NetEase Announces Fourth Quarter and Fiscal Year 2023 Unaudited Financial Results
HANGZHOU, China, Feb. 29, 2024 /PRNewswire/ -- NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase" or the "Company"), a leading internet and game services provider, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2023.
Fourth Quarter 2023 Financial Highlights
-- Net revenues were RMB27.1 billion (US$3.8 billion), an increase of 7.0%
compared with the fourth quarter of 2022.
-- Games and related value-added services net revenues were RMB20.9
billion (US$2.9 billion), an increase of 9.6% compared with the
fourth quarter of 2022.
-- Youdao net revenues were RMB1.5 billion (US$208.5 million), an
increase of 1.8% compared with the fourth quarter of 2022.
-- Cloud Music net revenues were RMB2.0 billion (US$279.7 million), a
decrease of 16.4% compared with the fourth quarter of 2022.
-- Innovative businesses and others net revenues were RMB2.8 billion
(US$387.7 million), an increase of 12.9% compared with the fourth
quarter of 2022.
-- Gross profit was RMB16.8 billion (US$2.4 billion), an increase of 27.0%
compared with the fourth quarter of 2022.
-- Total operating expenses were RMB10.0 billion (US$1.4 billion), an
increase of 13.0% compared with the fourth quarter of 2022.
-- Net income attributable to the Company's shareholders was RMB6.6 billion
(US$927.1 million). Non-GAAP net income from continuing operations
attributable to the Company's shareholders was RMB7.4 billion (US$1.0
billion).([1])
-- Basic net income per share was US$0.29 (US$1.44 per ADS). Non-GAAP basic
net income from continuing operations per share was US$0.32 (US$1.62 per
ADS).([1])
[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 and
Taiwan, including topping the local iOS download and grossing charts in
Taiwan 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 RMB27.1 billion (US$3.8 billion), compared with RMB27.3 billion and RMB25.4 billion for the preceding quarter and the fourth quarter of 2022, respectively.
Net revenues from games and related value-added services were RMB20.9 billion (US$2.9 billion) for the fourth quarter of 2023, compared with RMB21.8 billion and RMB19.1 billion for the preceding quarter and the fourth quarter of 2022, respectively. Net revenues from the operation of online games accounted for approximately 93.4% of the segment's net revenues for the fourth quarter of 2023, compared with 93.7% and 91.8% for the preceding quarter and the fourth quarter of 2022, respectively. Net revenues from mobile games accounted for approximately 76.7% of net revenues from the operation of online games for the fourth quarter of 2023, compared with 77.6% and 66.4% for the preceding quarter and the fourth quarter of 2022, respectively.
Net revenues from Youdao were RMB1.5 billion (US$208.5 million) for the fourth quarter of 2023, compared with RMB1.5 billion each for the preceding quarter and the fourth quarter of 2022.
Net revenues from Cloud Music were RMB2.0 billion (US$279.7 million) for the fourth quarter of 2023, compared with RMB2.0 billion and RMB2.4 billion for the preceding quarter and the fourth quarter of 2022, respectively.
Net revenues from innovative businesses and others were RMB2.8 billion (US$387.7 million) for the fourth quarter of 2023, compared with RMB2.0 billion and RMB2.4 billion for the preceding quarter and the fourth quarter of 2022, respectively.
Gross Profit
Gross profit for the fourth quarter of 2023 was RMB16.8 billion (US$2.4 billion), compared with RMB17.0 billion and RMB13.2 billion for the preceding quarter and the fourth quarter of 2022, respectively.
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 69.5%, compared with 69.0% and 59.1% for the preceding quarter and the fourth quarter of 2022, respectively. The slight quarter-over-quarter increase was primarily attributable to changes in the revenue contribution from different channels. The year-over-year increase was mainly attributable to a higher proportion of net revenues contributed by NetEase's self-developed games.
Gross profit margin for Youdao for the fourth quarter of 2023 was 49.9%, compared with 55.9% and 53.3% for the preceding quarter and the fourth quarter of 2022, respectively. The quarter-over-quarter and year-over-year decreases were mainly due to decreased revenue contribution from its learning services and decreased gross profit margin from its smart devices.
