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NetEase revenue of 14.2 billion yuan in the first quarter increased 3.9% year-on-year

via:博客园     time:2018/5/17 9:31:59     readed:134

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On May 17th, NetEase (NASDAQ:NTES) announced today the unaudited financial performance of the company for the first quarter ended March 31, 2018. According to statistics, NetEase's net income for the first quarter was 14.71 billion yuan (US$2.260 billion), an increase of 3.9% year-on-year; net profit was 752 million yuan (US$120 million).

Major Financial Results for the First Quarter of 2018:

· net income was RMB 14.17 billion (USD 2.26 billion). among them:

-On-line game service net income was RMB 8.761 billion (USD 1.397 billion);

-E-commerce business net income was 3.732 billion yuan (US$595 million);

- Net advertising revenue was RMB 462 million (US$73.66 million);

-Email and other business net income was RMB 1,217 million (US$194 million).

· gross profit was 5.954 billion yuan ($ 949 million).

· Operating expenses were 4.747 billion yuan (US$757 million).

Net profit attributable to Netease shareholders was RMB 752 million (US$ 120 million); based on non-US GAAP, net profit attributable to Netease shareholders was RMB 1,337 million (US$ 213 million).

· ADR of US$0.91 per share (dilutive); based on non-US GAAP, net profit per ADS is US$1.61 (dilutive).

2018 First Quarter and Recent Operations Highlights:

· "Wildlands Action" and "Terminator 2: Day of Judgment" commercialization process is smooth, mainly through the sale of in-game virtual products to achieve its realization. Among them, "Wildland Action" performed well in overseas markets, especially in the Japanese game market rankings have been among the best.

· recently released new games include: the highly anticipated "Chu Liu Xiang" launched in January; "The Fifth Personality" and "The Poem of Poetry" released in April. "The Fifth Personality" is Netease's first non-symmetry anti-competitive mobile game, with more than 10 million active users in the first week of release. "Poetry of Shadows" is a collection of card games handed out from Cygames.

· flagship IP products, the popularity of unabated, such as: "Fantasy Westward Journey", "Westward Journey" and "New Ghost Story" version of the tour and mobile games, "Yin and Yang Division" and "land of land" and so on.

· "My World" has more than 60 million registered users in China and also provides an open platform for third-party developers.

· continue to enrich the product line, the upcoming new games are: Japan comic style game player game "non-people school" and Chinese-style card collection games "God Night Record" and so on.

· further consolidated its leading position in the cross-border e-commerce business and its own-brand e-commerce business. Through optimizing customer experience and establishing closer cooperation with international brands, e-commerce business has maintained a strong growth momentum. Increased economies of scale.

“In the first quarter, all business segments have made progress and opened the curtain for the success of the new year. We are pleased to see that the flagship games have a long product life cycle and loyalty, while the new games have performed well this quarter. The e-commerce business is booming and the advertising business is growing steadily. "Ding Lei, CEO and director of NetEase, said:" We have maintained a leading position in China's MMORPG market, and "Chu Liu Xiang" has brought new gameplay to MMORPG. At the same time, the layout of other non-MMORPG games has also achieved initial success. The commercialization process of Wilderness Action and Terminator 2 has already started and progressed smoothly. After the release of Fifth Personality in April, a large number of players were quickly attracted. ”

“ We have been working on a variety of game layouts and have more mature experience in attracting non-MMORPG players. While expanding the game product line, we expect the future market expenses will tend to ease. In 2018, we will continue to commit ourselves to the prosperity and development of various business segments and create more value for our shareholders. "Ding Lei concluded.

First Quarter 2018 Financial Performance Analysis

First Quarter Net Income of 14.71 Billion

In the first quarter of 2018, net income was RMB 14.17 billion (USD 2.26 billion), which was RMB 14.608 billion and 13.641 billion RMB respectively in the previous quarter and the same period of last year.

In the first quarter of 2018, net gaming service revenue was 8.761 billion yuan (US$1.397 billion), compared with 8.004 billion yuan and 10.535 billion yuan respectively in the previous quarter and the same period of last year. In this quarter, net income from mobile games accounted for 71.8% of net gaming service revenue, compared with 68.0% and 73.3% respectively in the previous quarter and the same period of last year.

In the first quarter of 2018, net revenue from e-commerce business was 3.732 billion yuan (US$595 million), which was 4.654 billion yuan and 18.57 billion yuan respectively in the previous quarter and the same period of last year.

In the first quarter of 2018, net income from advertising services was 462 million yuan (US$73.66 million), compared with 737 million yuan and 445 million yuan in the same period last year and the same period of last year. The industries with the best advertising revenue during the quarter were real estate, internet services and transportation.

In the first quarter of 2018, net income from mailboxes and other businesses was RMB 1,217 million (US$194 million), which was RMB 1,213 million and RMB 603 million respectively in the previous quarter and the same period of last year.

Gross profit of 5.946 billion yuan

In the first quarter of 2018, gross profit was 5.954 billion yuan (US$949 million), compared with 5.754 billion yuan and 7.484 billion yuan in the previous quarter and the same period of last year. The consolidated gross profit margin was 42.0%, which was 39.3% and 54.9% respectively in the previous quarter and the same period of last year.

