NetEase Announces Fourth Quarter and Fiscal Year 2023 Unaudited Financial Results
- NetEase reported a 7.0% increase in net revenues for Q4 2023, reaching RMB27.1 billion.
- Gross profit rose by 27.0% to RMB16.8 billion in Q4 2023.
- Total operating expenses increased by 13.0% to RMB10.0 billion in Q4 2023.
- Net income attributable to shareholders was RMB6.6 billion for Q4 2023.
- Non-GAAP net income from continuing operations was RMB7.4 billion for Q4 2023.
- Successful games like Eggy Party and Justice franchises contributed to the positive financial results.
- Improvements in Cloud Music and Youdao further enhanced the company's financial performance.
- None.
Insights
The disclosed financial results of NetEase for Q4 and the fiscal year 2023 show a mixed performance with varying growth rates across different segments. Notably, the 7.0% increase in net revenues year-over-year for Q4 reflects a stable growth trajectory, particularly in the context of the gaming industry where NetEase holds a significant position. However, the decline in Cloud Music net revenues by 16.4% suggests challenges in this vertical that may require strategic reassessment.
Expansion in gross profit margin to 69.5% for games and related value-added services is a positive indicator of efficiency and the successful integration of new titles. The increase in operating expenses, largely driven by marketing and R&D, points to an aggressive investment in future growth, which could impact short-term profitability but potentially enhance long-term market share.
Investors should note the increase in non-GAAP net income from continuing operations, which excludes share-based compensation expenses, as it provides a view of the company's operational performance without the volatility of stock-based compensation costs. The decline in effective tax rate to 13.8% for the fiscal year 2023 is also beneficial to the bottom line.
The dividend increase for Q4 2023 compared to Q3 2023 and the share repurchase program announced in November 2022 demonstrate confidence in the company's cash flow and financial stability, which are attractive to income-focused investors.
NetEase's continued user engagement with legacy franchises and the successful launch of new games such as Eggy Party and Racing Master illustrate the company's ability to innovate and retain a competitive edge in the gaming industry. The 100 million active users milestone for the Justice franchise and 40 million daily active users for Eggy Party during the Lunar New Year highlight the company's market penetration and user retention strategies.
Despite the overall positive performance in gaming, the decrease in Cloud Music revenues raises questions about the sustainability of its business model in the face of stiff competition from other music streaming services. The segment's improved gross profit margin indicates effective cost control, but the drop in revenue might suggest a need for innovation or repositioning.
NetEase's diversification into innovative businesses and others, which saw a 12.9% increase in net revenues, indicates a strategic move to reduce reliance on its core gaming segment and explore new revenue streams. The growth in this segment could be a hedge against the volatility of the gaming industry.
NetEase's financial results can be seen as a reflection of the broader economic environment, particularly in China's tech and gaming sectors. The company's revenue growth suggests resilience amidst regulatory challenges and economic headwinds, including currency fluctuations evidenced by the net exchange loss reported. The strong cash position with an increase in net cash to RMB110.9 billion provides a buffer against potential economic downturns and enables strategic investments.
The effective tax rate reduction could be indicative of favorable tax policies or efficient tax planning, contributing to NetEase's improved profitability. The company's operational highlights, such as user growth in the gaming segment, signal potential for further expansion in a post-pandemic recovery phase, assuming continued innovation and market adaptation.
It is important to consider the global economic outlook, including interest rate trends and trade relations, as they may impact consumer spending on entertainment and digital products, which are core to NetEase's business model.
Fourth Quarter 2023 Financial Highlights
- Net revenues were
RMB27.1 billion (US ), an increase of$3.8 billion 7.0% compared with the fourth quarter of 2022.- Games and related value-added services net revenues were
RMB20.9 billion (US ), an increase of$2.9 billion 9.6% compared with the fourth quarter of 2022. - Youdao net revenues were
RMB1.5 billion (US ), an increase of$208.5 million 1.8% compared with the fourth quarter of 2022. - Cloud Music net revenues were
RMB2.0 billion (US ), a decrease of$279.7 million 16.4% compared with the fourth quarter of 2022. - Innovative businesses and others net revenues were
RMB2.8 billion (US ), an increase of$387.7 million 12.9% compared with the fourth quarter of 2022.
