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Netease announced the fourth quarter financial report: net income of 19.8 billion yuan

via:博客园     time:2021/2/26 1:17:57     readed:131

Main financial results in the fourth quarter of 2020:

Key points of operation in the fourth quarter of 2020 and the beginning of 2021:

Financial performance in the fourth quarter of 2020

net income

In the fourth quarter of 2020, the net income was 19761.7 million yuan (3028.6 million US dollars), 18658.2 million yuan in the previous quarter and 15734.8 million yuan in the same period last year.

In the fourth quarter of 2020, the net revenue of online game services was 13400.2 million yuan (2053.7 million US dollars), 13862.0 million yuan in the previous quarter and 11604.3 million yuan in the same period last year. In this quarter, the net revenue from mobile games accounted for 72.4% of the net revenue from online game services, which accounted for 72.7% and 70.4% respectively in the last quarter and the same period last year.

In the fourth quarter of 2020, Youdao's net income was 1106.8 million yuan (169.6 million US dollars), compared with 896.0 million yuan in the previous quarter and 410.4 million yuan in the same period last year.

In the fourth quarter of 2020, the net income of innovation and other businesses was RMB 5254.8 million (US $805.3 million), compared with RMB 3900.1 million in the previous quarter and RMB 3720.0 million in the same period last year.

Gross profit

In the fourth quarter of 2020, the gross profit was 9927.8 million yuan (1521.5 million US dollars), 9885.8 million yuan in the last quarter and 8210.4 million yuan in the same period last year.

The decline in the gross profit of online game services was mainly due to the slight decline in the net income of some mobile games. The year-on-year increase was mainly due to the increase in net revenue of mobile games, such as dream journey to the West web page and light travel"Yu", "after tomorrow" and "the shore of the land", as well as the increase in net income of end-users, such as the computer version of "dream journey to the west".

The month on month and year-on-year growth of Youdao's gross profit was mainly due to the significant growth of its net income from learning services and learning products.

The month on month growth of innovation and other business gross profit was mainly due to the growth of advertising service and strict selection gross profit. The year-on-year growth was mainly due to the performance improvement of yanxuan and Netease cloud music.

Gross profit rate

In the fourth quarter of 2020, the gross profit rate of online game service was 63.1%, which was 63.6% in the last quarter and 63.1% in the same period last year. The gross profit rate of online game service is relatively stable on the whole, and fluctuates slightly due to the changes in the proportion of mobile game and end game revenue, and the proportion of self research and agent game revenue.

In the fourth quarter of 2020, Youdao's gross profit margin was 47.5%, 45.9% in the last quarter and 29.8% in the same period last year. The month on month and year-on-year increase of gross profit rate is mainly due to the enhancement of scale effect, the further optimization of teachers' salary structure and the significant increase of Youdao dictionary pen sales with relatively high gross profit rate.

In the fourth quarter of 2020, the gross profit margin of innovation and other businesses was 18.0%, compared with 16.8% in the previous quarter and 20.6% in the same period last year. The month on month rise of gross profit rate is mainly due to the rise of gross profit rate of advertising service. The year-on-year decrease was mainly due to the decrease of gross profit rate of Netease CC live broadcasting platform.

Operating expenses

The total operating expenses in the fourth quarter of 2020 were RMB 6915.8 million (US $1059.9 million), which were RMB 7015.7 million and RMB 5234.0 million in the last quarter and the same period last year respectively. The month on month decrease was mainly due to the decrease of Youdao's marketing expenses. The year-on-year increase was mainly due to the increase of online game services and Youdao marketing fees, as well as the increase of personnel costs and R & D investment.

Other income

Other income includes investment income / (loss), interest income, exchange loss and others. The month on month and year-on-year decrease is mainly due to the fluctuation of the exchange rate between us dollar and RMB in the current period, which leads to the increase of unrealized net exchange loss caused by the balance of bank deposits and short-term loans denominated in US dollar and the loss caused by the change of fair value of equity investment which is easy to determine the fair value.

income tax

The income tax expense recognized by the company in the fourth quarter of 2020 was RMB 552.7 million (US $84.7 million), which was RMB 342.7 million and RMB 876.3 million in the last quarter and the same period last year respectively. The effective tax rate was 37.2% in the fourth quarter of 2020, compared with 10.9% in the last quarter and 22.1% in the same period last year. The effective tax rate reflects the company's estimate of the tax obligations and rights applicable on a quarterly basis.

