NTES(HK:09999)2023-11-16 10:05Financial Performance - NetEase reported Q3 2023 net revenue of RMB 27.3 billion (USD 3.7 billion), an increase of 11.6% year-over-year[4]. - Game and related value-added services net revenue reached RMB 21.8 billion (USD 3.0 billion), up 16.5% year-over-year[4]. - Youdao net revenue was RMB 1.5 billion (USD 210.9 million), reflecting a 9.7% year-over-year increase[4]. - Cloud Music net revenue decreased to RMB 2.0 billion (USD 270.4 million), down 16.3% year-over-year[4]. - Gross profit for Q3 2023 was RMB 17.0 billion (USD 2.3 billion), a 23.4% increase year-over-year[4]. - Net profit attributable to shareholders was RMB 7.8 billion (USD 1.1 billion), with non-GAAP net profit at RMB 8.6 billion (USD 1.2 billion)[5]. - The net profit attributable to shareholders in Q3 2023 was RMB 7,836.9 million (approximately USD 1,074.1 million), compared to RMB 8,242.8 million in the previous quarter and RMB 6,699.4 million year-over-year[15]. - Net income for the nine months ended September 30, 2023, was RMB 22,680,891, an increase from RMB 16,033,595 in the same period of 2022, representing a growth of approximately 41.5%[26]. - The company achieved a net profit margin of approximately 30.5% for the nine months ended September 30, 2023, compared to 28.5% in the same period of 2022[26]. - The total revenue for the nine months ended September 30, 2023, was RMB 76,327,994, an increase from RMB 71,141,680 in the same period of 2022, indicating a growth of about 7.5%[26]. Operating Expenses - The total operating expenses for Q3 2023 amounted to RMB 9,408.4 million (approximately USD 1,289.5 million), an increase from RMB 8,312.8 million in the previous quarter and RMB 9,002.1 million year-over-year[12]. - The total operating costs for the nine months ended September 30, 2023, were RMB 30,089,735, a decrease of 4.8% from RMB 31,619,918 in the same period of 2022[28]. - Research and development expenses for the nine months ended September 30, 2023, totaled RMB 3,648,011, compared to RMB 3,392,866 in the same period of 2022, reflecting an increase of approximately 7.5%[26]. - Research and development expenses for the nine months ended September 30, 2023, amounted to RMB 869,361, reflecting an increase from RMB 782,259 in the same period of 2022[30]. Cash Flow and Assets - As of September 30, 2023, the net cash and cash equivalents, along with short-term investments, amounted to RMB 104.4 billion (approximately USD 14.3 billion), an increase from RMB 95.6 billion at the end of 2022[16]. - The net cash flow from operating activities for Q3 2023 was RMB 9.8 billion (approximately USD 1.3 billion), compared to RMB 7.7 billion in the previous quarter and RMB 7.5 billion year-over-year[16]. - Cash and cash equivalents at the end of September 30, 2023, totaled RMB 20,844 million, an increase from RMB 18,158 million at the end of the previous year[27]. - Operating cash flow for the nine months ended September 30, 2023, was RMB 18,700 million, down from RMB 23,523 million in the previous year, indicating a decrease of about 20.5%[27]. - The company reported a net cash inflow from investment activities of RMB 987 million for the three months ended September 30, 2023, compared to an outflow of RMB 515 million in the same period last year[27]. Shareholder Returns - The company announced a quarterly dividend of USD 0.0990 per share, payable on December 12, 2023, to shareholders registered by December 1, 2023[17]. - The company has initiated a share repurchase plan of up to USD 5 billion, with approximately 6.6 million ADS repurchased for about USD 587.9 million as of September 30, 2023[18]. Market and Product Development - The mobile game "Nirvana in Fire" achieved strong revenue and user growth, surpassing 50 million registered players[6]. - The newly launched basketball game "All-Star Street Basketball Party" topped the iOS sales chart in China[6]. - The company plans to release several highly anticipated new games in 2024, showcasing its R&D capabilities[6]. - Youdao's learning services and online marketing services continue to drive revenue growth, improving operational losses[10]. - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[26]. - The company emphasizes the integration of culture and education into gaming, enhancing the meaningfulness and vibrancy of its games[22]. Financial Metrics and Comparisons - Non-GAAP financial metrics are used to assess operational performance, excluding stock-based compensation expenses from net profit attributable to shareholders[24]. - The non-GAAP net profit attributable to shareholders is defined as the profit after excluding stock-based compensation expenses, providing a clearer view of operational performance[24]. - The company acknowledges that non-GAAP metrics may differ from those used by other companies, affecting comparability[24]. - NetEase encourages a comprehensive review of its financial information rather than relying on any single financial metric[24]. Tax and Regulatory - The effective tax rate for Q3 2023 was 14.2%, a decrease from 19.3% year-over-year, primarily due to the recognition of tax incentives[14]. Balance Sheet Highlights - As of September 30, 2023, total assets amounted to RMB 172.76 billion, a slight increase from RMB 171.58 billion as of December 31, 2022[25]. - Cash and cash equivalents decreased to RMB 15.12 billion from RMB 24.89 billion, representing a decline of approximately 39.2%[25]. - Total current liabilities increased significantly to RMB 56.83 billion, up from RMB 43.87 billion, reflecting a rise of about 29.5%[25]. - The company's total equity decreased to RMB 108.74 billion from RMB 123.80 billion, a decline of approximately 12.1%[25]. - Short-term borrowings surged to RMB 23.88 billion, compared to RMB 11.22 billion, marking an increase of around 112.5%[25]. - The net value of accounts receivable rose to RMB 6.49 billion from RMB 5.00 billion, an increase of approximately 29.8%[25]. - Non-current assets totaled RMB 41.16 billion, down from RMB 44.01 billion, indicating a decrease of about 6.5%[25]. - The company's total liabilities reached RMB 63.89 billion, up from RMB 47.63 billion, reflecting an increase of approximately 34.1%[25]. - The net value of inventories increased to RMB 721.96 million from RMB 993.64 million, a decrease of about 27.3%[25]. - The total amount of restricted cash was RMB 3.04 billion, a decrease from RMB 2.70 billion, indicating a decline of approximately 10.3%[25]. Leadership Changes - The company is undergoing a leadership transition as CFO Yang Zhaoxuan will resign effective November 30, 2023, but will remain as an advisor until June 30, 2024[19]. ESG Performance - NetEase has been recognized for its strong ESG performance, being included in the 2022 Dow Jones Sustainability World Index and receiving an A rating from MSCI[22]. Risks and Challenges - Forward-looking statements indicate potential risks, including the online gaming market's growth stagnation and challenges in maintaining market position[23].