- Games and related value-added services net revenues were
- Gross profit was
RMB16.8 billion (US ), an increase of$2.4 billion 27.0% compared with the fourth quarter of 2022. - Total operating expenses were
RMB10.0 billion (US ), an increase of$1.4 billion 13.0% compared with the fourth quarter of 2022. - Net income attributable to the Company's shareholders was
RMB6.6 billion (US ). Non-GAAP net income from continuing operations attributable to the Company's shareholders was$927.1 million RMB7.4 billion (US ).[1]$1.0 billion - Basic net income per share was
US ($0.29 US per ADS). Non-GAAP basic net income from continuing operations per share was$1.44 US ($0.32 US per ADS).[1]$1.62
[1] As used in this announcement, non-GAAP net income from continuing operations attributable to the Company's shareholders and non-GAAP basic and diluted net income from continuing operations per share and per ADS are defined to exclude share-based compensation expenses. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. |
Fourth Quarter 2023 and Early 2024 Operational Highlights
- Leading franchises, such as Fantasy Westward Journey and Westward Journey Online, maintained enduring user appeal, supported by periodic new content introductions.
- Eggy Party's broad popularity has engaged over 500 million cumulative registered players since its launch in 2022 and made a significant breakthrough of 40 million daily active users during the Lunar New Year.
- Justice franchises reached a new milestone of 100 million active users with densely packed content and widely embraced in-game events for players.
- Racing Master achieved superb performances in
Hong Kong ,Macau andTaiwan , including topping the local iOS download and grossing charts inTaiwan within the first week of its launch. - Cloud Music considerably enhanced its music-centric monetization and further improved profitability, while continuing to cultivate its music community and introduce new premium content and features.
- Youdao further improved its profitability and achieved record-high operating cash flow, driven by the robust performance of digital content services and online marketing services.
"2023 proved to be another landmark year for NetEase Games with continuous cross-category innovations that expand and diversify our robust game portfolio," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "The success of games like Eggy Party and our heralded new titles, such as Racing Master and Dunk City Dynasty, highlights our ability to bring players dynamic and original products in multiple genres. At the same time, we have maintained a strategic advantage with our MMO roots, propelling Justice mobile game to transcend the boundaries of conventional MMO gaming.
"Alongside our business's momentum, we have assumed increasing social responsibility. By integrating a 'Minors Mode' across our domestic game lineup, we have strengthened our existing anti-addiction system and continue to steer the gaming ecosystem toward a healthier trajectory with innovative products and technology.
"Besides games, our diverse business segments, such as Cloud Music and Youdao, remain on course, consistently delivering premium content. Throughout the NetEase family, we prioritize the creation of novel and high-quality products and services that grow our global appeal and elevate user experiences while pushing innovation forward," Mr. Ding concluded.
Fourth Quarter 2023 Financial Results
Net Revenues
Net revenues for the fourth quarter of 2023 were
Net revenues from games and related value-added services were
Net revenues from Youdao were
Net revenues from Cloud Music were
Net revenues from innovative businesses and others were
Gross Profit
Gross profit for the fourth quarter of 2023 was
The slight quarter-over-quarter decrease in games and related value-added services' gross profit was primarily due to decreased net revenues from online games. The year-over-year increase was primarily due to increased net revenues from online games such as Justice mobile game, which was launched in 2023, and Eggy Party, offset in part by the termination of certain licensed games.
The quarter-over-quarter decrease in Youdao's gross profit was primarily due to decreased revenue contribution from its learning services. The slight year-over-year decrease was primarily due to reduced revenue contribution from its smart devices, which was partially offset by increased revenue contribution from its online marketing services.
The quarter-over-quarter and year-over-year increases in Cloud Music's gross profit primarily resulted from increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.
The quarter-over-quarter and year-over-year increases in innovative businesses and others' gross profit were primarily due to increased gross profit contribution from Yanxuan and advertising services.
Gross Profit Margin
Gross profit margin for games and related value-added services for the fourth quarter of 2023 was
Gross profit margin for Youdao for the fourth quarter of 2023 was
Gross profit margin for Cloud Music for the fourth quarter of 2023 was
Gross profit margin for innovative businesses and others for the fourth quarter of 2023 was
Operating Expenses
Total operating expenses for the fourth quarter of 2023 were
Other Income/(Expenses)
Other income/(expenses) consisted of investment (loss)/income, interest income, exchange (losses)/ gains and others. The quarter-over-quarter decrease was mainly due to a net investment loss resulting from fair value changes of equity investments with readily determinable fair value in the fourth quarter of 2023, compared with a net investment income recorded in the prior quarter, as well as a higher net exchange loss arising from the fluctuation of the exchange rate of the
Income Tax
The Company recorded a net income tax charge of
Net Income and Non-GAAP Net Income
Net income attributable to the Company's shareholders totaled
NetEase reported basic net income of
Non-GAAP net income from continuing operations attributable to the Company's shareholders totaled
NetEase reported non-GAAP basic net income from continuing operations of
Fiscal Year 2023 Financial Results
Net Revenues
Net revenues for fiscal year 2023 were
Net revenues from games and related value-added services were
Net revenues from Youdao were
Net revenues from Cloud Music were
Net revenues from innovative businesses and others were
Gross Profit
Gross profit for fiscal year 2023 was
The year-over-year increase in games and related value-added services gross profit was primarily due to increased net revenues from the operation of online games, mainly from certain newly launched mobile games.
