-basedmembership services, achieving its first sequential quarter of positive net income.
. Cloud Music continued actively prioritizing its core music business, including a recent comprehensiveproduct upgrade to
its NetEase Cloud Music App, aimed at cultivating a music-centric ecosystem and driving sustainable long-term growth.
"Alongside the enduring success of our time-honoredflagship games, we continue
to expand into diverse genres and achieve new milestones in game operations,
user expansion and partnershipestablishment. With a portfolio featuring
premium-quality games and more diversification across genres, we are
well-positioned to extendour exciting gaming experiences to audiences around
the globe," said Mr. William Ding, Chief Executive Officer and Directorof
NetEase. "We remain committed to innovation and genre expansion by leveraging
our strong R&D capabilities while exploringmore opportunities through
collaboration with talent and partners globally.
"In our broader NetEase family, Cloud Musicand Youdao are performing well,
providing innovative content offerings in their respective domains. Our focus
in 2024 remains on craftingproducts and content that ignite the market with
passion and deliver vibrant experiences, ultimately creating value for both
our usersand our Company," Mr. Ding concluded.
First Quarter 2024 Financial Results
Net Revenues
Net revenues for the first quarter of 2024 wereRMB26.9 billion (US$3.7
billion), compared with RMB27.1 billion and RMB25.0 billion for the preceding
quarter and the first quarter of2023, respectively.
Net revenues from games and related value-addedservices were RMB21.5 billion
(US$3.0 billion) for the first quarter of 2024, compared with RMB20.9 billion
and RMB20.1 billion for thepreceding quarter and the first quarter of 2023,
respectively. Net revenues from the operation of online games accounted for
approximately95.2% of the segment's net revenues for the first quarter of
2024, compared with 93.4% and 92.7% for the preceding quarter and thefirst
quarter of 2023, respectively. Net revenues from mobile games accounted for
approximately 78.6% of net revenues from the operationof online games for the
first quarter of 2024, compared with 76.7% and 72.3% for the preceding quarter
and the first quarter of 2023,respectively.
Net revenues from Youdao were RMB1.4 billion (US$192.8million) for the first
quarter of 2024, compared with RMB1.5 billion and RMB1.2 billion for the
preceding quarter and the first quarterof 2023, respectively.
Net revenues from Cloud Music were RMB2.0 billion(US$281.1 million) for the
first quarter of 2024, compared with RMB2.0 billion for the preceding quarter
and the first quarter of 2023.
3
Net revenues from innovative businesses and otherswere RMB2.0 billion
(US$272.8 million) for the first quarter of 2024, compared with RMB2.8 billion
and RMB1.9 billion for the precedingquarter and the first quarter of 2023,
respectively.
Gross Profit
Gross profit for the first quarter of 2024 wasRMB17.0 billion (US$2.4
billion), compared with RMB16.8 billion and RMB14.9 billion for the preceding
quarter and the first quarter of2023, respectively.
The quarter-over-quarter and year-over-year increasesin games and related
value-added services' gross profit were primarily due to increased net
revenues from mobile games such as
EggyParty
and certain newly launched titles.
The quarter-over-quarter decrease in Youdao'sgross profit was primarily due to
decreased revenue contribution from its learning services and sales of smart
devices. The year-over-yearincrease was primarily due to increased revenue
contribution from its online marketing services.
The quarter-over-quarter and year-over-year increasesin Cloud Music's gross
profit primarily resulted from the one-off adjustment of certain copyright
costs, increased net revenuesfrom sales of membership subscriptions and
continued improvement in cost control measures.
The quarter-over-quarter decrease in innovativebusinesses and others' gross
profit was primarily due to decreased e-commerce net revenues from Yanxuan and
advertising servicesresulting from seasonality. The year-over-year increase
was primarily due to increased gross profit from Yanxuan and several other
businessesincluded within the segment.
Gross Profit Margin
Gross profit margin for games and related value-addedservices for the first
quarter of 2024 was 69.5%, compared with 69.5% and 66.7% for the preceding
quarter and the first quarter of 2023,respectively. The year-over-year
increase was mainly attributable to changes in revenue contribution from
different platforms and self-developedgames.
