BEIJING, May 20 /PRNewswire-Asia/ -- NetEase.com, Inc. (Nasdaq: NTES), one of China’s leading Internet and online game services providers, today announced its unaudited financial results for the quarter ended March 31, 2009.
William Ding, Chief Executive Officer and Director of NetEase said, “Our online game business continued to perform well during the first quarter as a result of the longevity of our game lifecycles, strong user loyalty among our gamers and robust online communities.”
“Fantasy Westward Journey (“FWJ”) has maintained a steady user base, and we are planning a variety of promotional activities via diversified channels in the upcoming summer season to reinforce the long-standing popularity of FWJ and promote its appeal to new gamers. The performance of Westward Journey Online II (“WWJ2”) is another indicator of our brand’s longevity in the marketplace as the number of online registered users remained steady through the first quarter. Recently introduced promotional activities to enhance game play continue to attract new users and retain existing players, and we plan to continue releasing expansion packs in due course to further enhance this game’s appeal to our users.”
“Diversification of our game product offerings through strategic licensing opportunities is an integral part of our long-term growth plan. Our recent successful execution in this area has resulted in the expansion of our partnership with Blizzard Entertainment(R) to license World of Warcraft(R) in mainland China for a term of three years following the re-launch of that game after the expiration of the current license agreement. Adding to our existing licensing agreements for other Blizzard Entertainment games like Warcraft III and StarCraft II and the Battle.net platform, this new licensing achievement positions NetEase with the most popular MMORPG worldwide in addition to our outstanding portfolio of market leading in-house developed games.”
Mr. Ding continued, “While advertisers remained cautious overall during the first quarter as the global economic slowdown continued and as reflected in the decrease in our revenue from advertising services, the Chinese government’s stimulus measures and continually expanding internal consumption power have delivered some initial signs of recovery. To accommodate future market stability and an expected return to online advertising spending growth later this year, we remain on plan to complete several new products and upgrades to our existing channels and add new channels by the end of the first half of 2009 to create more premium ad space for our advertisers.”
“NetEase maintains a very strong balance sheet with ample cash resources to fund our ongoing development of world-class online games and premium online content and our third-party licensing arrangements.” Mr. Ding concluded.
First Quarter 2009 Financial Results
Revenues
Total revenues for the first quarter of 2009 were RMB781.7 million (US$114.4 million), compared to RMB801.7 million (US$117.3 million) and RMB651.9 million (US$95.4 million) for the fourth and first quarters of 2008, respectively.
Revenues from online games were RMB724.0 million (US$106.0 million) for the first quarter of 2009, compared to RMB672.5 million (US$98.4 million) and RMB555.9 million (US$81.4 million) for the fourth and first quarters of 2008, respectively.
Revenues from advertising services were RMB41.0 million (US$6.0 million) for the first quarter of 2009, compared to RMB111.8 million (US$16.4 million) and RMB77.1 million (US$11.3 million) for the fourth and first quarters of 2008, respectively.
Revenues from wireless value-added services and others (“WVAS and others”) were RMB16.6 million (US$2.4 million) for the first quarter of 2009, compared to RMB17.4 million (US$2.6 million) and RMB18.9 million (US$2.8 million) for the fourth and first quarters of 2008, respectively.
Gross Profit
Gross profit for the first quarter of 2009 was RMB641.7 million (US$93.9 million), compared to RMB639.0 million (US$93.5 million) and RMB532.0 million (US$77.9 million) for the fourth and first quarters of 2008, respectively.
The slight quarter-over-quarter increase in gross profit was primarily attributable to the continued strong revenue growth from the Company’s flagship games, FWJ and WWJ2 as well as Tianxia II, coupled with cost savings on staff-related costs in the current quarter, which was largely offset by the significant decrease in advertising revenues. The first quarter is normally a low season for the advertising industry in China, especially in 2009 due to the global economic slowdown. Many of the Company’s advertisers delayed or reduced their advertising spending. The reduction in advertising revenues was partly offset by reduced business taxes and content cost. The year-over-year increase in gross profit was primarily attributable to the strong revenue growth from the Company’s flagship games, partially offset by the significant decrease in advertising revenues as explained above.
Gross Profit (Loss) Margin
Gross profit margin for the online game business for the first quarter of 2009 was 90.0%, compared to 88.0% and 90.2% for the fourth and first quarters of 2008, respectively. The quarter-over-quarter increase in gross profit margin was primarily due to cost savings on staff-related costs. The
year-over-year gross profit margin remained relatively stable.
