NetEase Reports Third Quarter 2015 Unaudited Financial Results

Nov 11, 2015, 18:00 ET from NetEase, Inc.

BEIJING, Nov. 11, 2015 /PRNewswire/ -- NetEase, Inc. (NASDAQ: NTES), one of China's leading Internet and online game services providers, today announced its unaudited financial results for the third quarter ended September 30, 2015.

"We are honored to be a leading developer and operator of some of the country's most popular games as China's online game industry is on track to become the world's largest gaming market," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "Our third quarter financial results reflect our success at innovation with total net revenues increasing by 114.1% compared with the third quarter of last year. We grew our top-line net revenues across our three business segments both sequentially and year-over-year, with year-over-year increases of 124.5% in online games, 10.5% in advertising services and 162.2% in e-mail, e-commerce and others."

"Our self-developed and licensed PC-client games maintain a healthy appeal to our users, while our mobile games are driving new growth. During the third quarter of this year, we launched our Westward Journey Online mobile game, which together with our Fantasy Westward Journey mobile game, are now the top two grossing games in the iOS China app store. Players' appetite for our new self-developed PC-client game Revelation, a 3D oriental fantasy MMORPG, was also strong in the third quarter, and we saw continued interest in Blizzard Entertainment's Diablo III®: Reaper of Souls and Hearthstone®: Heroes of Warcraft. A number of new expansion packs for our PC-client games were warmly received during the third quarter as well, including Fantasy Westward Journey II and a new version of Ghost II, named New Ghost. Additionally, we have entered into collaboration between New Ghost and an urban TV show, which is based on a renowned youth romance novel. This cooperation represents the initiation of our strategy to utilize innovative marketing models for our games that further extend our brand."

"Today, our mobile portfolio stands strong with more than 50 titles, and we plan to grow this position with self-developed and licensed games that continue to delight our players. These include games that we have launched since July of this year that have gained immediate traction such as Fairy Tales: The World of the Brave, Kari-ri-sei Million Arthur, Lunar Flowers, The Beautiful Dream and Chrono Blade. In addition, we are planning for the exciting introduction of our highly-anticipated Kung Fu Panda mobile game in late November, as well as The X-World, Fantasy Westward Journey: Warriors and Raven in the coming months. For our PC-client games, the new expansion pack for Kung Fu Master II, which we released in October, is being well received. We also look forward to bringing our PC-client players thrilling new experiences with expansion packs planned for Tianxia III, Heroes of Tang Dynasty Zero, and the new release of Hegemon-King of Western Chu."

"Advertisers are continuing the transition from PC to mobile, a platform where our foothold is particularly strong. Supported by the popularity of our Mobile News App, we are seeing continued growth in our advertising revenues from mobile platforms. During the third quarter, our advertising services' net revenues growth was led by the automobile, Internet services and food and beverage sectors. Our cross-border e-commerce platform Kaola.com also continued to grow rapidly during the third quarter and we are seeing sustained strong momentum from our e-commerce business."

"Our portfolio of PC-client and mobile games is robust and growing. In addition to the domestic popularity of our mobile initiatives that span games, apps, advertising services and e-commerce, we have now launched several new games for overseas audiences to a positive reception. Along with our rapid mobile growth, our focus remains on superior quality and innovation, particularly where there is an opportunity to enhance our offerings with IP and data sharing between our PC-client and mobile games, and other product and service offerings across our business lines," Mr. Ding concluded.

Third Quarter 2015 Financial Results

Net Revenues

Net revenues for the third quarter of 2015 were RMB6,671.8 million (US$1,049.7 million), compared to RMB4,567.9 million and RMB3,116.7 million for the preceding quarter and the third quarter of 2014, respectively.

Net revenues from online games were RMB5,212.9 million (US$820.2 million) for the third quarter of 2015, compared to RMB3,657.1 million and RMB2,322.0 million for the preceding quarter and the third quarter of 2014, respectively.

Net revenues from advertising services were RMB454.9 million (US$71.6 million) for the third quarter of 2015, compared to RMB427.7 million and RMB411.7 million for the preceding quarter and the third quarter of 2014, respectively.

Net revenues from e-mail, e-commerce and others were RMB1,004.0 million (US$158.0 million) for the third quarter of 2015, compared to RMB483.0 million and RMB383.0 million for the preceding quarter and the third quarter of 2014, respectively.