Gross profit margin for Youdao for the first quarterof 2024 was 49.0%,
compared with 49.9% and 51.7% for the preceding quarter and the first quarter
of 2023, respectively. The quarter-over-quarterand year-over-year decreases
were mainly due to increased revenue contribution from its online marketing
services, which have a lowergross profit margin compared to its other products
and services.
Gross profit margin for Cloud Music for the firstquarter of 2024 was 38.0%,
compared with 30.3% and 22.4% for the preceding quarter and the first quarter
of 2023, respectively. The quarter-over-quarterand year-over-year improvements
were mainly due to the factors enumerated above. The one-off adjustment of
certain copyright costs mentionedabove increased the gross profit margin in
the first quarter of 2024 by approximately five percentage points.
4
Gross profit margin for innovative businessesand others for the first quarter
of 2024 was 33.4%, compared with 34.4% and 25.4% for the preceding quarter and
the first quarter of 2023,respectively. The quarter-over-quarter decrease was
mainly due to decreased revenue contribution from advertising services. The
year-over-yearincrease was mainly due to improved gross profit margins from
Yanxuan and several other businesses included within the segment.
Operating Expenses
Total operating expenses for the first quarterof 2024 were RMB9.4 billion
(US$1.3 billion), compared with RMB10.0 billion and RMB7.7 billion for the
preceding quarter and the firstquarter of 2023, respectively. The
quarter-over-quarter decrease was mainly due to decreased research and
development investments relatedto games and related value-added services and
marketing expenditures, as well as lower staff-related costs. The
year-over-year increasewas mainly due to increased marketing expenditures and
higher staff-related costs.
Other Income/(Expenses
)
Other income/(expenses) consisted of investmentincome/(loss), interest income,
exchange (losses)/ gains and others. The quarter-over-quarter increase was
mainly due to net exchangegains in the first quarter of 2024 compared with net
exchange losses recorded in the prior quarter. The year-over-year increase was
primarilyattributable to higher interest income resulting from the improved
net cash position and net exchange gains in the first quarter of 2024,compared
with net exchange losses recorded in the first quarter of 2023.
Income Tax
The Company recorded a net income tax charge ofRMB1.5 billion (US$205.8
million) for the first quarter of 2024, compared with RMB1.1 billion and
RMB1.6 billion for the preceding quarterand the first quarter of 2023,
respectively. The effective tax rate for the first quarter of 2024 was 16.0%,
compared with 13.8% and 19.5%for the preceding quarter and the first quarter
of 2023, respectively. The effective tax rate represents certain estimates by
the Companyas 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'sshareholders totaled RMB7.6 billion
(US$1.1 billion) for the first quarter of 2024, compared with RMB6.6 billion
and RMB6.8 billion forthe preceding quarter and the first quarter of 2023,
respectively.
NetEase reported basic net income of US$0.33 pershare (US$1.65 per ADS) for
the first quarter of 2024, compared with US$0.28 per share (US$1.42 per ADS)
and US$0.29 per share (US$1.45per ADS) for the preceding quarter and the first
quarter of 2023, respectively.
5
Non-GAAP net income attributable to the Company'sshareholders totaled RMB8.5
billion (US$1.2 billion) for the first quarter of 2024, compared with RMB7.4
billion and RMB7.6 billion forthe preceding quarter and the first quarter of
2023, respectively.
NetEase reported non-GAAP basic net income ofUS$0.37 per share (US$1.84 per
ADS) for the first quarter of 2024, compared with US$0.32 per share (US$1.59
per ADS) and US$0.33 per share(US$1.63 per ADS) for the preceding quarter and
the first quarter of 2023, respectively.
Other Financial Information
As of March 31, 2024, the Company'snet cash (total cash and cash equivalents,
current and non-current time deposits and restricted cash, as well as
short-term investmentsbalance, minus short-term and long-term loans) totaled
RMB113.4 billion (US$15.7 billion), compared with RMB110.9 billion as of
December 31,2023. Net cash provided by operating activities was RMB9.6 billion
(US$1.3 billion) for the first quarter of 2024, compared with RMB11.8billion
and RMB6.0 billion for the preceding quarter and the first quarter of 2023,
respectively.
