NetEase, Inc. (NASDAQ:NTES) Q2 2021 Earnings Conference Call August 31, 2021 8:00 PM ET Company Participants Margaret Shi – IR Director of NetEase William Ding – Chief Executive Officer Charles Yang – Chief Financial Officer Conference Call Participants Alex Yao – JP Morgan Kenneth Fong – Credit Suisse Alex Poon – Morgan Stanley Natalie Wu – Haitong International Thomas Chong – Jefferies Eddie Leung – Bank of America Merrill Lynch Operator Good day and welcome to the NetEase 2021 Second Quarter Earnings Con ...

Financial Performance - NetEase reported Q2 2021 net revenue of RMB 20.5 billion (USD 3.18 billion), a year-over-year increase of 12.9%[5] - Online gaming services net revenue reached RMB 14.5 billion (USD 2.25 billion), up 5.1% year-over-year[5] - Youdao net revenue was RMB 1.3 billion (USD 200.3 million), showing a significant increase of 107.5% year-over-year[5] - Gross profit for Q2 2021 was RMB 11.2 billion (USD 1.73 billion), reflecting a year-over-year growth of 14.3%[5] - In Q2 2021, the net profit attributable to shareholders was RMB 3,541.8 million (USD 548.5 million), down from RMB 4,439.2 million in the previous quarter and RMB 4,537.8 million in the same quarter last year[14] - The non-GAAP net profit attributable to shareholders for Q2 2021 was RMB 4,227.9 million (USD 654.8 million), compared to RMB 5,080.7 million in the previous quarter and RMB 5,226.0 million in the same quarter last year[15] - The basic earnings per share for Q2 2021 was USD 0.16, down from USD 0.21 in the previous quarter and USD 0.22 in the same quarter last year[15] - Net profit for the three months ended June 30, 2021, was RMB 4,651,280, showing an increase compared to RMB 3,476,364 for the same period in 2020[31] - The company reported a net profit attributable to shareholders of RMB 4,227,865 thousand for the three months ended June 30, 2021, compared to RMB 3,541,754 thousand for the same period in 2020, representing a year-over-year increase of 19.4%[34] Operating Expenses - Operating expenses totaled RMB 7.4 billion (USD 1.15 billion), a year-over-year increase of 32.2%[11] - Total operating expenses for the six months ended June 30, 2021, were RMB 14,208,554, an increase from RMB 10,513,479 in the same period of 2020, reflecting a rise of approximately 35.5%[30] Cash Flow and Investments - As of June 30, 2021, the company's cash and cash equivalents totaled RMB 108 billion (USD 16.7 billion), an increase from RMB 100.1 billion as of December 31, 2020[17] - The net cash inflow from operating activities for Q2 2021 was RMB 4.7 billion (USD 731.5 million), down from RMB 5.5 billion in the previous quarter[17] - The company reported a net cash outflow from investing activities of RMB 22,735,348 for the six months ended June 30, 2021[31] - The net cash inflow from financing activities was RMB 18,784,780 for the six months ended June 30, 2021[31] Market and Product Developments - The flagship game "Naraka: Bladepoint" topped the Steam sales chart after its global launch in August[6] - Upcoming mobile game "Harry Potter: Magic Awakened" is set to launch on September 9, 2021[7] - NetEase's CEO expressed excitement about the upcoming product launches, which are expected to strengthen the company's leading position in the gaming industry[6] - The company has expanded its business into international markets, including Japan and North America, and continues to develop popular online games and services[22] - The company plans to continue expanding its market presence and investing in new technologies and products to drive future growth[32] Regulatory and Market Risks - The company is expected to be significantly impacted by regulatory changes in the K-12 education sector in China, although the extent of the impact remains uncertain[18] - The company faces risks related to market growth, regulatory changes, and competition in the online gaming sector, which could impact future performance[24] Financial Metrics and Ratios - The effective tax rate for Q2 2021 was 24.3%, an increase from 22.0% in the previous quarter and 18.6% in the same quarter last year[13] - The company emphasizes the importance of non-GAAP financial metrics for investors to assess operational performance and future prospects[26] - Net income attributable to shareholders under non-GAAP was defined as net income excluding stock-based compensation expenses, providing a clearer view of operational performance[25] Assets and Liabilities - Total assets increased from RMB 141.87 billion in 2020 to RMB 154.86 billion in 2021, reflecting a growth of approximately 9%[28] - Current assets totaled RMB 115.96 billion as of June 30, 2021, up from RMB 107.83 billion in 2020, indicating an increase of about 7%[28] - Total liabilities rose from RMB 48.08 billion in 2020 to RMB 56.34 billion in 2021, representing an increase of approximately 17%[29] - The company reported a total equity attributable to shareholders of RMB 86.14 billion as of June 30, 2021, up from RMB 82.13 billion in 2020, reflecting an increase of about 5%[29] Research and Development - The company’s research and development expenses for the three months ended June 30, 2021, were RMB 217,766 thousand, slightly up from RMB 212,369 thousand for the same period in 2020[33]