Gross Profit

Gross profit for the third quarter of 2015 was RMB3,849.3 million (US$605.6 million), compared to RMB2,845.6 million and RMB2,258.4 million for the preceding quarter and the third quarter of 2014, respectively.

The year-over-year and quarter-over-quarter increases in online games gross profit were primarily driven by revenue contribution from mobile games such as the Fantasy Westward Journey mobile game and licensed games such as Blizzard Entertainment's Diablo III®: Reaper of Souls and Hearthstone®: Heroes of Warcraft, as well as NetEase's new self-developed PC-client games such as Revelation.

The year-over-year and quarter-over-quarter increases in advertising services gross profit were primarily attributable to strong demand from the automobile, Internet services and food and beverage sectors, and NetEase's monetization efforts for its mobile applications, primarily its Mobile News App.

The year-over-year decrease in e-mail, e-commerce and others gross profit was primarily due to the temporary suspension of higher margin e-commerce services related to third-party lottery products since late February 2015, which was partially offset by increased revenue contribution from NetEase's other e-commerce platforms, which have relatively lower gross profit margins. The quarter-over-quarter decrease was primarily due to the one-off recognition of expenses related to certain copyrights in the third quarter of 2015.

Gross Profit Margin

Gross profit margin for the online games business for the third quarter of 2015 was 67.9%, compared to 69.3% and 77.2% for the preceding quarter and the third quarter of 2014, respectively. The year-over-year and quarter-over-quarter decreases in gross profit margin were mainly due to increased revenue contribution from mobile games, which have relatively lower gross profit margins, as a percentage of NetEase's total online games revenues. 

Gross profit margin for the advertising services business for the third quarter of 2015 was 67.6%, compared to 68.2% and 65.3% for the preceding quarter and the third quarter of 2014, respectively.

Gross profit margin for the e-mail, e-commerce and others business for the third quarter of 2015 was 0.1%, compared to 4.2% and 51.6% for the preceding quarter and the third quarter of 2014, respectively. The year-over-year decrease in gross profit margin was primarily attributable to the temporary suspension of higher margin e-commerce services related to third-party lottery products discussed above, as well as increased revenue contribution from NetEase's other e-commerce platforms, which have relatively lower gross profit margins. The quarter-over-quarter decrease was mainly due to the one-off recognition of expenses related to certain copyrights in the third quarter of 2015.

Operating Expenses

Total operating expenses for the third quarter of 2015 were RMB1,761.2 million (US$277.1 million), compared to RMB1,395.2 million and RMB1,059.2 million for the preceding quarter and the third quarter of 2014, respectively. The year-over-year and quarter-over-quarter increases in operating expenses were mainly due to increased selling and marketing expenses for mobile and PC-client games, advertising services and other mobile products, and higher staff-related costs resulting from an increase in headcount and average compensation.

Income Taxes

The Company recorded a net income tax charge of RMB399.2 million (US$62.8 million) for the third quarter of 2015, compared to RMB145.9 million and RMB197.3 million for the preceding quarter and the third quarter of 2014, respectively. The effective tax rate for the third quarter of 2015 was 17.1%, compared to 9.2% and 14.4% for the preceding quarter and the third quarter of 2014, respectively. The year-over-year increase in the effective tax rate was mainly due to the fact that certain subsidiaries of the Company were approved as Key Software Enterprises and subject to a preferential tax rate of 10% for 2014. Those subsidiaries were subject to a tax rate of 15% in 2015. The quarter-over-quarter increase in the effective tax rate was mainly due to the fact that the Company recognized certain tax credits in the second quarter of 2015 related to annual tax filing benefits, most of which comprised extra tax deductions for research and development expenses approved by the tax authorities.

Net Income After Tax

Net income attributable to the Company's shareholders for the third quarter of 2015 totaled RMB1.9 billion (US$296.1 million), compared to RMB1.4 billion and RMB1.2 billion for the preceding quarter and the third quarter of 2014, respectively. Non-GAAP net income attributable to the Company's shareholders[1] for the third quarter of 2015 totaled RMB2.1 billion (US$322.6 million), compared to RMB1.6 billion and RMB1.3 billion for the preceding quarter and the third quarter of 2014, respectively.

