3Q 2019
Investor Presentation
1
SAFE HARBOR STATEMENT
This presentation 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 statements. These forward-looking statements are based on the current assumptions, expectations and projections of the Company's management about future events. Although the assumptions, expectations and projections reflected in these forward-looking statements represent management's best judgment at the time of this presentation, the Company can give no assurance that they will prove to be correct. Numerous factors, including those related to market conditions and those detailed from time-to-time in the Company's filings with the Securities Exchange Commission, may cause results of the Company to differ materially from those anticipated in these forward-looking statements. Many of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. These forward- looking statements are subject to risks and uncertainties and, therefore, actual results may differ materially. The Company cautions you not to place undue reliance on these forward-looking statements. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. All references to "Company" and "NetEase" as used throughout this presentation refer to NetEase, Inc. and its subsidiaries.
2
COMPANY OVERVIEW
Founded in 1997 and listed on NASDAQ since 2000, NetEase, Inc. is a leading China-based internet technology company that develops and operates some of China's most popular online PC and mobile games, and offers other innovative services, including the intelligent learning services of its majority-controlled subsidiary, Youdao, music streaming and its private label e-commerce platform.
As of September 30, 2019, NetEase had around 21,000 employees, with offices globally.
3
MARKET SNAPSHOT
In USD
$36.8 | $130 |
billion | million |
Market Cap | ADS Outstanding, |
(11/20/19) | diluted |
(3Q19) |
$2.0 | $1,803 |
billion | million |
Net Revenue | Net income attributable to |
(3Q19) | |
the Company's shareholders | |
(Continuing) (GAAP) | |
(3Q19) |
$13.97
Earnings per ADS
(Continuing) (GAAP)
(3Q19)
$8.6 billion
Cash, time deposits and short-term investment
(09/30/19)
4
BUSINESS SEGMENTS
PC & Mobile Games
Leading developer and operator of self-developed PC and mobile games to internet users in China; Operator of licensed games from Blizzard Entertainment and Mojang AB (a Microsoft subsidiary) in China.
Cloud Music
Leading interactive music streaming service providers in China with more than 800 million users and one of China's most active music platforms in terms of user retention rate, user time spent on the platform and the level of user-generated content.
Online Education
Leading intelligent learning service provider through Youdao, a company dedicated to developing and using technologies to provide learning content, applications and solutions to users of all ages.
E-commerce and Others
Leading service provider of private label e-commerce through Yanxuan, a platform offers access to cost effective and high-quality products in China;
Others include one of the largest providers of free e-mail services in China, one of the most popular internet media service providers in China, as well as our CC live-streaming platform.
5
ONLINE GAMES
Online Games Net Revenue and Gross Margin
RMB million | Gross Margin | Mobile Game Net Revenue | PC Game Net Revenue | ||||
64.3% | 65.1% | ||||||
63.7% | 63.1% | 63.8% | |||||
62.8% | |||||||
62.1% | |||||||
11,020 | 11,850 | 11,433 | 11,535 | ||||
10,061 10,348
8,761
Mobile Games as a | 75% | 68% | 70% | 72% | 72% | 71% |
72% | ||||||
Percentage of |
Online Games Net
Revenue
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 6 |
ONLINE GAMES - PC GAMES
Flagship Self-Developed PC titles | Flagship Licensed PC titles |
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ONLINE GAMES - MOBILE GAMES
- Over 100 mobile games offered in China
Self-Developed Mobile Games
Licensed Mobile Games From Overseas Developers
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ONLINE GAMES - MOBILE GAMES
Launching Mobile Games in Overseas Markets
Overseas games revenue reached a new record high in the third quarter of 2019, accounting for more than 10% of total online games revenue
- Knives Out led Japan's iOS top grossing chart several times in August, September and October
- Identity V led Japan's iOS top grossing chart for the first time in September
- Life-after,a newer release, is also ramping up in Japan
9
ONLINE EDUCATION
Online Education Net Revenue and Gross Margin
RMB million | Gross Margin | Net Revenue | ||
36.3% | ||||
32.9% | ||||
28.0% | 29.7% | |||
25.8% | ||||
23.4% | ||||
23.3% | ||||
346 | ||||
323 |
230226
193
174
134
1Q18 | 2Q18 | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | 10 |
ONLINE EDUCATION
Youdao Premium Courses | |||||||
Dual-teacher Live Streaming Class & Interactive Learning Experience Empowered by AI | |||||||
STEM | China University MOOC | ||||||
Learning | NetEase Cloud Classroom | ||||||
Gamified Learning | Certificates & Career Advancement | ||||||
Youdao | Youdao | ||||||
Fun Reading | Math | ||||||
Youdao | U-Dictionary | Youdao | Manual | Youdao | Cloud | Youdao | |
Dictionary | Translation | Translation | Cloudnote | Collaboration | Speaking | ||