Financial Results Announcement - The board meeting for NetEase, Inc. is scheduled for August 30, 2021, to approve the unaudited financial results for the three and six months ended June 30, 2021[1]. - The financial results will be announced on August 31, 2021, around 6 PM Hong Kong time[1]. - A conference call to discuss the financial results will take place on August 31, 2021, at 8 PM Hong Kong time[1].

NetEase, Inc. (NASDAQ:NTES) Q1 2021 Results Conference Call May 18, 2021 8:00 AM ET Company Participants Margaret Shi - Investor Relations-Director William Ding - Chief Executive Officer Charles Yang - Chief Financial Officer Conference Call Participants Alex Poon - Morgan Stanley Jialong Shi - Nomura Thomas Chong - Jefferies Eddie Leung - Bank of America Alicia Yap - Citi Elsie Cheng - Goldman Sachs Operator Good day, and welcome to the NetEase 2021 First Quarter Earnings Conference Call. Today's conferenc ...

Financial Performance - NetEase, Inc. reported a net revenue of RMB 73,667,133 thousand for 2020, representing a 24.4% increase from RMB 59,241,145 thousand in 2019[4] - The gross profit for 2020 was RMB 38,983,402 thousand, up 23.5% from RMB 31,555,300 thousand in 2019[4] - The company reported online gaming service revenue of RMB 54.6 billion for the year ended December 31, 2020[11] - The online gaming services segment generated RMB 54,608,717 in revenue for 2020, up 17.8% from RMB 46,422,640 in 2019[24] - Total comprehensive income for the period was RMB 6,496,041 thousand, a decrease from RMB 21,337,352 thousand in the previous period[26] - Net income attributable to NetEase, Inc. shareholders was RMB 12,062,754 for 2020, a decrease from RMB 21,237,516 in 2019[24] - Basic earnings per share (EPS) was RMB 1.90, compared to RMB 6.59 in the previous year, reflecting a decline of approximately 71%[26] - The diluted EPS was RMB 1.89, down from RMB 6.53 in the previous year, indicating a decline of approximately 71%[26] - The total net revenue for 2020 was RMB 62,191,162,000, up 25.7% from RMB 49,455,146,000 in 2019[38] - The total revenue for the discontinued operations for the year ended December 31, 2019, was RMB 10,571,406, down from RMB 15,977,878 in 2018, representing a decrease of approximately 33.5%[106] Assets and Liabilities - The total assets increased to RMB 141,874,582 thousand in 2020, a rise of 26.6% from RMB 112,124,371 thousand in 2019[5] - The total liabilities rose to RMB 48,080,658 thousand, which is an increase of 23.0% from RMB 39,082,916 thousand in 2019[5] - The total current assets increased to RMB 107,831,043 thousand, reflecting a growth of 26.8% from RMB 85,105,012 thousand in 2019[5] - The total equity attributable to shareholders increased to RMB 82,997,804 thousand, a growth of 32.5% from RMB 62,592,855 thousand in 2019[5] - Cash and cash equivalents rose significantly from RMB 3.25 billion in 2019 to RMB 9.12 billion in 2020, an increase of 180.5%[19] - Total liabilities increased from RMB 38.24 billion in 2019 to RMB 46.74 billion in 2020, an increase of 22.0%[21] - The company maintained a strong liquidity position with current assets significantly exceeding current liabilities in 2020[19] Revenue Recognition and Accounting Policies - The company has adopted ASC 606 for revenue recognition, which did not have a significant impact on the consolidated financial statements[53] - Revenue is primarily derived from online gaming services, online course services, advertising services, e-commerce, and other paid value-added services[54] - The company generates mobile game revenue through the sale of virtual items, with revenue recognized proportionally based on the estimated average gaming time of paying players[56] - The online course