[1]

As used in this press release, non-GAAP net income attributable to the Company's shareholders is defined to exclude share-based compensation expenses. See "Unaudited Reconciliation of GAAP and Non-GAAP Results" at the end of this press release.

During the third quarter of 2015, the Company had a net foreign exchange gain of RMB66.5 million (US$10.5 million), compared to a net foreign exchange loss of RMB21.7 million and a net foreign exchange gain of RMB2.2 million for the preceding quarter and the third quarter of 2014, respectively. The year-over-year and quarter-over-quarter changes in foreign exchange gains/(losses) were mainly due to unrealized exchange gains/(losses) arising from the Company's foreign currency-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$2.25 and US$2.24, respectively, for the third quarter of 2015. The Company reported basic and diluted earnings per ADS of US$1.70 and US$1.69, respectively, for the preceding quarter, and basic and diluted earnings per ADS of US$1.40 and US$1.39, respectively, for the third quarter of 2014. Non-GAAP basic and diluted earnings per ADS were US$2.45 and US$2.44, respectively, for the third quarter of 2015, compared to non-GAAP basic and diluted earnings per ADS of US$1.90 and US$1.89, respectively, in the preceding quarter, and US$1.51 each for the third quarter of 2014.

Quarterly Dividend

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.

NetEase paid a dividend of US$0.39 per ADS for the first quarter of 2015 on June 5, 2015, and US$0.44 per ADS for the second quarter of 2015 on September 4, 2015.

The board of directors has approved a dividend of US$0.56 per ADS for the third quarter of 2015, which is expected to be paid on December 4, 2015 to shareholders of record as of the close of business on November 27, 2015. 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 September 30, 2015, the Company's total cash and current and non-current time deposits balance was RMB20.4 billion (US$3.2 billion), compared to RMB21.2 billion as of December 31, 2014. Cash flow generated from operating activities was RMB2.2 billion (US$346.5 million) for the third quarter of 2015, compared to RMB835.9 million and RMB1.2 billion for the preceding quarter and the third quarter of 2014, respectively.

Beginning in the first quarter of 2015, NetEase made a reclassification of certain revenue and cost of revenue items from its advertising services segment to its e-mail, e-commerce and others segment. The segments reclassification reflects changes in the way the Company evaluates its business performance and manages its operations. Certain prior period amounts have been reclassified to conform to the current period presentation.

Share Repurchase Program

On September 1, 2015, the Company announced that its board of directors approved a new share repurchase program of up to US$500 million of the Company's outstanding ADSs for a period not to exceed 12 months. NetEase plans to fund repurchases made under this program from available working capital. Under the terms of the 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 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. As of September 30, 2015, the Company has repurchased approximately 0.19 million ADSs for about US$20.7 million under this program.

** 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$1.00 = RMB6.3556 on September 30, 2015 as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on September 30, 2015, or at any other certain date. 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 p.m. Eastern Time on Wednesday, November 11, 2015 (Beijing/Hong Kong Time: 9:00 a.m., Thursday, November 12, 2015). 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 1-888-438-5525 (international: 1-719-325-2144), 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 447860#. The replay will be available through November 25, 2015.

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, advertising services, e-mail services and e-commerce platforms. In partnership with Blizzard Entertainment, 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 Shanghai EaseNet will not be able to continue operating World of Warcraft®, StarCraft® II, Hearthstone®:Heroes of Warcraft, 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 services 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 services 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. 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, 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 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 we use 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:
Juliet Yang
NetEase, Inc.
hzyangyy@corp.netease.com
Tel: (+86) 571-8985-3378

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, 


 September 30, 


 September 30, 



2014


2015


2015



 RMB  


 RMB  


 USD (Note 1) 

Assets














Current assets:







   Cash and cash equivalents


2,021,453


6,270,082


986,544

   Time deposits


18,496,574


13,646,100


2,147,099

   Restricted cash


2,628,847


3,161,510


497,437

   Accounts receivable, net


873,137


1,942,200


305,589

   Prepayments and other current assets


1,451,919


3,478,137


547,256

   Short-term investments


2,058,552


4,392,847


691,177

   Deferred tax assets


202,040


328,307


51,656

Total current assets


27,732,522


33,219,183


5,226,758








Non-current assets:







