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2011 Q1 China NetEase.com Financial Results
Author:Sino-report    Source:NetEase.com    Number of clicks :     Update time:2011-05-19 12:21
Sino-report Data Center May 2011

NETEASE.COM, INC.
 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
(in thousands)
 
 
December 31,
 
March 31,
 
March 31,
 
 
2010
 
2011
 
2011
 
 
RMB  
 
RMB  
 
USD (Note 1)
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
  Cash
1,285,137
 
1,669,597
 
254,966
 
  Time deposits
8,193,972
 
8,689,695
 
1,327,015
 
  Restricted cash
140,599
 
140,761
 
21,496
 
  Accounts receivable, net
256,335
 
181,098
 
27,656
 
  Prepayments and other current assets
678,793
 
719,845
 
109,929
 
  Deferred tax assets
72,059
 
80,268
 
12,258
 
Total current assets
10,626,895
 
11,481,264
 
1,753,320
 
 
 
 
 
 
 
 
Non-current assets:
 
 
 
 
 
 
  Property, equipment and software, net
755,778
 
765,933
 
116,967
 
  Land use right, net
12,046
 
11,982
 
1,830
 
  License right, net
144,637
 
127,817
 
19,519
 
  Deferred tax assets
1,530
 
2,504
 
382
 
  Other long-term assets
45,776
 
52,274
 
7,983
 
Total non-current assets
959,767
 
960,510
 
146,681
 
Total assets
11,586,662
 
12,441,774
 
1,900,001
 
 
 
 
 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
  Accounts payable
130,558
 
107,854
 
16,471
 
  Salary and welfare payables
181,973
 
117,039
 
17,873
 
  Taxes payable
289,332
 
294,399
 
44,958
 
  Deferred revenue
773,952
 
865,059
 
132,104
 
  Accrued liabilities and other payables
452,412
 
490,300
 
74,874
 
Total current liabilities
1,828,227
 
1,874,651
 
286,280
 
 
 
 
 
 
 
 
Long-term payable:
 
 
 
 
 
 
  Other long-term payable
33,342
 
27,671
 
4,226
 
  Deferred tax liabilities
1,455
 
2,237
 
342
 
Total long-term payable
34,797
 
29,908
 
4,568
 
 
 
 
 
 
 
 
Total liabilities
1,863,024
 
1,904,559
 
290,848
 
 
 
 
 
 
 
 
Total NetEase.com, Inc.'s equity
9,740,811
 
10,557,202
 
1,612,205
 
Non-controlling interests
(17,173)
 
(19,987)
 
(3,052)
 
Total shareholders' equity
9,723,638
 
10,537,215
 
1,609,153
 
Total liabilities and shareholders’ equity
11,586,662
 
12,441,774
 
1,900,001
 
 
 

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

 
 
 
 
 
 
 
 
 
NETEASE.COM, INC.
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(in thousands, except per share data)
 
 
Quarter Ended
 
 
March 31,
 
December 31,
 
March 31,
 
March 31,
 
2010
2010
2011
2011
 
 
RMB
 
RMB
 
RMB
 
USD (Note 1)
 
 
(Revised, Note 3)
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
Online game services
1,085,322
 
1,422,408
 
1,385,643
 
211,603
 
Advertising services
91,548
 
233,701
 
126,828
 
19,368
 
Wireless value-added
 
 
 
 
 
 
 
 
    services and others
18,060
 
23,301
 
25,680
 
3,922
 
 
 
 
 
 
 
 
 
 
Total revenues
1,194,930
 
1,679,410
 
1,538,151
 
234,893
 
Business taxes
(30,442)
 
(45,671)
 
(38,200)
 
(5,834)
 
 
 
 
 
 
 
 
 
 
Total net revenues
1,164,488
 
1,633,739
 
1,499,951
 
229,059
 
 
 
 
 
 
 
 
 
 
Total cost of revenues
(392,040)
 
(520,325)
 
(514,990)
 
(78,645)
 
 
 
 
 
 
 
 
 
 
Gross profit
772,448
 
1,113,414
 
984,961
 
150,414
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Selling and marketing expenses
(107,678)
 
(180,789)
 
(130,345)
 
(19,905)
 
General and administrative expenses
(39,191)
 
(53,805)
 
(63,332)
 
(9,672)
 
Research and development expenses
(70,566)
 
(86,151)
 
(98,306)
 
(15,012)
 
Total operating expenses
(217,435)
 
(320,745)
 
(291,983)
 
(44,589)
 
 
 
 
 
 
 
 
 
 
Operating profit
555,013
 
792,669
 
692,978
 
105,825
 
Other income (expenses):
 
 
 
 
 
 
 
 
Investment income
76
 
76
 
82
 
13
 
Interest income
30,785
 
41,173
 
51,363
 
7,844
 
Exchange gains (losses)
(39,480)
 
(36,432)
 
25,274
 
3,860
 
Other, net
(2,750)
 
6,358
 
2,084
 
318
 
 
 
 
 
 
 
 
 
 
Net income before tax
543,644
 
803,844
 
771,781
 
117,860
 
Income tax
(94,515)
 