Gross profit margin for Cloud Music for the fourth quarter of 2023 was 30.3%, compared with 27.2% and 17.8% for the preceding quarter and the fourth quarter of 2022, respectively. The quarter-over-quarter and year-over-year improvements were mainly due to the factors enumerated above.
Gross profit margin for innovative businesses and others for the fourth quarter of 2023 was 34.4%, compared with 27.3% and 31.5% for the preceding quarter and the fourth quarter of 2022, respectively. The quarter-over-quarter increase was mainly due to improved gross profit margin from advertising services. The year-over-year increase was mainly due to improved gross profit margin from Yanxuan and advertising services.
Operating Expenses
Total operating expenses for the fourth quarter of 2023 were RMB10.0 billion (US$1.4 billion), compared with RMB9.4 billion and RMB8.8 billion for the preceding quarter and the fourth quarter of 2022, respectively. The quarter-over-quarter and year-over-year increases were mainly due to increased marketing expenditures and research and development investments associated with games and related value-added services.
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 U.S. dollar against the RMB in the fourth quarter of 2023. The year-over-year increase was primarily attributable to higher interest income resulting from the improved net cash position.
Income Tax
The Company recorded a net income tax charge of RMB1.1 billion (US$150.5 million) for the fourth quarter of 2023, compared with RMB1.3 billion and RMB966.6 million for the preceding quarter and the fourth quarter of 2022, respectively. The effective tax rate for the fourth quarter of 2023 was 13.8%, compared with 14.2% and 20.2% for the preceding quarter and the fourth quarter of 2022, respectively. The effective tax rate represents certain estimates by the Company as to the tax obligations and benefits applicable to it in each quarter.
Net Income and Non-GAAP Net Income
Net income attributable to the Company's shareholders totaled RMB6.6 billion (US$927.1 million) for the fourth quarter of 2023, compared with RMB7.8 billion and RMB4.0 billion for the preceding quarter and the fourth quarter of 2022, respectively.
NetEase reported basic net income of US$0.29 per share (US$1.44 per ADS) for the fourth quarter of 2023, compared with US$0.34 per share (US$1.72 per ADS) and US$0.17 per share (US$0.86 per ADS) for the preceding quarter and the fourth quarter of 2022, respectively.
Non-GAAP net income from continuing operations attributable to the Company's shareholders totaled RMB7.4 billion (US$1.0 billion) for the fourth quarter of 2023, compared with RMB8.6 billion and RMB4.8 billion for the preceding quarter and the fourth quarter of 2022, respectively.
NetEase reported non-GAAP basic net income from continuing operations of US$0.32 per share (US$1.62 per ADS) for the fourth quarter of 2023, compared with US$0.38 per share (US$1.89 per ADS) and US$0.21 per share (US$1.05 per ADS) for the preceding quarter and the fourth quarter of 2022, respectively.
Fiscal Year 2023 Financial Results
Net Revenues
Net revenues for fiscal year 2023 were RMB103.5 billion (US$14.6 billion), compared with RMB96.5 billion for fiscal year 2022.
Net revenues from games and related value-added services were RMB81.6 billion (US$11.5 billion) for fiscal year 2023, compared with RMB74.6 billion for fiscal year 2022. Net revenues from the operation of online games accounted for approximately 92.9% of the segment's total net revenues for fiscal year 2023, compared with 92.5% for fiscal year 2022. Net revenues from mobile games accounted for approximately 75.2% of net revenues from the operation of online games for fiscal year 2023, compared with 67.0% for fiscal year 2022. The higher percentage contribution from mobile games was mainly due to a higher proportion of net revenues generated by mobile games such as Eggy Party and Justice mobile game.
Net revenues from Youdao were RMB5.4 billion (US$759.1 million) for fiscal year 2023, compared with RMB5.0 billion for fiscal year 2022.
Net revenues from Cloud Music were RMB7.9 billion (US$1.1 billion) for fiscal year 2023, compared with RMB9.0 billion for fiscal year 2022.
Net revenues from innovative businesses and others were RMB8.6 billion (US$1.2 billion) for fiscal year 2023, compared with RMB7.9 billion for fiscal year 2022.