services provided by the company are considered a single performance obligation, with revenue recognized proportionally over the estimated average learning time during the student's learning period[59] - Advertising revenue is primarily generated from short-term contracts, with income recognized based on the number of ad impressions or actions completed by users[60] Research and Development - Research and development expenses for 2020 were RMB 10,369,382, which is a 23.2% increase from RMB 8,413,224 in 2019[24] - The company is investing $200 million in research and development for innovative online services and technologies[192] - The company is actively involved in research and development (R&D) initiatives[189] Risks and Compliance - The company faced industry-specific risks, including rapid technological changes and regulatory scrutiny in the Chinese internet and gaming sectors[40] - The company faces significant risks if the Chinese government takes actions that could restrict its business activities, including the potential revocation of business licenses and operational restrictions[49] - The company is subject to various regulatory bodies in China, including the China Securities Regulatory Commission[189] - The company faces various regulatory risks related to compliance with telecommunications, internet, foreign investment, and consumer protection laws in China[197] Shareholder Information - The company declared cash dividends totaling RMB 3,614.8 million (approximately USD 554.0 million) for the fiscal years 2019 and 2020[167] - The company has committed to a quarterly cash dividend policy, distributing approximately 20% to 30% of the estimated after-tax net profit for each fiscal quarter[167] - The company’s ordinary shareholders have the right to receive dividends and participate in the distribution of remaining assets upon liquidation, with no preferential rights[154] Investments and Acquisitions - The company has established several contractual arrangements to provide additional financial support to its VIE entities as needed[39] - The company has established joint ventures with Blizzard for online game operations in China, which are classified as variable interest entities[46] - The company is exploring potential acquisitions in the education technology sector to diversify its service offerings[192] Market and Competitive Landscape - The company is facing competitive pressures from emerging players in the online gaming market, which could affect market share[196] - The competitive landscape in the online gaming industry is rapidly changing, making it challenging for the company to maintain a competitive edge in the mobile gaming market[200] - The company must continue to invest in new technology development to enhance user experience across its gaming platforms[200] Financial Reporting and Internal Controls - The company follows U.S. Generally Accepted Accounting Principles (GAAP) for its financial reporting[186] - The company has implemented internal controls over financial reporting as required by the Sarbanes-Oxley Act[185] - The company reported audited consolidated financial statements for the years ended December 31, 2018, 2019, and 2020[187]

NetEase, Inc. (NASDAQ:NTES) Q4 2020 Earnings Conference Call February 25, 2021 7:00 AM ET Company Participants Margaret Shi - Investor Relations-Director Charles Yang - Chief Financial Officer William Ding - Chief Executive Officer Conference Call Participants Jialong Shi - Nomura Alex Poon - Morgan Stanley Alicia Yap - Citi Alex Yao - JPMorgan Thomas Chong - Jefferies Kenneth Fong - Credit Suisse Operator Good day and welcome to the NetEase 2020 Fourth Quarter and Full Year’s Earnings Conference Call. Toda ...