(83,182)
 
(37,208)
 
(5,682)
 
 
 
 
 
 
 
 
 
 
Net income after tax
449,129
 
720,662
 
734,573
 
112,178
 

Net loss (income) attributable to non-controlling interests

3,129
 
(8,139)
 
2,814
 
430
 

Net income attributable to the NetEase.com, Inc.'s shareholders

452,258
 
712,523
 
737,387
 
112,608
 
 
 
 
 
 
 
 
 
 
Earnings per share, basic
0.14
 
0.22
 
0.23
 
0.04
 
Earnings per ADS, basic
3.49
 
5.48
 
5.66
 
0.86
 
Earnings per share, diluted
0.14
 
0.22
 
0.23
 
0.04
 
Earnings per ADS, diluted
3.47
 
5.45
 
5.63
 
0.86
 
 
 
 
 
 
 
 
 
 

Weighted average number of ordinary shares outstanding, basic

3,239,858
 
3,251,764
 
3,255,764
 
3,255,764
 
Weighted average number of ADS outstanding, basic
129,594
 
130,071
 
130,231
 
130,231
 

Weighted average number of ordinary shares outstanding, diluted

3,259,490
 
3,265,856
 
3,273,909
 
3,273,909
 
Weighted average number of ADS outstanding, diluted
130,380
 
130,634
 
130,956
 
130,956
 
 
 

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

 
 
 
 
 
 
 
 
 
 
 
NETEASE.COM, INC.
 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 
(in thousands)
 
 
Quarter Ended
 
 
March 31,
 
December 31,
 
March 31,
 
March 31,
 
 
2010
 
2010
 
2011
 
2011
 
 
RMB
 
RMB
 
RMB
 
USD (Note 1)
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
Net income
449,129
 
720,662
 
734,573
 
112,178
 

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

 
 
 
 
 
 
 
 
Depreciation and amortization
58,839
 
57,526
 
65,706
 
10,034
 
Share-based compensation cost
5,861
 
24,508
 
38,238
 
5,839
 

Allowance for (reversal of) provision for doubtful debts

(9,361)
 
1,466
 
(1,366)
 
(209)
 
Loss on disposal of property,equipment and software
10,538
 
154
 
4
 
1
 
Unrealized exchange losses/(gains)
50,301
 
33,960
 
(31,077)
 
(4,746)
 
Deferred income taxes
11,949
 
16,487
 
(8,401)
 
(1,283)
 

Net equity share of losses (gains) from associated companies

132
 
(246)
 
330
 
50
 
Others
-
 
-
 
(162)
 
(25)
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
  Accounts receivable
48,843
 
(75,353)
 
75,613
 
11,547
 
  Prepayments and other current assets
110,172
 
26,335
 
54,987
 
8,397
 
  Accounts payable
(104,933)
 
39,519
 
(18,560)
 
(2,834)
 
  Salary and welfare payables
(40,940)
 
88,448
 
(64,934)
 
(9,916)
 
  Taxes payable
(20,875)
 
12,541
 
(30,719)
 
(4,691)
 
  Deferred revenue
73,145
 
7,297
 
91,107
 
13,913
 
  Accrued liabilities and other payables
33,730
 
(51,794)
 
63,976
 
9,770
 

           Net cash  provided by operating activities

676,530
 
901,510
 
969,315
 
148,025
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 

     Purchase of property, equipment and software

(60,135)
 
(63,199)
 
(141,157)
 
(21,556)
 

     Proceeds from sale of property, equipment and software

-
 
121
 
1
 
-
 
     Transfer from/(to) restricted cash
91,864
 
(108,600)
 
-
 
-
 

     Net change in time deposits with terms  

 
 
 
 
 
 
 
 

           of three months

(76,782)
 
487,580
 
231,682
 
35,380
 

     Placement/rollover of matured time deposits

(2,771,650)
 
(4,390,645)
 
(2,863,899)
 
(437,350)
 
     Uplift of matured time deposits
2,540,391
 
2,799,112
 
2,157,008
 
329,400
 
     Net change in other assets
(1,977)
 
(1,746)
 
(5,844)
 
(892)
 

           Net cash used in investing activities

(278,289)
 
(1,277,377)
 
(622,209)
 
(95,018)
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 

 Capital contribution from non-controlling interests

-
 
16
 
-
 
-
 

  Proceeds from employees exercising stock options

5,182
 
1
 
30,252
 
4,620
 
  Payment of other long-term payable
-
 
-
 
(10)
 
(2)
 

           Net cash  provided by financing activities

5,182
 
17
 
30,242
 
4,618
 
 
 
 
 
 
 
 
 
 
  Effect of exchange rate changes on cash held in
 
 
 
 
 
 
 
 
    foreign currencies
(1,608)
 
(3,123)
 
7,112
 
1,086
 

           Net increase in cash

401,815
 
(378,973)
 
384,460
 
58,711
 
Cash, beginning of the period
1,041,290
 
1,664,110
 
1,285,137
 
196,255
 
Cash, end of the period
1,443,105
 
1,285,137
 
1,669,597
 
254,966
 
 
 
 
 
 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
 
 
 

        Cash paid for income tax, net of tax refund

62,264
 
31,177
 
91,682
 
14,001
 
Supplemental schedule of non-cash investing and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

     Fixed asset purchases financed by accounts payable and accrued liabilities

39,625
 
146,523
 
64,347
 
9,827
 
 
 

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

 
 
 
 
 
 
 
 
 
 
 
NETEASE.COM, INC.
 