The year-on-year decrease in gross profit of on-line gaming services was mainly due to the decline in revenue contribution from mobile games such as “Yinyangshi” and “Ghost Story” mobile games, which was partially offset by the revenue growth of Wildland Action and Chu Liuxiang. The increase in gross profit of online game services was mainly due to the increase in revenue contribution from Wildland Action and Chu Liuxiang. The business gross margin was 62.1%, which was 61.4% and 63.9% in the previous quarter and the same period last year. The year-on-year decrease in online game service gross profit margin was mainly due to the decline in net income from self-developed mobile game business and the relatively stable cost of some games.

The year-over-year increase in the gross profit of the e-commerce business was mainly attributable to the rapid development of NetEase's Koala Haiku and Netease’s selection. The business gross margin was 9.5%, which was 7.4% and 13.1% respectively in the previous quarter and the same period of last year. The year-on-year decrease in the gross profit margin of e-commerce was mainly due to the strong promotion efforts in the first quarter of 2018 to support the rapid development of the e-commerce business. The quarter-over-quarter increase in the gross profit margin of e-commerce was mainly due to seasonal factors. The large-scale promotion and discount activities of the e-commerce business are usually arranged in the fourth quarter.

The decrease in gross margin of advertising services was mainly due to the decline in revenue caused by seasonal factors. The business gross margin was 59.0%, which was 71.2% and 57.3% respectively in the previous quarter and the same period of last year. The quarter-on-quarter decrease in gross profit margin was mainly due to the decline in income caused by seasonal factors.

The year-over-year and quarter-to-quarter increase in gross loss of mailboxes and other businesses was mainly due to the decline in Netease’s platform business revenue with relatively high gross profit margin, and the higher copyright fees confirmed this quarter. The business gross loss rate was 9.9%, and the gross profit margin was 3.3% and gross profit margin was 20.3% in the previous quarter and the same period of last year. The year-on-year and quarter-over-quarter increases in the gross loss rate of mailboxes and other businesses were mainly due to the decline in Netease’s platform business revenue with relatively high gross profit margins and the higher copyright fees confirmed this quarter.

Operating expenses 4.747 billion yuan

In the first quarter of 2018, operating expenses were 4.747 billion yuan (US$757 million), compared with 4.318 billion yuan and 7.712 billion yuan in the previous quarter and the same period of last year.

The year-on-year and quarter-over-quarter increase in operating expenses were mainly due to the increase in marketing expenses, R&D expenditures, and personnel costs associated with the game business. In the first quarter of 2018, freight and management fees for goods included in sales and marketing expenses were 326 million yuan (51.95 million US dollars), and 393 million yuan and 213 million yuan respectively in the previous quarter and the same period of last year.

Income tax 283 million yuan

In the first quarter of 2018, corporate income tax expense was RMB 283 million (US$ 45.07 million), compared with RMB 290 million and RMB 943 million respectively in the previous quarter and the same period of last year. The effective tax rate was 26.0% in the first quarter of 2018, and 18.2% and 19.0% respectively in the previous quarter and the same period of last year. The year-on-year and quarter-on-quarter changes in the effective tax rate were mainly attributable to the continued expansion of operating losses of some of the Group's subsidiaries during the quarter. The effective tax rate reflects the Group’s estimates of tax obligations and rights that apply each quarter.

Net profit of 752 million yuan

In the first quarter of 2018, net profit attributable to Netease shareholders was RMB 752 million (US$ 120 million), which was RMB 1.286 billion and RMB 3.923 billion respectively in the previous quarter and the same period of last year.

Based on non-US GAAP measures, net profit attributable to Netease shareholders in the first quarter of 2018 was 1.337 billion yuan (US$213 million), which was 1.897 billion yuan and 4.336 billion yuan respectively in the previous quarter and the same period of last year.

In the first quarter of 2018, the company recorded a net exchange loss of 375 million yuan (US$59.8 million). In the previous quarter and the same period of last year, net exchange losses were 159 million yuan and 48.53 million yuan, respectively. The change in net exchange loss was mainly due to the conversion of the company’s U.S. dollar bank deposits and loan balances to the exchange rate of the U.S. dollar to the U.S. dollar.

In the first quarter of 2018, net profit per ADS was 0.91 (basic) and 0.91 (diluted). The previous quarter was 1.56 US dollars (basic) and 1.55 U.S. dollars (diluted), compared with 4.76 U.S. dollars (basic) and 4.71 U.S. dollars (dilutive) in the same period of last year.

Based on non-US GAAP, net profit per ADS for the first quarter of 2018 was $1.62 (basic) and $1.61 (diluted), compared with $2.28 (basic) and $2.26 (diluted) for the previous quarter. Last year The same period was 5.26 US dollars (basic) and 5.21 US dollars (diluted).

other information

As of March 31, 2018, Netease held cash and cash equivalents, current and fixed deposits, and short-term investments of 43.5 billion yuan (US$6.9 billion). As of December 31, 2017, it was RMB 43.2 billion. Cash flow from operating activities was RMB 1.9 billion (US$ 303.7 million), compared with RMB 3.8 billion in the previous quarter and RMB 4 billion in the same period of last year. In the US stock market trade on Wednesday, Netease shares fell 0.13% to 266 US dollars. After the financial report was released, NetEase's share price dropped 7.14% to US$247.

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