Age of Students | Serving Diversified Demands Across All Age Groups | ||||||
0 | 6 | 15 | 18 | 22 | |||
Pre-School | K-12 |
- Youdao is the leading intelligent learning company in China with over 100 million average total MAUs
- K-12continues to be the primary growth engine for Youdao where we offer online courses via after-school curriculum tutorials and extra-curriculum courses in STEAM subjects
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INNOVATIVE BUSINESS AND OTHERS
Innovative Business and Others
Net Revenue and Gross Margin
RMB million
Gross Margin | Net Revenue | |||
17.0% | 15.5% | Cloud Music | NetEase Yanxuan | |
15.2% |
2,755
2,692
NetEase E-mail | NetEase Media |
2,637
NetEase CC
3Q18 2Q19 3Q19
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INNOVATIVE BUSINESS AND OTHERS
NetEase Cloud Music | NetEase Yanxuan |
- Launched in April 2013
- One of the largest online music streaming services in China with more than 800 million users
- China's most active music platform, with a market leading user retention rate and user time spent on the platform
- Continues to ramp up the monetization efforts, Cloud Music reached a new record high revenue in the third quarter of 2019
- Our popular private label business, targetingmiddle-class consumers in China with a strong emphasis on quality of life
- We work with over 500 quality manufactures and provide a premium selection ofhigh-quality and cost-effective lifestyle products to end users, eliminating the extraneous costs and third-party layers of distribution and retail
- During the third quarter, we made additional progress to improve our operating efficiency, continue to maximize our supply chain management and refine our factory relationships, successfully reducing our inventory to a more optimal level
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INNOVATIVE BUSINESS AND OTHERS
Internet Media
- www.163.com is one of China's most visited internet portals, with strong user diversity, reach and stickiness
- Mobile News App is one of the most popular news apps in China
Live Streaming
- CC live streaming platform offers various live streaming content with a primary focus on games
E-mail Services
- China's leadinge-mail service provider since 1997
- 1.05 billion registerede-mail users as of Sep 30, 2019
14
FINANCIAL HIGHLIGHTS
Net Revenues
RMB billion | 14.6 | |
14.4 | ||
13.2 | ||
3Q18 | 2Q19 | 3Q19 |
RMB billion | Operating Cash Flow (Continuing) | |
4.5 | 4.9 | |
3.8 | ||
3Q18 | 2Q19 | 3Q19 |
Net Income (Continuing) (GAAP)
RMB billion
12.9
3.4
2.1
3Q182Q193Q19
Value Returned to Shareholders
US$ | 2018FY | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 |
Dividend per ADS | $1.77 | $0.45 | $0.48 | $0.69 | $1.04 | $7.59 |
Share Buyback | $1,178.5m | $255.7m | $10.8m | $0 | $0 | $0.2m |
(during the period)
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BALANCE SHEET SUMMARY
2018 | 2019 | ||
in millions | Dec 31, RMB | Sep 30, RMB | Sep 30, USD |
(Unaudited) | (Unaudited) | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | 4,988 | 2,741 | 384 |
Time deposits | 32,900 | 39,224 | 5,488 |
Other current assets | 30,828 | 40,581 | 5,677 |
Total current assets | 68,716 | 82,546 | 11,549 |
Property, equipment and software | 4,673 | 4,708 | 659 |
Other non-current assets | 13,579 | 18,570 | 2,597 |
Total assets | 86,968 | 105,824 | 14,805 |
LIABILITIES, REDEEMABLE NONCONTROLING INTERESTS & | |||
SHAREHOLDERS' EQUITY | |||
Current liabilities: | |||
Deferred revenue | 7,718 | 8,196 | 1,147 |
Other current liabilities | 27,391 | 26,415 | 3,695 |
Total current liabilities | 35,109 | 34,611 | 4,842 |
Total liabilities | 35,556 | 35,818 | 5,011 |
Redeemable Noncontrolling Interests | 5,386 | 5,954 | 833 |
Total shareholders' equity | 46,026 | 64,052 | 8,961 |
Total liabilities and shareholders' equity | 86,968 | 105,824 | 14,805 |
16
INCOME STATEMENT SUMMARY
3Q18 | 2Q19 | 3Q19 | 3Q19 | QoQ | YoY |
RMB | RMB | RMB | USD | Change | Change |
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) |
Total net revenues: | 13,160 | 14,448 | 14,636 | 2,048 | 1.3% | 11.2% |
Online game services | 10,348 | 11,433 | 11,535 | 1,614 | 0.9% | 11.5% |
Youdao | 174 | 323 | 346 | 48 | 7.2% | 98.4% |
Innovative businesses and others | 2,638 | 2,692 | 2,755 | 386 | 2.3% | 4.4% |
Gross profit | 7,224 | 7,737 | 7,870 | 1,101 | 1.7% | 8.9% |
Gross profit margin | 54.9% | 53.5% | 53.8% | 53.8% | ||
Operating profit | 2,535 | 3,724 | 3,335 | 467 | -10.5% | 31.5% |
Operating profit margin | 19.3% | 25.8% | 22.8% | 22.8% | ||
Net income attributable to the | 1,596 | 3,071 | 12,730 | 1,781 | 314.5% | 697.5% |
Company's shareholders | ||||||
Diluted earnings per ADS | ¥12.37 | ¥23.64 | ¥97.80 | $13.68 | 313.7% | 690.6% |
Diluted earnings per ADS | ¥15.98 | ¥25.82 | ¥98.99 | $13.85 | 283.4% | 519.5% |
(Continuing operations) | ||||||
17
CONTACT US
Margaret Shi | Brandi Piacente |
NetEase, Inc. | The Piacente Group, Inc. |
E-mail: ir@service.netease.com | E-mail: netease@thepiacentegroup.com |
Tel: (+86) 571-8985-3378 | Tel: (+1) 212-481-2050 |
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THANK YOU
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Disclaimer
Netease Inc. published this content on 21 November 2019 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 November 2019 10:15:00 UTC