Quarterly Dividend
The board of directors has approved a dividendof US$0.0990 per share
(US$0.4950 per ADS) for the first quarter of 2024 to holders of ordinary
shares and holders of ADSs as of the closeof business on June 6, 2024,
Beijing/Hong Kong Time and New York Time, respectively, payable in U.S.
dollars. For holders of ordinaryshares, in order to qualify for the dividend,
all valid documents for the transfer of shares accompanied by the relevant
share certificatesmust be lodged for registration with the Company's Hong Kong
branch share registrar, Computershare Hong Kong Investor Services Limited,at
Shops 1712-1716, 17
th
Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong no later
than 4:30 p.m. onJune 6, 2024 (Beijing/ Hong Kong Time). The payment date is
expected to be June 17, 2024 for holders of ordinary shares andon or around
June 21, 2024 for holders of ADSs.
NetEase paid a dividend of US$0.21597 per share(US$1.07985 per ADS) for the
fourth quarter of 2023 in March 2024.
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 discretionof its board of directors and will be based upon
the Company's operations and earnings, cash flow, financial condition and
otherrelevant factors.
6
Share Repurchase Program
On November 17, 2022, the Company announcedthat its board of directors had
approved a share repurchase program of up to US$5.0 billion of the Company's
ADSs and ordinary sharesin open market transactions. This share repurchase
program commenced on January 10, 2023 and will be in effect for a period not
toexceed 36 months from such date. As of March 31, 2024, approximately 8.9
million ADSs had been repurchased under this program fora total cost of
US$811.0 million.
The extent to which NetEase repurchases its ADSsand its ordinary shares
depends upon a variety of factors, including market conditions. These programs
may be suspended or discontinuedat any time.
** The United States dollar (US$) amounts disclosedin 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 teleconferencecall with a simultaneous
webcast at 7:00 a.m. New York Time on Thursday, May 23, 2024 (Beijing/ Hong
Kong Time: 7:00 p.m., Thursday,May 23, 2024). NetEase's management will be on
the call to discuss the quarterly results and answer questions.
Interested parties may participate in the conferencecall by dialing
1-914-202-3258 and providing conference ID: 10038664, 15 minutes prior to the
initiation of the call. A replay of thecall will be available by dialing
1-855-883-1031 and entering PIN: 10038664. The replay will be available
through May 30, 2024.
This call will be webcast live and the replaywill 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 acrossits expanding gaming ecosystem, the Company develops and
operates some of the most popular and longest running mobile and PC games
availablein China and globally.
Powered by one of the largest in-house game R&Dteams focused on mobile, PC and
console, NetEase creates superior gaming experiences, inspires players, and
passionately delivers valuefor its thriving community worldwide. By infusing
play with culture, and education with technology, NetEase transforms gaming
into a meaningfulvehicle to build a more entertaining and enlightened world.
7
Beyond games, NetEase service offerings includeits 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.
For more information, please visit:
http://ir.netease.com/.