The year-over-year increase in Youdao gross profit was mainly due to increased revenue contribution from its online marketing services and learning services.
The year-over-year increase in Cloud Music gross profit was primarily attributable to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures.
The year-over-year increase in innovative businesses and others gross profit was primarily due to increased gross profits from Yanxuan and several other businesses included within the segment.
Operating Expenses
Total operating expenses for fiscal year 2023 were
Other Income/(Expenses)
The year-over-year increase was mainly due to higher interest income resulting from the Company's increased net cash position, and investment income arising from fair value changes of equity investments with readily determinable fair value. The foregoing was partially offset by the fact that the Company recorded a net exchange loss in fiscal year 2023, compared to a net exchange gain in fiscal year 2022, mainly resulting from the fluctuation of the exchange rate of the
Income Taxes
The Company recorded a net income tax charge of
Net Income and Non-GAAP Net Income
Net income attributable to the Company's shareholders for fiscal year 2023 totaled
NetEase reported basic net income of
Non-GAAP net income from continuing operations attributable to the Company's shareholders for fiscal year 2023 totaled
NetEase reported non-GAAP basic net income from continuing operations of
Other Financial Information
As of December 31, 2023, the Company's net cash (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 RMB110.9 billion (
Quarterly Dividend
The board of directors has approved a dividend of
NetEase paid a dividend of
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.
Share Repurchase Program
On November 17, 2022, the Company announced that its board of directors had approved a share repurchase program of up to
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.
**
Conference Call
NetEase's management team will host a teleconference call with a simultaneous webcast at 7:00 a.m. New York Time on Thursday, February 29, 2024 (
Interested parties may participate in the conference call by dialing 1-914-202-3258 and providing conference ID: 10036635, 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: 10036635. The replay will be available through March 6, 2024.
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
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 the 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
Non-GAAP Financial Measures
NetEase considers and uses non-GAAP financial measures, such as non-GAAP net income from continuing operations attributable to the Company's shareholders and non-GAAP basic and diluted net income from continuing operations 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
NetEase defines non-GAAP net income from continuing operations attributable to the Company's shareholders as net income from continuing operations attributable to the Company's shareholders excluding share-based compensation expenses. Non-GAAP net income from continuing operations 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 this non-GAAP financial measure 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
NetEase compensates for these limitations by reconciling non-GAAP net income from continuing operations attributable to the Company's shareholders to the nearest
Contact for Media and Investors:
Email: ir@service.netease.com
Tel: (+86) 571-8985-3378
NETEASE, INC. | ||||||||||||||||||||||||||
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||
December 31, | December 31, | December 31, | ||||||||||||||||||||||||
2022 | 2023 | 2023 | ||||||||||||||||||||||||
RMB | RMB | USD (Note 1) | ||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||||