Net profit and non GAAP net profit

In the fourth quarter of 2020, the net profit from going concern attributable to shareholders of the company was RMB 975.7 million (US $149.5 million), including net exchange loss of RMB 1801.9 million (US $276.2 million) and net investment loss of RMB 271.9 million (US $41.7 million), which were RMB 2998.2 million and RMB 3053.7 million in the last quarter and the same period last year respectively Million yuan.

In the fourth quarter of 2020, the net profit from going concern attributable to shareholders of the company under non GAAP was 1597.9 million yuan (244.9 million US dollars), which was 3669.2 million yuan in the previous quarter and 3662.3 million yuan in the same period last year.

In the fourth quarter of 2020, the basic and diluted net profit from going concern per share were both US $0.04, US $0.14 and US $0.13 in the previous quarter, and US $0.15 and US $0.14 in the same period last year.

In the fourth quarter of 2020, the net profit from continuing operations of basic and diluted ADSS per share were both US $0.22, compared with us $0.68 and US $0.67 in the previous quarter, and US $0.72 in the same period of last year.

In the fourth quarter of 2020, both basic and diluted going concern net profit per share under non GAAP were US $0.07, compared with us $0.17 and US $0.16 in the previous quarter and US $0.17 in the same period of last year.

In the fourth quarter of 2020, the net profits from going concern of basic and diluted ADSS per share were both US $0.36, compared with us $0.83 and US $0.82 in the previous quarter and US $0.87 and US $0.86 in the same period of last year.

Financial performance of financial year 2020

net income

The net income in 2020 is RMB 73667.1 million (US $11290.0 million) and that in 2019 is RMB 59241.1 million.

The net revenue of online game service is 54608.7 million yuan (8369.2 million US dollars) in 2020 and 46422.6 million yuan in 2019. In 2020, the net income of mobile games will account for 71.9% of the net income of online game services, and in 2019, it will account for 71.4%.

The net income of Youdao is 3167.5 million yuan (485.4 million US dollars) in 2020 and 1304.9 million yuan in 2019.

In 2020, the net income of innovation and other business is RMB 15890.9 million (US $2435.4 million), and in 2019, it is RMB 11513.6 million.

Gross profit

The gross profit is 38983.4 million yuan (5974.5 million US dollars) in 2020 and 31555.3 million yuan in 2019.

The year-on-year growth of online game service gross profit mainly benefited from the revenue contribution of self-developed games, such as "dream journey to the West web version" and "dream journey to the West 3D version".

The year-on-year growth of Youdao's gross profit was mainly due to the increase of its net income from learning services and learning products.

The year-on-year growth of innovation and other business gross profit was mainly due to the improvement of Netease cloud music performance.

Operating expenses

The operating expenses will be RMB 24445.0 million (US $3746.4 million) in 2020 and RMB 17764.6 million in 2019. The year-on-year increase was mainly due to the increase in online game services and Youdao marketing fees, as well as the increase in R & D investment and personnel costs.

Other income

Other income includes investment income, interest income, exchange income / (loss) and others. The year-on-year decrease was mainly due to the increase of net exchange loss in the current period.

income tax

The income tax expense recognized by the company is RMB 3041.8 million (US $466.2 million) in 2020 and RMB 2914.7 million in 2019. The effective tax rate will be 19.8% in 2020 and 17.8% in 2019. The year-on-year increase in effective tax rate was mainly due to the increase in losses of some subsidiaries.

Net profit and non GAAP net profit

The net profit of going concern attributable to shareholders of the company in 2020 is RMB 12062.8 million (US $1848.7 million), of which the net exchange loss is RMB 3112.2 million (US $477.0 million) and RMB 13275.0 million in 2019.

The net profit from going concern attributable to shareholders of the company under non GAAP in 2020 is RMB 14706.0 million (US $2253.8 million) and RMB 15662.7 million in 2019.

In 2020, the net profit of basic and diluted going concern per share is US $0.56 and US $0.55 respectively, and the average annual profit in 2019 is US $0.63.

In 2020, the net profit from going concern of basic and diluted ADSS per share was US $2.80 and US $2.76 respectively, and in 2019, it was US $3.16 and US $3.13 respectively.

In 2020, the net profit of basic and diluted going concern per share under non GAAP is US $0.68 and US $0.67 respectively, and the average annual profit in 2019 is US $0.74.