Forward Looking Statements
This announcement contains statements of a forward-lookingnature. These
statements are made under the "safe harbor" provisions of the U.S. Private
Securities Litigation Reform Actof 1995. You can identify these forward-looking
statements by terminology such as "will," "expects," "anticipates," "future,"
"intends," "plans," "believes," "estimates" and similar expressions.In
addition, statements that are not historical facts, including statements about
NetEase's strategies and business plans, its expectationsregarding the growth
of its business and its revenue and the quotations from management in this
announcement are or contain forward-lookingstatements. 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. Theaccuracy of these
statements may be impacted by a number of business risks and uncertainties
that could cause actual results to differmaterially from those projected or
anticipated, including risks related to: the risk that the online games market
will not continue togrow or that NetEase will not be able to maintain its
position in that market in China or globally; risks associated with
NetEase'sbusiness and operating strategies and its ability to implement such
strategies; NetEase's ability to develop and manage its operationsand
business; competition for, among other things, capital, technology and skilled
personnel; potential changes in government regulationthat could adversely
affect the industry and geographical markets in which NetEase operates; the
risk that NetEase may not be able tocontinuously develop new and creative
online services or that NetEase will not be able to set, or follow in a timely
manner, trends inthe market; risks related to economic uncertainty and capital
market disruption; risks related to the expansion of NetEase's businessesand
operations internationally; risks associated with cybersecurity threats or
incidents; and the risk that fluctuations in the valueof the Renminbi with
respect to other currencies could adversely affect NetEase's business and
financial results. Further informationregarding these and other risks is
included in NetEase's filings with the SEC and announcements on the website of
the Hong KongStock Exchange. NetEase does not undertake any obligation to
update this forward-looking information, except as required under
applicablelaw.
8
Non-GAAP Financial Measures
NetEase considers and uses non-GAAP financialmeasures, such as non-GAAP net
income attributable to the Company's shareholders and non-GAAP basic and
diluted net income per ADSand per share, as supplemental metrics in reviewing
and assessing its operating performance and formulating its business plan. The
presentationof non-GAAP financial measures is not intended to be considered in
isolation or as a substitute for the financial information preparedand
presented in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP").
NetEase defines non-GAAP net income attributableto the Company's shareholders
as net income attributable to the Company's shareholders excluding share-based
compensationexpenses. Non-GAAP net income attributable to the Company's
shareholders enables NetEase's management to assess its operatingresults
without considering the impact of share-based compensation expenses. NetEase
believes that this non-GAAP financial measure provideuseful information to
investors in understanding and evaluating the Company's current operating
performance and prospects in thesame 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 underU.S. GAAP and are not
presented in accordance with U.S. GAAP. Non-GAAP financial measures have
limitations as analytical tools. One ofthe key limitations of using non-GAAP
net income attributable to the Company's shareholders is that it does not
reflect all itemsof expense/ income that affect our operations. Share-based
compensation expenses have been and may continue to be incurred in
NetEase'sbusiness 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 reconcilingnon-GAAP net income
attributable to the Company's shareholders to the nearest U.S. GAAP
performance measure, all of which shouldbe considered when evaluating the
Company's performance. See the unaudited reconciliation of GAAP and non-GAAP
results at the endof this announcement. NetEase encourages you to review its
financial information in its entirety and not rely on a single financial
measure.
9
NETEASE, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, March 31, March 31,
2023 2024 2024
RMB RMB USD (Note 1)
Assets
Current assets:
Cash and cash equivalents 21,428,902 43,026,904 5,959,157
Time deposits 100,856,034 89,473,549 12,391,943
Restricted cash 2,777,206 3,055,366 423,163
Accounts receivable, net 6,422,417 7,767,599 1,075,800
Inventories 695,374 603,981 83,650
Prepayments and other current assets, net 6,076,595 5,769,626 799,084
Short-term investments 4,436,057 2,095,218 290,184
Total current assets 142,692,585 151,792,243 21,022,981
Non-current assets:
Property, equipment and software, net 8,075,044 8,056,689 1,115,839
Land use rights, net 4,075,143 4,048,518 560,713
Deferred tax assets 1,560,088 1,476,100 204,437
Time deposits 1,050,000 1,050,000 145,423
Restricted cash 550 3,250 450
Other long-term assets 28,471,568 28,638,072 3,966,328
Total non-current assets 43,232,393 43,272,629 5,993,190
Total assets 185,924,978 195,064,872 27,016,171
Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity
Current liabilities:
Accounts payable 881,016 871,430 120,692
Salary and welfare payables 4,857,206 2,700,087 373,958
Taxes payable 2,571,534 3,844,879 532,510
Short-term loans 19,240,163 24,843,410 3,440,773
Contract liabilities 13,362,166 14,911,048 2,065,156
Accrued liabilities and other payables 12,930,399 12,878,519 1,783,651
Total current liabilities 53,842,484 60,049,373 8,316,740
Non-current liabilities:
Deferred tax liabilities 2,299,303 2,700,293 373,986
Long-term loans 427,997 427,997 59,277
Other long-term liabilities 1,271,113 1,248,717 172,945
Total non-current liabilities 3,998,413 4,377,007 606,208
Total liabilities 57,840,897 64,426,380 8,922,948
Redeemable noncontrolling interests 115,759 118,460 16,407
NetEase, Inc.'s shareholders' equity 124,285,776 127,275,764 17,627,490
Noncontrolling interests 3,682,546 3,244,268 449,326
Total equity 127,968,322 130,520,032 18,076,816
Total liabilities, redeemable noncontrolling interests and shareholders' equity 185,924,978 195,064,872 27,016,171
The accompanying notes are an integral partof this announcement.