Cash and cash equivalents | 24,889,000 | 21,428,902 | 3,018,198 | |||||||||||||||||||||||
Time deposits | 84,947,679 | 100,856,034 | 14,205,275 | |||||||||||||||||||||||
Restricted cash | 2,699,055 | 2,777,206 | 391,161 | |||||||||||||||||||||||
Accounts receivable, net | 5,002,872 | 6,422,417 | 904,579 | |||||||||||||||||||||||
Inventories | 993,636 | 695,374 | 97,941 | |||||||||||||||||||||||
Prepayments and other current assets, net | 5,448,284 | 6,076,595 | 855,871 | |||||||||||||||||||||||
Short-term investments | 7,622,673 | 4,436,057 | 624,806 | |||||||||||||||||||||||
Total current assets | 131,603,199 | 142,692,585 | 20,097,831 | |||||||||||||||||||||||
Non-current assets: | ||||||||||||||||||||||||||
Property, equipment and software, net | 6,342,330 | 8,075,044 | 1,137,346 | |||||||||||||||||||||||
Land use rights, net | 4,121,767 | 4,075,143 | 573,972 | |||||||||||||||||||||||
Deferred tax assets | 1,480,789 | 1,560,088 | 219,734 | |||||||||||||||||||||||
Time deposits | 2,973,840 | 1,050,000 | 147,889 | |||||||||||||||||||||||
Restricted cash | 270 | 550 | 77 | |||||||||||||||||||||||
Other long-term assets | 26,238,790 | 28,471,568 | 4,010,136 | |||||||||||||||||||||||
Total non-current assets | 41,157,786 | 43,232,393 | 6,089,154 | |||||||||||||||||||||||
Total assets | 172,760,985 | 185,924,978 | 26,186,985 | |||||||||||||||||||||||
Liabilities, Redeemable Noncontrolling Interests | ||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||
Accounts payable | 1,507,141 | 881,016 | 124,089 | |||||||||||||||||||||||
Salary and welfare payables | 4,732,941 | 4,857,206 | 684,123 | |||||||||||||||||||||||
Taxes payable | 2,813,096 | 2,571,534 | 362,193 | |||||||||||||||||||||||
Short-term loans | 23,875,704 | 19,240,163 | 2,709,920 | |||||||||||||||||||||||
Contract liabilities | 12,518,890 | 13,362,166 | 1,882,022 | |||||||||||||||||||||||
Accrued liabilities and other payables | 11,381,075 | 12,930,399 | 1,821,209 | |||||||||||||||||||||||
Total current liabilities | 56,828,847 | 53,842,484 | 7,583,556 | |||||||||||||||||||||||
Non-current liabilities: | ||||||||||||||||||||||||||
Deferred tax liabilities | 2,126,120 | 2,299,303 | 323,850 | |||||||||||||||||||||||
Long-term loans | 3,654,964 | 427,997 | 60,282 | |||||||||||||||||||||||
Other long-term liabilities | 1,277,574 | 1,271,113 | 179,032 | |||||||||||||||||||||||
Total non-current liabilities | 7,058,658 | 3,998,413 | 563,164 | |||||||||||||||||||||||
Total liabilities | 63,887,505 | 57,840,897 | 8,146,720 | |||||||||||||||||||||||
Redeemable noncontrolling interests | 136,440 | 115,759 | 16,304 | |||||||||||||||||||||||
NetEase, Inc.'s shareholders' equity | 104,731,317 | 124,285,776 | 17,505,285 | |||||||||||||||||||||||
Noncontrolling interests | 4,005,723 | 3,682,546 | 518,676 | |||||||||||||||||||||||
Total equity | 108,737,040 | 127,968,322 | 18,023,961 | |||||||||||||||||||||||
Total liabilities, redeemable noncontrolling | 172,760,985 | 185,924,978 | 26,186,985 | |||||||||||||||||||||||
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 | Year Ended | |||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||
2022 | 2023 | 2023 | 2023 | 2022 | 2023 | 2023 | ||||||||
RMB | RMB | RMB | USD (Note 1) | RMB | RMB | USD (Note 1) | ||||||||
Net revenues | 25,354,129 | 27,270,406 | 27,140,165 | 3,822,612 | 96,495,809 | 103,468,159 | 14,573,185 | |||||||
Cost of revenues | (12,109,765) | (10,304,106) | (10,315,030) | (1,452,842) | (43,729,683) | (40,404,765) | (5,690,892) | |||||||
Gross profit | 13,244,364 | 16,966,300 | 16,825,135 | 2,369,770 | 52,766,126 | 63,063,394 | 8,882,293 | |||||||
Operating expenses: | ||||||||||||||
Selling and marketing expenses | (3,417,909) | (3,567,153) | (4,225,556) | (595,157) | (13,402,721) | (13,969,460) | (1,967,557) | |||||||