Gross loss margin for the advertising business for the first quarter of 2009 was 13.1%, compared to gross profit margin of 51.1% and 45.8% for the fourth and first quarters of 2008, respectively. The quarter-over-quarter and year-over-year decreases in gross profit margin were primarily attributable to significantly reduced advertising revenues in the current quarter as explained above.
Gross loss margin for the WVAS and others business for the first quarter of 2009 was 22.3%, compared to 24.9% and 6.2% for the fourth and first quarters of 2008, respectively. The quarter-over-quarter gross loss margin remained relatively stable. The year-over-year increase in gross loss margin was mainly due to a reduction in revenues from SMS services, partially offset by increased revenues from premium e-mail services.
Operating Expenses
Total operating expenses for the first quarter of 2009 were RMB150.6 million (US$22.0 million), compared to RMB168.5 million (US$24.7 million) and RMB127.6 million (US$18.7 million) for the fourth and first quarters of 2008, respectively. The quarter-over-quarter decrease in selling and marketing expenses was primarily attributable to reduced sales and marketing promotion costs related to games and advertising services, and reduced staff-related costs. The quarter-over-quarter decrease in research and development expenses was primarily due to a reduction in bonus accruals. The foregoing decreases were partially offset by increased general and administration expenses resulting from increased provision for bad debts on overdue accounts receivable balances and increased headcount and game management staff-related costs.
The year-over-year increase in selling and marketing expenses was mainly due to increased temporary staff costs for promoting online games and increased promotional activities related to advertising services in the current quarter. The year-over-year increase in general and administration expenses was mainly caused by increased provision for bad debts and increased headcount. The year-over-year increase in research and development expenses was mainly caused by higher depreciation expense related to additional servers acquired to develop online game and search engine services and increased bandwidth usage and server custody fees, resulting from increased usage by the development teams in online game, advertising and search engine areas.
Net Profit
Net profit for the first quarter of 2009 totaled RMB416.7 million (US$61.0 million), compared to RMB575.9 million (US$84.3 million) and RMB269.4 million (US$39.4 million) for the fourth and first quarters of 2008, respectively. During the current quarter, the Company reported a net foreign exchange loss of RMB47.5 million (US$7.0 million) under Other, net, compared to losses of RMB22.0 million (US$3.2 million) and RMB50.4 million (US$7.4 million) for the fourth and first quarters of 2008, respectively. The quarter-over-quarter increase and year-over-year decrease in foreign exchange loss was mainly related to the translation loss on Euro-denominated bank deposit balances as of March 31, 2009 as the exchange rate of the Euro against the RMB fluctuated over the periods. NetEase reported basic and diluted earnings per American depositary share (“ADS”) of US$0.48 and US$0.47, respectively, for the first quarter of 2009. The Company reported basic and diluted earnings per ADS of US$0.66 and US$0.65 and US$0.32 and US$0.30 for fourth and first quarters of 2008, respectively.
Income Taxes
Effective as of January 1, 2008, the Chinese government adopted a new income tax law which unified the enterprise income tax payable by domestic and foreign-invested enterprises at 25%. For the first three quarters of 2008, the Company followed the applicable accounting standards and adopted the statutory rate of 25% in making tax provisions, except for entities still enjoying unexpired tax holidays. By December 31, 2008, the Company’s applications for High/New Technology Enterprises (“HNTEs”) status by certain of its subsidiaries had been assessed and included in the relevant Chinese government authority’s published list of approved HNTEs, with the over-paid income taxes for the first three quarters of fiscal year 2008 duly refunded. Accordingly, the Company recorded a net tax benefit of RMB79.9 million (US$11.7 million) in the fourth quarter of 2008. For the first quarter of 2009, the Company recorded a net tax provision of RMB61.7 million (US$9.0 million) based on the applicable preferred tax rate of 15% for HNTEs, except for certain subsidiaries still enjoying unexpired tax holidays and at 25% for certain variable interest entities. For the first quarter of 2008, the Company recorded a tax charge of RMB114.8 million (US$16.8 million).
Other Information
As of March 31, 2009, the Company’s cash and time deposits totaled RMB6.0 billion (US$882.6 million), compared to RMB5.6 billion (US$821.5 million) as of December 31, 2008. In addition, the Company had a restricted cash balance of RMB82.0 million (US$12.0 million), representing a security deposit placed with a court in Guangzhou, China in connection with certain arbitration proceedings against the property developer of the office building located in Guangzhou, China, which is occupied by the Company. The Company and Mr. Ding agreed that Mr. Ding would initiate such arbitration due to the property developer’s failure to complete registration for the transfer of title to the property to Mr. Ding who has agreed to on-sell the property to NetEase at cost and the property developer’s mortgaging of the property in contravention of its agreement with Mr. Ding. The arbitration proceedings are currently in the preliminary stage.