UNAUDITED SEGMENT INFORMATION
 
(in thousands)
 
 
 
 
Quarter Ended
 
 
March 31,
 
December 31,
 
March 31,
 
March 31,
 
 
2010
 
2010
 
2011
 
2011
 
 
RMB
 
RMB
 
RMB
 
USD (Note 1)
 
 
(Revised, Note 3)
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
Online game services
1,085,322
 
1,422,408
 
1,385,643
 
211,603
 
Advertising services
91,548
 
233,701
 
126,828
 
19,368
 
Wireless value-added services and others
18,060
 
23,301
 
25,680
 
3,922
 
Total revenues
1,194,930
 
1,679,410
 
1,538,151
 
234,893
 
 
 
 
 
 
 
 
 
 
Business taxes:  
 
 
 
 
 
 
 
 
Online game services
(21,108)
 
(22,772)
 
(25,392)
 
(3,878)
 
Advertising services
(8,979)
 
(22,329)
 
(12,198)
 
(1,863)
 
Wireless value-added services and others
(355)
 
(570)
 
(610)
 
(93)
 
Total business taxes
(30,442)
 
(45,671)
 
(38,200)
 
(5,834)
 
 
 
 
 
 
 
 
 
 
Net revenues:
 
 
 
 
 
 
 
 
Online game services
1,064,214
 
1,399,636
 
1,360,251
 
207,725
 
Advertising services
82,569
 
211,372
 
114,630
 
17,505
 
Wireless value-added services and others
17,705
 
22,731
 
25,070
 
3,829
 
Total net revenues
1,164,488
 
1,633,739
 
1,499,951
 
229,059
 
 
 
 
 
 
 
 
 
 
Cost of revenues:
 
 
 
 
 
 
 
 
Online game services
(299,337)
 
(394,764)
 
(408,201)
 
(62,337)
 
Advertising services
(68,637)
 
(98,354)
 
(76,316)
 
(11,654)
 
Wireless value-added services and others
(24,066)
 
(27,207)
 
(30,473)
 
(4,654)
 
Total cost of revenues
(392,040)
 
(520,325)
 
(514,990)
 
(78,645)
 
 
 
 
 
 
 
 
 
 
Gross profit (loss):
 
 
 
 
 
 
 
 
Online game services
764,877
 
1,004,872
 
952,050
 
145,388
 
Advertising services
13,932
 
113,018
 
38,314
 
5,851
 
Wireless value-added services and others
(6,361)
 
(4,476)
 
(5,403)
 
(825)
 
Total gross profit
772,448
 
1,113,414
 
984,961
 
150,414
 
 
 
 
 
 
 
 
 
 
Gross profit (loss) margin:
 
 
 
 
 
 
 
 
Online game services
71.9%
 
71.8%
 
70.0%
 
70.0%
 
Advertising services
16.9%
 
53.5%
 
33.4%
 
33.4%
 
Wireless value-added services and others
(35.9%)
 
(19.7%)
 
(21.6%)
 
(21.6%)
 
 
 

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

 
 
 
 
 
 
 
 
 
 

NETEASE.COM, INC.

NOTES TO UNAUDITED FINANCIAL INFORMATION

Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00 = RMB6.5483 on March 31, 2011 as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.

Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of operations is set out as follows (in thousands):

 
 
Quarter Ended
 
 
 
March 31,
 
December 31,
 
March 31,
 
March 31,
 
 
 
2010
 
2010
 
2011
 
2011
 
 
 
RMB
 
RMB
 
RMB
 
USD (Note 1)
 
Share-based compensation cost included in:
 
 
 
 
 
 
 
 
 
Cost of revenue
 
1,670
 
8,081
 
13,602
 
2,077
 
Operating expenses
 
 
 
 
 
 
 
 
 
- Selling and marketing expenses
 
320
 
1,869
 
3,255
 
497
 
- General and administrative expenses
 
1,823
 
7,915
 
11,237
 
1,716
 
- Research and development expenses
 
2,048
 
6,643
 
10,144
 
1,549
 

Note 3: In the fourth quarter of 2010, management of the Company decided to allocate facility costs comprising of office and staff quarter rentals and management fees, building amortization and miscellaneous utility costs previously recorded under general and administration to the respective functions based on headcount under cost of revenue, selling and marketing, research and development and general and administration. The change was implemented to better reflect staff-related operating cost. Reclassifications have been made to cost of revenue and operating expense amounts in the condensed consolidated statements of operations and segment information for the relevant prior period in order to conform to the current period's presentation. There is no change to the condensed consolidated balance sheets and the condensed consolidated statements of cash flows.

 
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