General and administrative expenses | (1,302,932) | (1,494,186) | (1,251,869) | (176,322) | (4,695,798) | (4,899,880) | (690,134) | |||||||
Research and development expenses | (4,090,076) | (4,347,052) | (4,479,219) | (630,885) | (15,039,014) | (16,484,910) | (2,321,851) | |||||||
Total operating expenses | (8,810,917) | (9,408,391) | (9,956,644) | (1,402,364) | (33,137,533) | (35,354,250) | (4,979,542) | |||||||
Operating profit | 4,433,447 | 7,557,909 | 6,868,491 | 967,406 | 19,628,593 | 27,709,144 | 3,902,751 | |||||||
Other income/(expenses): | ||||||||||||||
Investment (loss)/income, net | (37,102) | 556,603 | (8,940) | (1,259) | 53,976 | 1,306,722 | 184,048 | |||||||
Interest income, net | 629,290 | 1,147,227 | 1,261,583 | 177,690 | 2,149,673 | 4,120,418 | 580,349 | |||||||
Exchange (losses)/gains , net | (594,241) | (400,483) | (810,904) | (114,213) | 1,571,207 | (132,999) | (18,733) | |||||||
Other, net | 344,875 | 240,024 | 434,759 | 61,235 | 846,815 | 1,053,642 | 148,402 | |||||||
Income before tax | 4,776,269 | 9,101,280 | 7,744,989 | 1,090,859 | 24,250,264 | 34,056,927 | 4,796,817 | |||||||
Income tax | (966,574) | (1,290,398) | (1,068,657) | (150,517) | (5,031,838) | (4,699,704) | (661,939) | |||||||
Net income from continuing operations | 3,809,695 | 7,810,882 | 6,676,332 | 940,342 | 19,218,426 | 29,357,223 | 4,134,878 | |||||||
Net income from discontinued operations | - | - | - | - | 624,864 | - | - | |||||||
Net income | 3,809,695 | 7,810,882 | 6,676,332 | 940,342 | 19,843,290 | 29,357,223 | 4,134,878 | |||||||
Accretion of redeemable noncontrolling | (710) | (895) | (966) | (136) | (2,978) | (3,589) | (506) | |||||||
Net loss/(income) attributable to noncontrolling | 143,752 | 26,901 | (93,103) | (13,113) | 497,288 | 62,918 | 8,862 | |||||||
Net income attributable to the | 3,952,737 | 7,836,888 | 6,582,263 | 927,093 | 20,337,600 | 29,416,552 | 4,143,234 | |||||||
Including: | ||||||||||||||
-Net income from continuing operations | 3,952,737 | 7,836,888 | 6,582,263 | 927,093 | 19,712,736 | 29,416,552 | 4,143,234 | |||||||
-Net income from discontinued operations | - | - | - | - | 624,864 | - | - | |||||||
Basic net income per share * | 1.22 | 2.44 | 2.05 | 0.29 | 6.23 | 9.15 | 1.29 | |||||||
-Continuing operations | 1.22 | 2.44 | 2.05 | 0.29 | 6.04 | 9.15 | 1.29 | |||||||
-Discontinued operations | - | - | - | - | 0.19 | - | - | |||||||
Basic net income per ADS * | 6.10 | 12.19 | 10.25 | 1.44 | 31.16 | 45.73 | 6.44 | |||||||
-Continuing operations | 6.10 | 12.19 | 10.25 | 1.44 | 30.20 | 45.73 | 6.44 | |||||||
-Discontinued operations | - | - | - | - | 0.96 | - | - | |||||||
Diluted net income per share * | 1.21 | 2.41 | 2.02 | 0.28 | 6.17 | 9.05 | 1.27 | |||||||
-Continuing operations | 1.21 | 2.41 | 2.02 | 0.28 | 5.98 | 9.05 | 1.27 | |||||||
-Discontinued operations | - | - | - | - | 0.19 | - | - | |||||||
Diluted net income per ADS * | 6.05 | 12.06 | 10.12 | 1.42 | 30.85 | 45.23 | 6.37 | |||||||
-Continuing operations | 6.05 | 12.06 | 10.12 | 1.42 | 29.90 | 45.23 | 6.37 | |||||||
-Discontinued operations | - | - | - | - | 0.95 | - | - | |||||||
Weighted average number of ordinary | ||||||||||||||
Basic | 3,239,282 | 3,213,834 | 3,212,328 | 3,212,328 | 3,263,455 | 3,216,475 | 3,216,475 | |||||||
Diluted | 3,269,082 | 3,249,649 | 3,253,166 | 3,253,166 | 3,296,014 | 3,252,029 | 3,252,029 | |||||||
* 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 | Year Ended | ||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||
2022 | 2023 | 2023 | 2023 | 2022 | 2023 | 2023 | |||||||
RMB | RMB | RMB | USD (Note 1) | RMB | RMB | USD (Note 1) | |||||||
Cash flows from operating activities: | |||||||||||||
Net income | 3,809,695 | 7,810,882 | 6,676,332 | 940,342 | 19,843,290 | 29,357,223 | 4,134,878 | ||||||
