NETEASE, INC. Juliet Yang NetEase, Inc.
hzyangyy@corp.netease.com Tel: (+86) 571-8985-3378
Brandi Piacente Investor Relations
brandi@corp.netease.com Tel: (+1) 212-481-2050
(Beijing - Feb 24, 2016) - NetEase, Inc. (NASDAQ: NTES) ("NetEase" or the "Company"), one of China's leading Internet and online game services providers, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2015.
"2015 marked a year of tremendous growth fueled by all-around achievement for our company," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "Our total net revenues grew 94.7% for the year and 128.2% for the fourth quarter compared to the same quarter of fiscal year 2014, with expanding contributions from each of our three business segments. We saw year-over-year net revenue increases in the fourth quarter of 103.2% from online games, 68.1% from advertising services and 355.5% from e-mail, e- commerce and others."
"PC-client games remain vital to China's online game industry, while mobile games are driving rapid new growth. The steps we have taken over the last year to enhance our mobile capabilities have secured our position in the mobile arena. Our high-profile mobile portfolio now consists of over 80 diverse games, including our Fantasy Westward Journey and Westward Journey Online mobile games, which maintained their positions as the top two grossing games in China's iOS app store in the fourth quarter. Our other mobile games, including licensed game Kai-ri-sei Million Arthur as well as a number of other new and exciting games such as Invincible, the Kung Fu Panda mobile game and Chrono Blade also demonstrated strong performances during the fourth quarter."
"Offering thrilling gaming experiences to our existing and growing community of PC-client players remains an integral part of our online games strategy. Our self-developed 3D oriental fantasy MMORPG Revelation maintained strong traction in the fourth quarter, and in November we launched open beta testing for our 3D warfare MMORPG Hegemon-King of Western Chu. During the fourth quarter we also released new expansion packs for PC-client games including Tianxia III, Heroes of Tang Dynasty Zero and Kung Fu Master II, and launched a promotional campaign for Demon Seals. In addition to our successful and growing portfolio of self-developed online games, Blizzard Entertainment's Hearthstone®: Heroes of Warcraft™ continued to
perform well and attract new players."
"We are taking a number of steps to broaden our game offerings with exciting new game-play for both our PC-clients and mobile users. We recently released a trailer for War Rage, a real-time action tactical game for PC-clients, which we expect to launch in 2016. We also plan to enhance the popularity of our established PC- client titles with upcoming expansion packs for games including New Westward Journey Online II, Tianxia III, Heroes of Tang Dynasty Zero, Demon Seals and Kung Fu Master II in the first half of 2016. We are simultaneously expanding our robust mobile games pipeline with gripping new games. For example, in January we released new mobile games such as Kung Fu Panda 3 and The X-World, which have quickly gained traction with players. In addition, a number of other compelling new games including Raven, Fantasy Westward Journey: Warriors, the mobile version of New Ghost, and a series of new game titles based on the best-selling novels by Mr. Gu Long, a famous wuxia fiction writer, are scheduled to premiere in the coming months."
"Business is thriving across our game and Internet service offerings. In 2015 our advertising services revenues continued to grow. Supported by the popularity of our Mobile News App and NetEase-hosted, high profile events such as our NetEase Annual Economist Conference, our overall brand was further strengthened. The automobile, Internet services and telecommunication services sectors were our top performing advertising verticals in the fourth quarter. Our e-commerce platforms including Kaola.com also continue to grow at a swift pace, and we plan to keep expanding this business where we see considerable growth opportunity."
"We returned over $247.0 million to our investors in 2015 through share repurchases and our regular dividend program. In 2016 we believe we are well-positioned to continue to create and return value to our shareholders through diligently building and growing our business with a focus on providing the highest quality PC-client and mobile games, Internet products and e-commerce services," Mr. Ding concluded.
Net Revenues
Net revenues for the fourth quarter of 2015 were RMB7,903.0 million (US$1,220.0 million), compared to RMB6,671.8 million and RMB3,463.0 million for the preceding quarter and the fourth quarter of 2014, respectively.
Net revenues from online games were RMB5,502.9 million (US$849.5 million) for the fourth quarter of 2015, compared to RMB5,212.9 million and RMB2,707.5 million for the preceding quarter and the fourth quarter of 2014, respectively.
Net revenues from advertising services were RMB609.0 million (US$94.0 million) for the fourth quarter of 2015, compared to RMB454.9 million and RMB362.2 million for the preceding quarter and the fourth quarter of 2014, respectively.
Net revenues from e-mail, e-commerce and others were RMB1,791.1 million (US$276.5 million) for the fourth quarter of 2015, compared to RMB1,004.0 million and RMB393.2 million for the preceding quarter and the fourth quarter of 2014, respectively.
Gross Profit
Gross profit for the fourth quarter of 2015 was RMB4,219.7 million (US$651.4 million), compared to RMB3,849.3 million and RMB2,485.4 million for the preceding quarter and the fourth quarter of 2014, respectively.