Gross Profit
Gross profit for fiscal year 2023 was RMB63.1 billion (US$8.9 billion), compared with RMB52.8 billion for fiscal year 2022.
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 RMB35.4 billion (US$5.0 billion), compared with RMB33.1 billion for fiscal year 2022. The year-over-year increase was primarily due to higher research and development investments and marketing expenditures for games and related value-added services.
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 U.S. dollar against the RMB during the years.
Income Taxes
The Company recorded a net income tax charge of RMB4.7 billion (US$661.9 million) for fiscal year 2023, compared with RMB5.0 billion for fiscal year 2022. The effective tax rate was 13.8% for fiscal year 2023, compared with 20.7% for fiscal year 2022. The lower effective tax rate for fiscal year 2023 was partially due to tax benefits recognized in the year.
Net Income and Non-GAAP Net Income
Net income attributable to the Company's shareholders for fiscal year 2023 totaled RMB29.4 billion (US$4.1 billion), compared with RMB20.3 billion for fiscal year 2022.
NetEase reported basic net income of US$1.29 per share (US$6.44 per ADS) for fiscal year 2023, compared with US$0.88 per share (US$4.39 per ADS) for fiscal year 2022.
Non-GAAP net income from continuing operations attributable to the Company's shareholders for fiscal year 2023 totaled RMB32.6 billion (US$4.6 billion), compared with RMB22.8 billion for fiscal year 2022.
NetEase reported non-GAAP basic net income from continuing operations of US$1.43 per share (US$7.14 per ADS) for fiscal year 2023, compared with US$0.98 per share (US$4.92 per ADS) for fiscal year 2022.
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 (US$15.6 billion), compared with RMB95.6 billion as of December 31, 2022. Net cash provided by operating activities was RMB35.3 billion (US$5.0 billion) for fiscal year 2023, compared with RMB27.7 billion for fiscal year 2022.
Quarterly Dividend
The board of directors has approved a dividend of US$0.21597 per share (US$1.07985 per ADS) for the fourth quarter of 2023 to holders of ordinary shares and holders of ADSs as of the close of business on March 14, 2024, Beijing/Hong Kong Time and New York Time, respectively, payable in U.S. dollars. For holders of ordinary shares, in order to qualify for the dividend, all valid documents for the transfer of shares accompanied by the relevant share certificates must be lodged for registration with the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17(th) Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong no later than 4:30 p.m. on March 14, 2024 (Beijing/ Hong Kong Time). The payment date is expected to be March 25, 2024 for holders of ordinary shares, and on or around March 28, 2024 for holders of ADSs.
NetEase paid a dividend of US$0.0990 per share (US$0.4950 per ADS) for the third quarter of 2023 in December 2023.
Under the Company's current dividend policy, the determination to make dividend distributions and the amount of such distribution in any particular quarter will be made at the discretion of its board of directors and will be based upon the Company's operations and earnings, cash flow, financial condition and other relevant factors.
Share Repurchase Program
On November 17, 2022, the Company announced that its board of directors had approved a share repurchase program of up to US$5.0 billion of the Company's ADSs and ordinary shares in open market transactions. This share repurchase program commenced on January 10, 2023 and will be in effect for a period not to exceed 36 months from such date. As of December 31, 2023, approximately 7.2 million ADSs had been repurchased under this program for a total cost of US$644.1 million.
The extent to which NetEase repurchases its ADSs and its ordinary shares depends upon a variety of factors, including market conditions. These programs may be suspended or discontinued at any time.
** The United States dollar (US$) amounts disclosed in this announcement are presented solely for the convenience of the reader. The percentages stated are calculated based on RMB.
Conference Call
NetEase's management team will host a teleconference call with a simultaneous webcast at 7:00 a.m. New York Time on Thursday, February 29, 2024 (Beijing/ Hong Kong Time: 8:00 p.m., Thursday, February 29, 2024). NetEase's management will be on the call to discuss the quarterly results and answer questions.
Interested parties may participate in the conference call by dialing 1-914-202-3258 and providing conference ID: 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 China and globally.
Powered by one of the largest in-house game R&D teams focused on mobile, PC and console, NetEase creates superior gaming experiences, inspires players, and passionately delivers value for its thriving community worldwide. By infusing play with culture, and education with technology, NetEase transforms gaming into a meaningful vehicle to build a more entertaining and enlightened world.