Net income from discontinued operations | - | - | - | - | (624,864) | - | - | ||||||
Adjustments to reconcile net income to net cash provided | |||||||||||||
Depreciation and amortization | 769,141 | 651,856 | 659,772 | 92,927 | 2,858,209 | 3,055,260 | 430,324 | ||||||
Fair value changes of equity security investments | 148,156 | (382,132) | 151,571 | 21,348 | 3,104,336 | (535,316) | (75,398) | ||||||
Impairment losses on investments and other long-term assets | 45,401 | 280,641 | 140,648 | 19,810 | 300,249 | 469,159 | 66,080 | ||||||
Fair value changes of short-term investments | (23,364) | (72,875) | (106,532) | (15,005) | (342,642) | (414,207) | (58,340) | ||||||
Share-based compensation cost | 876,560 | 819,548 | 812,987 | 114,507 | 3,174,160 | 3,242,810 | 456,740 | ||||||
Allowance for expected credit losses | 6,615 | 22,386 | 9,500 | 1,338 | 61,393 | 61,146 | 8,612 | ||||||
Losses on disposal of property, equipment and software | 1,166 | 2,649 | 3,385 | 477 | 3,620 | 5,676 | 799 | ||||||
Unrealized exchange losses/(gains) | 589,665 | 362,213 | 838,056 | 118,038 | (1,604,260) | 119,935 | 16,893 | ||||||
Gains on disposal of long-term investments, business and | (62,922) | (3,197) | (38,437) | (5,414) | (1,791,355) | (63,784) | (8,984) | ||||||
Deferred income taxes | 578,317 | (305,703) | 193,854 | 27,304 | 489,670 | 131,437 | 18,513 | ||||||
Share of results on equity method investees and revaluation | (54,746) | (160,042) | (88,805) | (12,508) | (1,259,941) | (473,947) | (66,754) | ||||||
Changes in operating assets and liabilities: | |||||||||||||
Accounts receivable | 224,197 | (1,177,732) | 53,089 | 7,477 | 554,340 | (1,470,374) | (207,098) | ||||||
Inventories | (60,695) | 84,970 | 25,054 | 3,529 | (27,613) | 296,764 | 41,798 | ||||||
Prepayments and other assets | 1,095,882 | (573,631) | 542,593 | 76,423 | 731,100 | 87,556 | 12,332 | ||||||
Accounts payable | 576,021 | 150,868 | 18,443 | 2,598 | 447,666 | (559,419) | (78,792) | ||||||
Salary and welfare payables | 1,965,624 | (588,217) | 1,992,931 | 280,698 | 424,513 | (62,917) | (8,862) | ||||||
Taxes payable | (928,071) | 515,087 | (500,172) | (70,448) | (917,614) | (244,261) | (34,403) | ||||||
Contract liabilities | (1,396,523) | 1,560,628 | (847,562) | (119,377) | 385,396 | 1,161,861 | 163,645 | ||||||
Accrued liabilities and other payables | 849,094 | 845,721 | 1,271,572 | 179,098 | 1,899,580 | 1,166,673 | 164,323 | ||||||
Net cash provided by operating activities | 9,009,213 | 9,843,920 | 11,808,279 | 1,663,162 | 27,709,233 | 35,331,275 | 4,976,306 | ||||||
Cash flows from investing activities: | |||||||||||||
Purchase of property, equipment and software | (348,821) | (643,144) | (484,927) | (68,300) | (2,100,264) | (2,301,554) | (324,167) | ||||||
Proceeds from sale of property, equipment and software | 2,257 | 3,101 | 405 | 57 | 41,467 | 10,302 | 1,451 | ||||||
Purchase of intangible assets, content and licensed copyrights | (161,987) | (742,523) | (121,797) | (17,155) | (543,220) | (1,974,323) | (278,078) | ||||||
Net change in short-term investments with terms of three | (931,790) | (1,993,921) | (690,628) | (97,273) | 776,357 | (1,777,687) | (250,382) | ||||||
Purchase of short-term investments with terms over three | (4,700,000) | - | - | - | (5,950,000) | - | - | ||||||
Proceeds from maturities of short-term investments with terms | 6,966,682 | 376,950 | 4,897,291 | 689,769 | 10,175,160 | 5,378,510 | 757,547 | ||||||
Investment in long-term investments and acquisition of | (1,694,928) | (417,448) | (914,962) | (128,870) | (5,129,680) | (2,831,686) | (398,834) | ||||||
Proceeds from disposal of long-term investments, businesses | 92,795 | 20,898 | 73,855 | 10,402 | 2,411,070 | 152,564 | 21,488 | ||||||