The year-over-year increase in online games gross profit was primarily driven by revenue contribution from mobile games such as the Fantasy Westward Journey and the Westward Journey Online mobile games, and licensed games such as Blizzard Entertainment's Hearthstone: Heroes of Warcraft and Diablo® III: Reaper of
Souls™, as well as Kai-ri-sei Million Arthur and NetEase's new self-developed PC-client games such as
Revelation. The quarter-over-quarter increase in online games gross profit was primarily driven by revenue contribution from mobile games such as the Westward Journey Online mobile game and Kai-ri-sei Million Arthur, as well as Blizzard Entertainment's Hearthstone: Heroes of Warcraft.
The year-over-year and quarter-over-quarter increases in advertising services gross profit were primarily attributable to strong demand from the automobile, Internet services and telecommunication sectors, and NetEase's monetization efforts for its mobile applications, primarily its Mobile News App.
The year-over-year decrease in e-mail, e-commerce and others gross profit was primarily due to the temporary suspension of higher margin e-commerce services related to third-party lottery products since February 2015. The quarter-over-quarter increase was mainly due to increased revenue contribution from NetEase's e- commerce businesses such as Kaola.com.
Gross Profit Margin
Gross profit margin for the online games business for the fourth quarter of 2015 was 67.2%, compared to 67.9% and 76.0% for the preceding quarter and the fourth quarter of 2014, respectively. The year-over-year and quarter-over-quarter decreases in gross profit margin were mainly due to increased revenue contribution from mobile games, which have relatively lower gross profit margins as a percentage of NetEase's total online games revenues.
Gross profit margin for the advertising services business for the fourth quarter of 2015 was 68.1%, compared to 67.6% and 65.9% for the preceding quarter and the fourth quarter of 2014, respectively.
Gross profit margin for the e-mail, e-commerce and others business for the fourth quarter of 2015 was 6.0%, compared to 0.1% and 48.2% for the preceding quarter and the fourth quarter of 2014, respectively. The year- over-year decrease in gross profit margin was primarily attributable to the temporary suspension of higher margin e-commerce services related to third-party lottery products discussed above, as well as increased revenue contribution from NetEase's other e-commerce platforms, which have relatively lower gross profit margins. The quarter-over-quarter improvement in gross profit margin was mainly due to the revenue growth from NetEase's e-commerce businesses such as Kaola.com.
Operating Expenses
Total operating expenses for the fourth quarter of 2015 were RMB1,801.7 million (US$278.1 million), compared to RMB1,761.2 million and RMB1,239.7 million for the preceding quarter and the fourth quarter of 2014, respectively. The year-over-year increase in operating expenses was mainly due to increased selling and marketing expenses related to online games and advertising services, higher research and development investments and higher staff-related costs resulting from an increase in headcount and average compensation. The quarter-over-quarter increase in operating expenses was mainly due to increased selling and marketing expenses for mobile games.
Income Taxes
The Company recorded a net income tax charge of RMB513.8 million (US$79.3 million) for the fourth quarter of 2015, compared to RMB399.2 million and RMB187.9 million for the preceding quarter and the fourth quarter of 2014, respectively. The effective tax rate for the fourth quarter of 2015 was 19.2%, compared to 17.1% and 12.8% for the preceding quarter and the fourth quarter of 2014, respectively. The year-over-year increase in the effective tax rate was mainly due to the fact that certain subsidiaries of the Company were approved as Key Software Enterprises and subject to a preferential tax rate of 10% for 2014. Those subsidiaries were subject to a tax rate of 15% in 2015.
Net Income After Tax
Net income attributable to the Company's shareholders for the fourth quarter of 2015 totaled RMB2.2 billion (US$334.1 million), compared to RMB1.9 billion and RMB1.3 billion for the preceding quarter and the fourth quarter of 2014, respectively. Non-GAAP net income attributable to the Company's shareholders [1] for the fourth quarter of 2015 totaled RMB2.4 billion (US$363.5 million), compared to RMB2.1 billion and RMB1.4 billion for the preceding quarter and the fourth quarter of 2014, respectively.
During the fourth quarter of 2015, the Company had a net foreign exchange gain of RMB66.3 million (US$10.2 million), compared to a net foreign exchange gain of RMB66.5 million and a net foreign exchange loss of RMB7.1 million for the preceding quarter and the fourth quarter of 2014, respectively. The year-over- year and quarter-over-quarter changes in foreign exchange gains and losses were mainly due to unrealized exchange gains and losses arising from the Company's U.S. dollar-denominated bank deposits and short-term loan balances as the exchange rate of the U.S. dollar against the RMB fluctuated over the periods.
NetEase reported basic and diluted earnings per ADS of US$2.54 and US$2.52, respectively, for the fourth quarter of 2015. The Company reported basic and diluted earnings per ADS of US$2.21 and US$2.20, respectively, for the preceding quarter, and basic and diluted earnings per ADS of US$1.50 and US$1.49, respectively, for the fourth quarter of 2014. Non-GAAP basic and diluted earnings per ADS were US$2.77 and US$2.74, respectively, for the fourth quarter of 2015, compared to non-GAAP basic and diluted earnings
[1] As used in this press release, non-GAAP net income attributable to the Company's shareholders is defined to exclude share-based compensation expenses. See "Unaudited Reconciliation of GAAP and Non-GAAP Results" at the end of this press release.
Netease Inc. issued this content on 25 February 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 24 February 2016 23:17:29 UTC
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