10
NETEASE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data or per ADS data)
Three Months Ended
March 31, December March 31, March 31,
31,
2023 2023 2024 2024
RMB RMB RMB USD (Note
1)
Net 25,046,287 27,140,165 26,851,741 3,718,923
revenues
Cost of (10,149,741 ) (10,315,030 ) (9,835,821 ) (1,362,245 )
revenues
Gross 14,896,546 16,825,135 17,015,920 2,356,678
profit
Operating
expenses:
Selling and (2,905,046 ) (4,225,556 ) (4,022,204 ) (557,069 )
marketing expenses
General and (1,021,678 ) (1,251,869 ) (1,196,475 ) (165,710 )
administrative expenses
Research and (3,749,732 ) (4,479,219 ) (4,174,758 ) (578,197 )
development expenses
Total operating (7,676,456 ) (9,956,644 ) (9,393,437 ) (1,300,976 )
expenses
Operating 7,220,090 6,868,491 7,622,483 1,055,702
profit
Other
income/(expenses):
Investment 471,368 (8,940 ) 179,291 24,832
income/(loss), net
Interest 776,030 1,261,583 1,277,597 176,945
income, net
Exchange (386,568 ) (810,904 ) 15,011 2,079
(losses)/gains , net
Other, 258,033 434,759 193,888 26,853
net
Income 8,338,953 7,744,989 9,288,270 1,286,411
before tax
Income (1,628,559 ) (1,068,657 ) (1,485,910 ) (205,796 )
tax
Net 6,710,394 6,676,332 7,802,360 1,080,615
income
Accretion of redeemable (860 ) (966 ) (958 ) (133 )
noncontrolling interests
Net loss/(income) attributable to noncontrolling 45,100 (93,103 ) (167,456 ) (23,192 )
interests and redeemable noncontrolling interests
Net income attributable to 6,754,634 6,582,263 7,633,946 1,057,290
the Company's shareholders
Net income
per share *
Basic 2.10 2.05 2.38 0.33
Diluted 2.07 2.02 2.35 0.33
Net income
per ADS *
Basic 10.49 10.25 11.88 1.65
Diluted 10.37 10.12 11.75 1.63
Weighted average number of ordinary shares
used in calculating net income per share *
Basic 3,221,083 3,212,328 3,211,665 3,211,665
Diluted 3,256,511 3,253,166 3,249,452 3,249,452
* Each ADS represents five ordinaryshares.
The accompanying notes are an integral part of this announcement.