Placement/rollover of matured time deposits | (22,975,014) | (30,831,994) | (46,666,670) | (6,572,863) | (98,973,884) | (124,693,598) | (17,562,726) | ||||||
Proceeds from maturities of time deposits | 27,676,529 | 33,893,436 | 33,273,393 | 4,686,459 | 92,247,046 | 111,417,969 | 15,692,893 | ||||||
Change in other long-term assets | (61,552) | (181,263) | (90,635) | (12,766) | (323,779) | (423,928) | (59,709) | ||||||
Net cash provided by/(used in) investing activities | 3,864,171 | (515,908) | (10,724,675) | (1,510,540) | (7,369,727) | (17,043,431) | (2,400,517) | ||||||
Cash flows from financing activities: | |||||||||||||
Net changes from loans with terms of three months or less | (3,753,493) | (7,501,788) | 6,179,979 | 870,432 | (1,274,043) | (13,654,704) | (1,923,225) | ||||||
Proceed of loans with terms over three months | 2,765,086 | 7,607,060 | 2,511,000 | 353,667 | 6,392,695 | 13,569,160 | 1,911,176 | ||||||
Payment of loans with terms over three months | (191,158) | (4,250,550) | (695,000) | (97,889) | (273,639) | (8,219,472) | (1,157,688) | ||||||
Net amounts received/(paid) related to capital contribution from | 23,616 | 11,573 | 28,009 | 3,945 | (30,921) | 86,159 | 12,136 | ||||||
Cash paid for repurchase of NetEase's ADSs/purchase of | (3,007,765) | (296,495) | (625,832) | (88,147) | (8,328,124) | (5,234,294) | (737,235) | ||||||
Dividends paid to NetEase's shareholders | (2,018,984) | (2,423,355) | (2,258,892) | (318,158) | (6,723,667) | (8,013,903) | (1,128,735) | ||||||
Net cash (used in)/provided by financing activities | (6,182,698) | (6,853,555) | 5,139,264 | 723,850 | (10,237,699) | (21,467,054) | (3,023,571) | ||||||
Effect of exchange rate changes on cash, cash equivalents and | 53,237 | 4,197 | (174,276) | (24,546) | 110,403 | (202,457) | (28,516) | ||||||
Net increase/(decrease) in cash, cash equivalents and restricted cash | 6,743,923 | 2,478,654 | 6,048,592 | 851,926 | 10,212,210 | (3,381,667) | (476,298) | ||||||
Cash, cash equivalents and restricted cash, at the beginning | 20,844,402 | 15,679,412 | 18,158,066 | 2,557,510 | 17,376,115 | 27,588,325 | 3,885,734 | ||||||
Cash, cash equivalents and restricted cash, at end of the period | 27,588,325 | 18,158,066 | 24,206,658 | 3,409,436 | 27,588,325 | 24,206,658 | 3,409,436 | ||||||
Supplemental disclosures of cash flow information: | |||||||||||||
Cash paid for income tax, net | 971,217 | 1,165,196 | 1,030,932 | 145,204 | 5,092,391 | 4,895,752 | 689,552 | ||||||
Cash paid for interest expenses | 264,232 | 105,665 | 71,847 | 10,119 | 588,381 | 779,872 | 109,843 | ||||||
The accompanying notes are an integral part of this announcement. | |||||||||||||
NETEASE, INC. | ||||||||||||||
UNAUDITED SEGMENT INFORMATION | ||||||||||||||
(in thousands, except percentages) | ||||||||||||||
Three Months Ended | Year Ended | |||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||
2022 | 2023 | 2023 | 2023 | 2022 | 2023 | 2023 | ||||||||
RMB | RMB | RMB | USD (Note 1) | RMB | RMB | USD (Note 1) | ||||||||
Net revenues: | ||||||||||||||
Games and related value-added services | 19,085,708 | 21,779,851 | 20,921,355 | 2,946,711 | 74,566,471 | 81,565,449 | 11,488,253 | |||||||
Youdao | 1,453,982 | 1,538,783 | 1,480,521 | 208,527 | 5,013,182 | 5,389,208 | 759,054 | |||||||
Cloud Music | 2,376,257 | 1,973,064 | 1,985,548 | 279,659 | 8,992,221 | 7,866,992 | 1,108,043 | |||||||
Innovative businesses and others | 2,438,182 | 1,978,708 | 2,752,741 | 387,715 | 7,923,935 | 8,646,510 | 1,217,835 | |||||||
Total net revenues | 25,354,129 | 27,270,406 | 27,140,165 | 3,822,612 | 96,495,809 | 103,468,159 | 14,573,185 | |||||||
Cost of revenues: | ||||||||||||||
Games and related value-added services | (7,805,578) | (6,749,507) | (6,383,474) | (899,094) | (27,784,419) | (25,938,865) | (3,653,413) | |||||||