Beyond games, NetEase service offerings include its majority-controlled subsidiaries Youdao (NYSE: DAO), an intelligent learning company with industry-leading technology, and Cloud Music (HKEX: 9899), a well-known online music platform featuring a vibrant content community, as well as Yanxuan, NetEase's private label consumer lifestyle brand.
NetEase's market-leading ESG initiatives are among the most recognized in the global media and entertainment industry, earning it inclusion in 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 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 expressions. In addition, statements that are not historical facts, including statements about NetEase's strategies and business plans, its expectations regarding the growth of its business and its revenue and the quotations from management in this announcement are or contain forward-looking statements. NetEase may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that the online games market will not continue to grow or that NetEase will not be able to maintain its position in that market in China or globally; risks associated with NetEase's business and operating strategies and its ability to implement such strategies; NetEase's ability to develop and manage its operations and business; competition for, among other things, capital, technology and skilled personnel; potential changes in government regulation that could adversely affect the industry and geographical markets in which NetEase operates; the risk that NetEase may not be able to continuously develop new and creative online services or that NetEase will not be able to set, or follow in a timely manner, trends in the market; risks related to economic uncertainty and capital market disruption; risks related to the expansion of NetEase's businesses and operations internationally; risks associated with cybersecurity threats or incidents; and the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEase's business and financial results. Further information regarding these and other risks is included in NetEase's filings with the SEC and announcements on the website of the Hong Kong Stock Exchange. NetEase does not undertake any obligation to update this forward-looking information, except as required under applicable law.
Non-GAAP Financial Measures
NetEase considers and uses non-GAAP financial measures, such as non-GAAP net income 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 the United States of America ("U.S. GAAP").
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 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 from continuing operations attributable to the Company's shareholders is that it does not reflect all items of expense/ income that affect our operations. Share-based compensation expenses have been and may continue to be incurred in NetEase's business and are not reflected in the presentation of non-GAAP net income from continuing operations attributable to the Company's shareholders. In addition, the non-GAAP financial measures NetEase uses may differ from the non-GAAP measures used by other companies, including peer companies, and therefore their comparability may be limited.
NetEase compensates for these limitations by reconciling non-GAAP net income from continuing operations 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 the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure.
Contact for Media and Investors:
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
and Shareholders' Equity
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
interests and shareholders' equity
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)
interests
Net loss/(income) attributable to noncontrolling 143,752 26,901 (93,103) (13,113) 497,288 62,918 8,862
interests
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
Company's shareholders
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
attributable to the Company's shareholders
-Net income from discontinued operations 624,864
attributable to the Company's shareholders
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
shares used in calculating net income
per share *
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
by operating activities:
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)
subsidiaries
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)
results from previously held equity interest
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)
months or less
Purchase of short-term investments with terms over three (4,700,000) (5,950,000)
months
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
over three months
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)
subsidiaries
Proceeds from disposal of long-term investments, businesses 92,795 20,898 73,855 10,402 2,411,070 152,564 21,488
and subsidiaries
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
or repurchase of noncontrolling interests shareholders
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)
subsidiaries' ADSs and shares
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)
restricted cash held in foreign currencies
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
of the period
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 United States dollars (USD) is based on the noon buying rate of USD1.00 = RMB7.0999 on the last trading day of December 2023 (December 29, 2023) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on December 29, 2023, or at any other certain date.
Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD (in thousands):
Three Months Ended
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 U.S. GAAP or different accounting standards requirements.
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
Company's shareholders
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
attributable to the Company's shareholders
Non-GAAP basic net income from continuing 1.49 2.69 2.30 0.32 6.99 10.14 1.43
operations per share *
Non-GAAP basic net income from continuing 7.43 13.45 11.49 1.62 34.95 50.69 7.14
operations per ADS *
Non-GAAP diluted net income from continuing 1.47 2.66 2.27 0.32 6.92 10.03 1.41
operations per share *
Non-GAAP diluted net income from continuing 7.36 13.30 11.34 1.60 34.60 50.14 7.06
operations per ADS *
* 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.