11
NETEASE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
March 31, December March 31, March 31,
31,
2023 2023 2024 2024
RMB RMB RMB USD (Note
1)
Cash flows from
operating activities:
Net 6,710,394 6,676,332 7,802,360 1,080,615
income
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and 1,082,269 659,772 567,923 78,656
amortization
Fair value changes of equity (226,720 ) 151,571 (368,258 ) (51,003 )
security and other investments
Impairment losses on investments - 140,648 128,417 17,786
and other long-term assets
Fair value changes of (137,916 ) (106,532 ) (60,810 ) (8,422 )
short-term investments
Share-based 822,413 812,987 894,300 123,859
compensation cost
Allowance for expected 20,720 9,500 11,600 1,607
credit losses
(Gains)/losses on disposal of (610 ) 3,385 2,132 295
property, equipment and software
Unrealized exchange 385,961 838,056 (17,509 ) (2,425 )
losses/(gains)
Gains on disposal of long-term (5,768 ) (38,437 ) (13,487 ) (1,868 )
investments, business and subsidiaries
Deferred 577,666 193,854 485,054 67,179
income taxes
Share of results on equity method investees and (95,808 ) (88,805 ) 164,271 22,751
revaluation results from previously held equity interest
Changes in operating
assets and liabilities:
Accounts (1,116,282 ) 53,089 (1,358,711 ) (188,179 )
receivable
Inventories 117,330 25,054 91,378 12,656
Prepayments and 125,827 542,593 326,140 45,170
other assets
Accounts (612,939 ) 18,443 (7,001 ) (970 )
payable
Salary and (2,225,737 ) 1,992,931 (2,178,608 ) (301,734 )
welfare payables
Taxes 733,716 (500,172 ) 1,271,822 176,145
payable
Contract 489,991 (847,562 ) 1,574,086 218,008
liabilities
Accrued liabilities (643,836 ) 1,271,572 242,070 33,526
and other payables
Net cash provided by 6,000,671 11,808,279 9,557,169 1,323,652
operating activities
Cash flows from
investing activities:
Purchase of property, (652,939 ) (484,927 ) (415,018 ) (57,479 )
equipment and software
Proceeds from sale of property, 2,504 405 3,506 486
equipment and software
Purchase of intangible assets, (826,682 ) (121,797 ) (188,821 ) (26,151 )
content and licensed copyrights
Net changes in short-term investments (723,151 ) (690,628 ) 2,401,649 332,625
with terms of three months or less
Proceeds from maturities of short-term 104,269 4,897,291 - -
investments with terms over three months
Investment in long-term investments (1,229,048 ) (914,962 ) (481,804 ) (66,729 )
and acquisition of subsidiaries
Proceeds from disposal of long-term 41,280 73,855 85,456 11,836
investments, businesses and subsidiaries
Placement/rollover of (36,320,103 ) (46,666,670 ) (34,558,836 ) (4,786,344 )
matured time deposits
Proceeds from maturities 22,332,349 33,273,393 46,048,382 6,377,627
of time deposits
Change in other (120,841 ) (90,635 ) (34,625 ) (4,796 )
long-term assets
Net cash (used in)/provided (17,392,362 ) (10,724,675 ) 12,859,889 1,781,075
by investing activities
Cash flows from
financing activities:
Net changes from loans with 2,638,040 6,179,979 (399,726 ) (55,361 )
terms of three months or less
Proceeds of loans with 1,279,559 2,511,000 6,998,250 969,246
terms over three months
Payment of loans with (40,422 ) (695,000 ) (957,000 ) (132,543 )
terms over three months
Net amounts received related to capital contribution 24,349 28,009 42,214 5,847
from noncontrolling interests shareholders
Cash paid for repurchase of NetEase's (2,116,757 ) (625,832 ) (1,233,780 ) (170,877 )
ADSs/purchase of subsidiaries' ADSs and shares
Dividends paid to (1,212,340 ) (2,258,892 ) (4,945,016 ) (684,877 )
NetEase's shareholders
Net cash provided by/(used 572,429 5,139,264 (495,058 ) (68,565 )
in) financing activities
Effect of exchange rate changes on cash, cash equivalents 15,498 (174,276 ) (43,138 ) (5,975 )
and restricted cash held in foreign currencies
Net (decrease)/increase in cash, (10,803,764 ) 6,048,592 21,878,862 3,030,187
cash equivalents and restricted cash
Cash, cash equivalents and restricted 27,588,325 18,158,066 24,206,658 3,352,583
cash, at the beginning of the period
Cash, cash equivalents and restricted 16,784,561 24,206,658 46,085,520 6,382,770
cash, at end of the period
Supplemental disclosures
of cash flow information:
Cash paid for 1,074,579 1,030,932 1,182,711 163,804
income taxes, net
Cash paid for 275,714 71,847 146,455 20,284
interest expenses
The accompanying notes are an integral part of this announcement.