   Property, equipment and software, net 


1,281,225


1,817,592


285,983

   Land use right, net


77,648


116,613


18,348

   Deferred tax assets 


21,160


24,912


3,920

   Time deposits


673,000


530,000


83,391

   Other long-term assets


569,116


1,498,285


235,743

Total non-current assets


2,622,149


3,987,402


627,385

Total assets 


30,354,671


37,206,585


5,854,143








Liabilities, Mezzanine Classified Noncontrolling Interests
    and Shareholders' Equity














Current liabilities:







   Accounts payable 


410,722


514,962


81,025

   Salary and welfare payables


534,565


522,754


82,251

   Taxes payable


334,290


591,452


93,060

   Short-term loan


2,049,865


2,226,455


350,314

   Deferred revenue


1,967,780


4,110,738


646,790

   Accrued liabilities and other payables


1,357,228


1,823,686


286,942

   Deferred tax liabilities


101,997


104,455


16,435

Total current liabilities


6,756,447


9,894,502


1,556,817








Long-term payable:







   Other long-term payable


106,430


68,952


10,849

Total liabilities


6,862,877


9,963,454


1,567,666








Mezzanine classified noncontrolling interests 


133,634


133,118


20,945








Total NetEase, Inc.'s equity


23,390,345


27,034,098


4,253,587

Noncontrolling interests


(32,185)


75,915


11,945

Total shareholders' equity


23,358,160


27,110,013


4,265,532








Total liabilities, mezzanine classified noncontrolling
    interests and shareholders' equity    


30,354,671


37,206,585


5,854,143








The accompanying notes are an integral part of this press release.





 

NETEASE, INC.









UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME




(RMB and USD in thousands, except per share data)







 Quarter Ended 



September 30,


June 30, 


September 30,


 September 30, 



2014


2015


2015


2015



 RMB 


 RMB 


 RMB 


 USD (Note 1) 

Net revenues:









Online game services


2,322,014


3,657,136


5,212,912


820,207

Advertising services


411,749


427,736


454,883


71,572

E-mail, e-commerce and others


382,976


483,033


1,003,994


157,970

Total net revenues


3,116,739


4,567,905


6,671,789


1,049,749










Total cost of revenues


(858,298)


(1,722,331)


(2,822,522)


(444,100)










Gross profit


2,258,441


2,845,574


3,849,267


605,649










Selling and marketing expenses 


(533,838)


(696,188)


(817,940)


(128,696)

General and administrative expenses


(128,928)


(202,228)


(319,713)


(50,304)

Research and development expenses 


(396,442)


(496,782)


(623,523)


(98,106)

Total operating expenses


(1,059,208)


(1,395,198)


(1,761,176)


(277,106)










Operating profit


1,199,233


1,450,376


2,088,091


328,543

Other income/(expenses):









Investment income, net


8,693


1,901


24,995


3,933

Interest income


156,084


156,653


140,399


22,091

Exchange gains/ (losses)


2,184


(21,682)


66,483


10,461

Other, net


1,872


562


10,133


1,594










Net income before tax


1,368,066


1,587,810


2,330,101


366,622

Income tax


(197,340)


(145,933)


(399,163)


(62,805)










Net income after tax


1,170,726


1,441,877


1,930,938


303,817

Net income attributable to noncontrolling interests
    and mezzanine classified noncontrolling interests


(11,581)


(17,557)


(49,035)


(7,715)

Net income attributable to
   the Company's shareholders


1,159,145


1,424,320


1,881,903


296,102



















Earnings per share, basic


0.35


0.43


0.57


0.09

Earnings per ADS, basic


8.87


10.83


14.31


2.25

Earnings per share, diluted


0.35


0.43


0.57


0.09

Earnings per ADS, diluted


8.83


10.77


14.22


2.24










Weighted average number of
   ordinary shares outstanding, basic


3,267,786


3,287,495


3,288,829


3,288,829

Weighted average number of
   ADS outstanding, basic


130,711


131,500


131,553


131,553

Weighted average number of
   ordinary shares outstanding, diluted


3,280,435


3,306,039


3,308,156


3,308,156

Weighted average number of
   ADS outstanding, diluted


131,217


132,242


132,326


132,326










The accompanying notes are an integral part of this press release.