Youdao | (679,295) | (679,147) | (741,720) | (104,469) | (2,430,738) | (2,621,746) | (369,265) | |||||||
Cloud Music | (1,953,900) | (1,436,552) | (1,384,537) | (195,008) | (7,699,103) | (5,764,322) | (811,888) | |||||||
Innovative businesses and others | (1,670,992) | (1,438,900) | (1,805,299) | (254,271) | (5,815,423) | (6,079,832) | (856,326) | |||||||
Total cost of revenues | (12,109,765) | (10,304,106) | (10,315,030) | (1,452,842) | (43,729,683) | (40,404,765) | (5,690,892) | |||||||
Gross profit: | ||||||||||||||
Games and related value-added services | 11,280,130 | 15,030,344 | 14,537,881 | 2,047,617 | 46,782,052 | 55,626,584 | 7,834,840 | |||||||
Youdao | 774,687 | 859,636 | 738,801 | 104,058 | 2,582,444 | 2,767,462 | 389,789 | |||||||
Cloud Music | 422,357 | 536,512 | 601,011 | 84,651 | 1,293,118 | 2,102,670 | 296,155 | |||||||
Innovative businesses and others | 767,190 | 539,808 | 947,442 | 133,444 | 2,108,512 | 2,566,678 | 361,509 | |||||||
Total gross profit | 13,244,364 | 16,966,300 | 16,825,135 | 2,369,770 | 52,766,126 | 63,063,394 | 8,882,293 | |||||||
Gross profit margin: | ||||||||||||||
Games and related value-added services | 59.1 % | 69.0 % | 69.5 % | 69.5 % | 62.7 % | 68.2 % | 68.2 % | |||||||
Youdao | 53.3 % | 55.9 % | 49.9 % | 49.9 % | 51.5 % | 51.4 % | 51.4 % | |||||||
Cloud Music | 17.8 % | 27.2 % | 30.3 % | 30.3 % | 14.4 % | 26.7 % | 26.7 % | |||||||
Innovative businesses and others | 31.5 % | 27.3 % | 34.4 % | 34.4 % | 26.6 % | 29.7 % | 29.7 % | |||||||
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
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 | Year Ended | ||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||
2022 | 2023 | 2023 | 2023 | 2022 | 2023 | 2023 | |||||||
RMB | RMB | RMB | USD (Note 1) | RMB | RMB | USD (Note 1) | |||||||
Share-based compensation cost included in: | |||||||||||||
Cost of revenues | 195,793 | 210,533 | 216,717 | 30,524 | 758,413 | 823,765 | 116,025 | ||||||
Operating expenses | |||||||||||||
Selling and marketing expenses | 33,001 | 33,804 | 35,575 | 5,011 | 120,171 | 132,801 | 18,705 | ||||||
General and administrative expenses | 349,444 | 280,581 | 262,830 | 37,019 | 1,214,995 | 1,119,018 | 157,610 | ||||||
Research and development expenses | 298,322 | 294,630 | 297,865 | 41,953 | 1,080,581 | 1,167,226 | 164,400 | ||||||
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
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 | Year Ended | |||||||||||||
December 31, | September 30, | December 31, | December 31, | December 31, | December 31, | December 31, | ||||||||
2022 | 2023 | 2023 | 2023 | 2022 | 2023 | 2023 | ||||||||
RMB | RMB | RMB | USD (Note 1) | RMB | RMB | USD (Note 1) | ||||||||
Net income from continuing operations attributable to the | 3,952,737 | 7,836,888 | 6,582,263 | 927,093 | 19,712,736 | 29,416,552 | 4,143,234 | |||||||
Add: Share-based compensation | 858,637 | 808,276 | 797,194 | 112,282 | 3,095,693 | 3,191,753 | 449,549 | |||||||
Non-GAAP net income from continuing operations | 4,811,374 | 8,645,164 | 7,379,457 | 1,039,375 | 22,808,429 | 32,608,305 | 4,592,783 | |||||||
Non-GAAP basic net income from continuing | 1.49 | 2.69 | 2.30 | 0.32 | 6.99 | 10.14 | 1.43 | |||||||
Non-GAAP basic net income from continuing | 7.43 | 13.45 | 11.49 | 1.62 | 34.95 | 50.69 | 7.14 | |||||||
Non-GAAP diluted net income from continuing | 1.47 | 2.66 | 2.27 | 0.32 | 6.92 | 10.03 | 1.41 | |||||||
Non-GAAP diluted net income from continuing | 7.36 | 13.30 | 11.34 | 1.60 | 34.60 | 50.14 | 7.06 | |||||||
* 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-fourth-quarter-and-fiscal-year-2023-unaudited-financial-results-302075427.html
SOURCE NetEase, Inc.
FAQ
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