12
NETEASE, INC.
UNAUDITED SEGMENT INFORMATION
(in thousands, except percentages)
Three Months Ended
March 31, December 31, March 31, March 31,
2023 2023 2024 2024
RMB RMB RMB USD (Note 1)
Net revenues:
Games and related value-added services 20,065,597 20,921,355 21,460,378 2,972,228
Youdao 1,163,270 1,480,521 1,391,859 192,770
Cloud Music 1,959,841 1,985,548 2,029,541 281,088
Innovative businesses and others 1,857,579 2,752,741 1,969,963 272,837
Total net revenues 25,046,287 27,140,165 26,851,741 3,718,923
Cost of revenues:
Games and related value-added services (6,683,048 ) (6,383,474 ) (6,555,311 ) (907,900 )
Youdao (561,420 ) (741,720 ) (710,356 ) (98,383 )
Cloud Music (1,520,378 ) (1,384,537 ) (1,259,006 ) (174,370 )
Innovative businesses and others (1,384,895 ) (1,805,299 ) (1,311,148 ) (181,592 )
Total cost of revenues (10,149,741 ) (10,315,030 ) (9,835,821 ) (1,362,245 )
Gross profit:
Games and related value-added services 13,382,549 14,537,881 14,905,067 2,064,328
Youdao 601,850 738,801 681,503 94,387
Cloud Music 439,463 601,011 770,535 106,718
Innovative businesses and others 472,684 947,442 658,815 91,245
Total gross profit 14,896,546 16,825,135 17,015,920 2,356,678
Gross profit margin:
Games and related value-added services 66.7 % 69.5 % 69.5 % 69.5 %
Youdao 51.7 % 49.9 % 49.0 % 49.0 %
Cloud Music 22.4 % 30.3 % 38.0 % 38.0 %
Innovative businesses and others 25.4 % 34.4 % 33.4 % 33.4 %
The accompanying notes are an integral partof this announcement.
13
NETEASE, INC.
NOTES TO UNAUDITED FINANCIAL INFORMATION
Note 1: The conversion of Renminbi (RMB) intoUnited States dollars (USD) is
based on the noon buying rate of USD1.00 = RMB7.2203 on the last trading day
of March 2024 (March 29,2024) as set forth in the H.10 statistical release of
the U.S. Federal Reserve Board. No representation is made that the RMB amounts
couldhave been, or could be, converted into US$ at that rate on March 29,
2024, or at any other certain date.
Note 2: Share-based compensation cost reportedin 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,
2023 2023 2024 2024
RMB RMB RMB USD (Note 1)
Share-based compensation cost included in:
Cost of revenues 203,514 216,717 254,935 35,308
Operating expenses
Selling and marketing expenses 32,353 35,575 17,869 2,475
General and administrative expenses 294,281 262,830 289,636 40,114
Research and development expenses 292,265 297,865 331,860 45,962
The accompanying notes are an integral part of this announcement.
Note 3: The financial information prepared andpresented in this announcement
might be different from those published and to be published by NetEase's
listed subsidiary to meetthe disclosure requirements under different
accounting standards requirements.
Note 4: The unaudited reconciliation of GAAP andnon-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,
2023 2023 2024 2024
RMB RMB RMB USD (Note 1)
Net income attributable to the Company's shareholders 6,754,634 6,582,263 7,633,946 1,057,290
Add: Share-based compensation 811,600 797,194 876,898 121,449
Non-GAAP net income attributable to the Company's shareholders 7,566,234 7,379,457 8,510,844 1,178,739
Non-GAAP net income per share *
Basic 2.35 2.30 2.65 0.37
Diluted 2.32 2.27 2.62 0.36
Non-GAAP net income per ADS *
Basic 11.74 11.49 13.25 1.84
Diluted 11.62 11.34 13.10 1.81
* Each ADS represents five ordinary shares.
The accompanying notes are an integral part of this announcement.
14
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