 

NETEASE, INC.











UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS







(RMB and USD in thousands)













Quarter Ended



September 30,


 March 31, 


 June 30,  


 September 30, 


 September 30, 



2014


2015


2015


2015


2015



 RMB  


 RMB  


 RMB  


 RMB  


 USD (Note 1) 

Cash flows from operating activities:











     Net income  


1,170,726


1,305,403


1,441,877


1,930,938


303,817

     Adjustments to reconcile net income to net
         cash provided by operating activities: 











     Depreciation and amortization 


36,921


38,675


42,529


46,693


7,347

     Share-based compensation cost 


96,619


160,459


165,335


168,190


26,463

     Allowance for (reversal of) provision for doubtful debts 


3,086


5,974


280


(3,050)


(480)

     Gain on disposal of property,
         equipment and software 


(67)


(88)


(4)


(21)


(3)

     Unrealized exchange losses (gains)    


1,686


(7,141)


17,816


(61,483)


(9,674)

     Deferred income taxes 


32,882


41,137


(184,958)


16,261


2,559

     Net equity share of loss from associated companies 


28,179


21,530


24,748


20,774


3,268

     Fair value changes of short-term investments 


(16,516)


(21,787)


(25,534)


(41,623)


(6,549)

     Changes in operating assets and liabilities: 











         Accounts receivable 


(203,257)


(23,999)


(883,386)


(164,331)


(25,856)

         Prepayments and other current assets 


(140,636)


(310,698)


(1,344,935)


(364,226)


(57,308)

         Accounts payable 


22,539


(46,234)


2,509


146,195


23,002

         Salary and welfare payables 


(44,225)


(72,485)


100,892


(40,219)


(6,328)

         Taxes payable 


31,742


178,991


(22,015)


100,165


15,760

         Deferred revenue 


58,072


224,742


1,616,133


302,082


47,530

         Accrued liabilities and other payables 


84,683


430,669


(115,341)


145,587


22,907

             Net cash provided by operating activities 


1,162,434


1,925,148


835,946


2,201,932


346,455












Cash flows from investing activities:











     Purchase of property, equipment and software 


(116,172)


(120,352)


(332,099)


(193,595)


(30,461)

     Proceeds from sale of property, equipment and software 


404


136


214


252


40

     Purchase of other intangible assets 


-


-


(91)


(256)


(40)

     Purchase of land use right 


(29,387)


-


(2,557)


(37,654)


(5,925)

     Net change in short-term investments
         with terms of three months or less 


335,803


386,479


(38,192)


(715,849)


(112,633)

     Purchase of short-term investments 


(593,805)


(830,000)


(1,437,000)


(2,050,000)


(322,550)

     Proceeds from maturities of short-term investments 


203,589


507,648


1,066,140


865,424


136,166

     Investment in associated companies 


(20,000)


-


(157,532)


(30,000)


(4,720)

     Transfer (to)/from restricted cash 


(98,517)


252,526


(843,479)


58,475


9,201

     Placement/rollover of matured time deposits 


(4,934,854)


(5,337,795)


(3,907,368)


(5,156,889)


(811,393)

     Proceeds from maturities of time deposits 


5,020,322


6,156,953


6,915,647


6,384,015


1,004,471

     Net change in other assets 


(105,195)


(79,609)


(1,041,025)


(28,910)


(4,549)

             Net cash (used in)/ provided by investing activities 


(337,812)


935,986


222,658


(904,987)


(142,393)












The accompanying notes are an integral part of this press release.









 

NETEASE, INC.












UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)



(RMB and USD in thousands)














Quarter Ended




September 30,


 March 31, 


 June 30,  


 September 30, 


 September 30, 




2014


2015


2015


2015


2015




 RMB  


 RMB  


 RMB  


 RMB  


 USD (Note 1) 













Cash flows from financing activities:












     Proceeds of short-term bank loans 



-


1,219,853


917,154


1,468,128


230,998

     Payment of short-term bank loans 



-


(2,049,865)


-


(1,468,128)


(230,998)

     Proceeds from employees exercising stock options 



870


-


-


-


-

     Capital injection from noncontrolling interests shareholders 



-


15


-


-


-

     Repurchase of shares 



-


-


-


(132,192)