Cash flows generated from operating activities totaled RMB567.8 million (US$83.1 million) for the first quarter of 2009, compared to RMB514.0 million (US$75.2 million) and RMB495.0 million (US$72.4 million) for the fourth and first quarters of 2008, respectively.
On September 12, 2008, the Company’s Board authorized a new share repurchase program of up to US$100 million of the Company’s outstanding ADSs for a period not to exceed one year. As of March 31, 2009, the Company had spent in aggregate a total purchase consideration of approximately US$13.1 million (including transaction costs).
** The United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the noon buying rate of US$1.00 = RMB6.8329 on March 31, 2009 in The City of New York for the cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on March 31, 2009, or at any other certain date. The percentages stated are calculated based on RMB.
Notes to Unaudited Financial Information
The unaudited financial information disclosed in this press release is preliminary. The audit of the financial statements and related notes to be included in our annual report on Form 20-F for the year ended December 31, 2008 is still in progress. In addition, because an audit of our internal controls over financial reporting in connection with section 404 of the Sarbanes-Oxley Act of 2002 has not yet been completed, we make no representation as to the effectiveness of those internal controls as of the end of fiscal year 2008. Adjustments to the financial statements may be identified when the audit work is completed, which could result in significant differences between our audited financial statements and this preliminary unaudited financial information.
Conference Call
NetEase’s management team will host a conference call at 9:00 p.m. Eastern Time on Wednesday, May 20, 2009 (Beijing/Hong Kong Time: 9:00 a.m., Thursday, May 21, 2009). Chief Executive Officer William Ding and Acting Chief Financial Officer Onward Choi will be on the call to discuss the quarterly results and answer questions.
Interested parties may participate in the conference call by dialing
877-941-2068 (international: 480-629-9712), 10-15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 800-406-7325 (international 303-590-3030), and entering passcode 4063444#. The replay will be available through June 3, 2009.
This call is being webcast live and archived, and will be available for 12 months on NetEase’s corporate web site at http://corp.netease.com , Investor Info: Earnings Call.
About NetEase
NetEase.com, Inc. is a leading China-based Internet technology company that pioneered the development of applications, services and other technologies for the Internet in China. NetEase’s online communities and personalized premium services have established a large and stable user base for the NetEase websites which are operated by its affiliates. In particular, NetEase provides online game services to Internet users through the in-house development or licensing of massively multi-player online role-playing games, including Fantasy Westward Journey, Westward Journey Online II, Westward Journey Online III, Tianxia II and Datang.
NetEase also offers online advertising on its websites which enables advertisers to reach its substantial user base. In addition, NetEase has paid listings on its search engine and web directory and classified advertising services, as well as an online mall, which provides opportunities for
e-commerce and traditional businesses to establish their own storefront on the Internet. NetEase also offers wireless value-added services such as news and information content, matchmaking services, music and photos from the Web which are sent over SMS, MMS, WAP, IVR and Color Ring-back Tone technologies.
Other community services which the NetEase websites offer include instant messaging, online personal advertisements, matchmaking, alumni clubs and community forums. NetEase is also the largest provider of free email services in China. Furthermore, the NetEase websites provide various channels of content. NetEase aggregates news content on world events, sports, science and technology, and financial markets, as well as entertainment content such as cartoons, games, astrology and jokes, from over one hundred international and domestic content providers.
This press release 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. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to: the risk that NetEase will not be successful in its product diversification efforts, including its focus on item- and fee-based games and entry into strategic licensing arrangements; the risk that the online game market will not continue to grow or that NetEase will not be able to maintain its leading position in that market, which could occur if, for example, its new online games or expansion packs and other improvements to its existing games do not become as popular as management anticipates; the ability of NetEase to effectively market its games and other services and achieve a positive return on its marketing expenditures; the risk that changes in Chinese government regulation of the online game market may limit future growth of NetEase’s revenue or cause revenue to decline; the risk that NetEase may not be able to continuously develop new and creative online services; the risk that NetEase will not be able to control its expenses in future periods; competition in NetEase’s existing and potential markets; governmental uncertainties (including possible changes in the effective tax rates applicable to NetEase and its subsidiaries and affiliates and the ability of NetEase to receive and maintain approvals of the preferential tax treatments and general competition and price pressures in the marketplace; the risk that the online advertising industry in China will continue to be adversely affected by the recent global economic slowdown or other factors beyond NetEase’s control; the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEase’s business and financial results; and other risks outlined in NetEase’s filings with the Securities and Exchange Commission. NetEase does not undertake any obligation to update this forward-looking information, except as required under applicable law.