In 2020, the net profit from going concern of basic and diluted ADSS per share was US $3.41 and US $3.36 respectively, and in 2019, it was US $3.73 and US $3.69 respectively.

Quarterly dividend

The Board approved a dividend of US $0.0120 per share (US $0.0600 per ADSS) for the fourth quarter of 2020, which will be paid in US dollars to the holders of ordinary shares and ADSS registered after the close of trading on March 12, 2021, Hong Kong time and New York time, respectively. In order to be eligible for dividends, the holders of common shares shall, no later than 4:30 p.m. Hong Kong time on March 12, 2021, deliver all valid share transfer files together with relevant share certificates to Netease's share transfer registry branch, namely Hong Kong Central Securities Registration Co., Ltd., at Hopewell centre, 183 queen's Road East, Wanchai, Hong Kong for registration Shop 1712-1716, 17th floor. The common stock dividend payment date is expected to be March 23, 2021, and the American Depository stock dividend payment date is expected to be around March 26, 2021.

In the first quarter of 2020, the dividend of US $0.0464 per share (US $0.2320 per ads) was paid in June 2020. The dividend for the second quarter of 2020 was US $0.0594 per share (US $0.2970 per ads), which was paid in September 2020. In the third quarter of 2020, the dividend of US $0.0390 per share (US $0.1950 per ads) was paid in December 2020.

According to the company's policy, starting from the second quarter of 2019, the quarterly dividend is expected to be about 20% - 30% of the company's after tax net profit in each financial quarter. The distribution and specific amount of each quarterly dividend shall be decided by the board of directors, which shall be based on the company's operation and profitability, cash flow, financial status and other relevant factors.

Other information

As of December 31, 2020, the balance of cash and cash equivalents, current and non current time deposits and short-term investment of the company amounted to RMB 100099.6 million (US $15340.9 million), and as of December 31, 2019, the balance was RMB 74406.0 million. The net cash inflow from continuing operations in 2020 is RMB 24888.2 million (US $3814.3 million) and RMB 16911.0 million in 2019.

Share purchase / repurchase plan

On November 20, 2019, the company announced that its board of directors approved a share purchase plan, that is, from November 25, 2019, it can publicly purchase the outstanding ADSS with a total amount of no more than US $20.0 million on the New York Stock Exchange within a period of no more than 12 months. As of November 24, 2020, the last day of the program, the company has purchased about 198000 ADSS, totaling about $3.4 million.

On February 26, 2020, the company announced that its board of directors approved a share repurchase plan, that is, from March 2, 2020, it can publicly repurchase the outstanding ADSS with a total amount of no more than US $1 billion in the NASDAQ Global Select market within a period of no more than 12 months. On May 19, 2020, the company announced that its board of directors had approved the amendment to the plan, increasing the total amount of public repurchase in the NASDAQ Global Select market to US $2 billion. As of December 31, 2020, the company has repurchased about 21.1 million ADSS, totaling about US $1.6 billion.

The company announced today that its board of directors has approved a new share repurchase plan, that is, from March 2, 2021, it can repurchase the outstanding ADSS and ordinary shares with a total amount of no more than US $2 billion in the open market within a period of no more than 24 months. Netease's repurchase of its ADSS and ordinary shares will depend on a variety of factors, including market conditions. The program may be suspended or suspended at any time.

**The U.S. dollar figures in this announcement are for ease of reading only. The conversion of US dollar to RMB is based on the buying rate at noon on December 31, 2020 published by the Federal Reserve Bank of the United States H.10, that is, 1 US dollar = RMB 6.5250. There is no formal statement that RMB has been or may be converted into US dollars at the exchange rate on December 31, 2020 or any other specific date. The percentages in this announcement are converted on the basis of RMB.

Other matters

Teleconferencing

Netease management will hold a conference call on Thursday, February 25, 2021, at 7:00 a.m. New York time (8:00 p.m. Beijing / Hong Kong time), during which Netease management will discuss the company's quarterly performance and answer questions.

At the same time, the company's investor relations websitehttp://ir.netease.com/The financial report will be broadcast live for 12 months.

Note: the exchange rate of RMB to us dollar is calculated according to the buying rate at noon on the last trading day in December 2020 (December 31, 2020) published by the Federal Reserve Bank of the United States H.10, that is: 1 US dollar = RMB 6.5250 yuan.

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