(20,799)

     Dividends paid to shareholders 



(298,142)


(313,406)


(313,780)


(369,845)


(58,192)

             Net cash (used in)/ provided by financing activities      



(297,272)


(1,143,403)


603,374


(502,037)


(78,991)













     Effect of exchange rate changes on cash 












         held in foreign currencies 



(1,397)


717


(12,007)


85,302


13,422

             Net increase in cash and cash equivalents 



525,953


1,718,448


1,649,971


880,210


138,493

Cash and cash equivalents, beginning of the period



1,668,981


2,021,453


3,739,901


5,389,872


848,051

Cash and cash equivalents, end of the period



2,194,934


3,739,901


5,389,872


6,270,082


986,544













Supplemental disclosures of cash flow information:












     Cash paid for income tax, net 



153,567


141,893


386,977


241,807


38,046

Supplemental schedule of non-cash investing 












     and financing activities:












     Fixed asset purchases financed by
         accounts payable and accrued liabilities 



49,891


42,198


57,936


95,365


15,005













The accompanying notes are an integral part of this press release.











 

NETEASE, INC.









UNAUDITED SEGMENT INFORMATION







(RMB and USD in thousands, except percentages)















Quarter Ended



September 30,


June 30, 


 September 30, 


 September 30, 



2014


2015


2015


2015



RMB


RMB


RMB


USD (Note 1)

Net revenues:









Online game services


2,322,014


3,657,136


5,212,912


820,207

Advertising services


411,749


427,736


454,883


71,572

E-mail, e-commerce and others


382,976


483,033


1,003,994


157,970

Total net revenues


3,116,739


4,567,905


6,671,789


1,049,749










Cost of revenues:









Online game services


(529,871)


(1,123,290)


(1,672,306)


(263,123)

Advertising services


(143,013)


(136,093)


(147,368)


(23,187)

E-mail, e-commerce and others


(185,414)


(462,948)


(1,002,848)


(157,790)

Total cost of revenues


(858,298)


(1,722,331)


(2,822,522)


(444,100)










Gross profit:









Online game services


1,792,143


2,533,846


3,540,606


557,084

Advertising services


268,736


291,643


307,515


48,385

E-mail, e-commerce and others


197,562


20,085


1,146


180

Total gross profit


2,258,441


2,845,574


3,849,267


605,649










Gross profit margin:









Online game services


77.2%


69.3%


67.9%


67.9%

Advertising services


65.3%


68.2%


67.6%


67.6%

E-mail, e-commerce and others


51.6%


4.2%


0.1%


0.1%










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
of USD1.00 = RMB6.3556 on the last trading day of September 2015 (September 30, 2015) as set
forth in the H.10 statistical release of the U.S. Federal Reserve Board.

Note 2:

Share-based compensation cost reported in the Company's unaudited condensed consolidated
statements of comprehensive income is set out as follows in RMB and USD (in thousands):

 












Quarter Ended



September 30,


June 30, 


September 30,


September 30,



2014


2015


2015


2015



RMB


RMB


RMB


USD (Note 1)

Share-based compensation cost included in:









Cost of revenue


43,336


81,339


77,891


12,255

Operating expenses









- Selling and marketing expenses


6,720


8,943


9,041


1,423

- General and administrative expenses


15,347


25,914


29,858


4,698

- Research and development expenses


31,216


49,139


51,400


8,087










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




September 30,


June 30, 


 September 30, 


 September 30, 




2014


2015


2015


2015




RMB


RMB


RMB


USD (Note 1)


Net income attributable to the Company's shareholders


1,159,145


1,424,320


1,881,903


296,102


Add: Share-based compensation


96,619


165,335


168,190


26,463


Non-GAAP net income attributable to the Company's shareholders


1,255,764


1,589,655


2,050,093


322,565












Non-GAAP earnings per share, basic


0.38


0.48


0.62


0.10


Non-GAAP earnings per ADS, basic


9.61


12.09


15.58


2.45


Non-GAAP earnings per share, diluted


0.38


0.48


0.62


0.10


Non-GAAP earnings per ADS, diluted


9.57


12.02


15.49


2.44












SOURCE NetEase, Inc.



RELATED LINKS

http://ir.netease.com