Contact for Media and Investors:
Brandi Piacente
Investor Relations
Email: brandi@corp.netease.com
Tel: +1-212-481-2050
Li Jia
NetEase.com, Inc.
Email: liddyli@corp.netease.com
Tel: +86-10-8255-8208
NETEASE.COM, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, March 31, March 31,
2008 2009 2009
RMB RMB USD (Note 1)
Assets
Current assets:
Cash 793,407,922 792,196,789 115,938,590
Time deposits 4,820,000,100 5,238,315,272 766,631,338
Accounts receivable, net 231,030,576 113,017,895 16,540,253
Prepayments and other
current assets 104,092,051 137,667,769 20,147,781
Deferred tax assets 25,248,842 42,408,242 6,206,478
Total current assets 5,973,779,491 6,323,605,967 925,464,440
Non-current assets:
Non-current rental deposits 3,443,249 3,773,703 552,284
Property, equipment and
software, net 258,787,534 260,052,681 38,058,903
Land use right, net 12,563,485 12,498,836 1,829,214
Prepayment for license right 27,463,600 27,463,600 4,019,318
Deferred tax assets 12,444,636 12,634,293 1,849,038
Restricted cash -- 82,000,000 12,000,761
Other long-term assets 57,411,308 52,937,596 7,747,457
Total non-current assets 372,113,812 451,360,709 66,056,975
Total assets 6,345,893,303 6,774,966,676 991,521,415
Liabilities and Shareholders’
Equity
Current liabilities:
Accounts payable 119,829,878 100,517,356 14,710,790
Salary and welfare payables 94,922,963 57,406,869 8,401,538
Taxes payable 104,754,356 133,956,900 19,604,692
Deferred revenue 447,725,795 454,772,821 66,556,341
Accrued liabilities 61,815,070 81,424,806 11,916,581
Total current liabilities 829,048,062 828,078,752 121,189,942
Long-term payable:
Other long-term payable 200,000 200,000 29,270
Total long-term payable 200,000 200,000 29,270
Total liabilities 829,248,062 828,278,752 121,219,212
Shareholders’ equity 5,516,645,241 5,946,687,924 870,302,203
Total liabilities and
shareholders’ equity 6,345,893,303 6,774,966,676 991,521,415
The accompanying notes are an integral part of this press release.
NETEASE.COM, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended
March 31, December 31, March 31, March 31,
2008 2008 2009 2009
RMB RMB RMB USD (Note 1)
Revenues:
Online game
services 555,859,907 672,491,424 724,023,597 105,961,392
Advertising
services 77,144,002 111,800,172 41,030,255 6,004,808
Wireless
value-added
services and
others 18,919,553 17,424,193 16,640,705 2,435,380
Total revenues 651,923,462 801,715,789 781,694,557 114,401,580
Business taxes (7,469,810) (10,509,954) (5,772,131) (844,756)
Total net
revenues 644,453,652 791,205,835 775,922,426 113,556,824
Total cost of
revenues (112,495,076) (152,249,013) (134,228,461) (19,644,435)
Gross profit 531,958,576 638,956,822 641,693,965 93,912,389
Operating
expenses:
Selling and
marketing
expenses (38,246,993) (67,395,203) (47,510,899) (6,953,255)
General and
administrative
expenses (43,143,442) (45,760,016) (52,295,550) (7,653,493)
Research and
development
expenses (46,184,577) (55,308,137) (50,789,431) (7,433,071)
Total
operating
expenses (127,575,012) (168,463,356) (150,595,880) (22,039,819)
Operating
profit 404,383,564 470,493,466 491,098,085 71,872,570
Other income
(expenses):
Investment
income 101,650 90,615 102,922 15,063
Interest
income 30,873,332 42,787,380 35,560,102 5,204,247
Other, net (51,178,963) (17,387,729) (48,319,337) (7,071,571)
Net income
before tax 384,179,583 495,983,732 478,441,772 70,020,309
Income tax (114,832,848) 79,850,979 (61,739,147) (9,035,570)
Net income
after tax 269,346,735 575,834,711 416,702,625 60,984,739
Add: Net loss
attributable to
noncontrolling
interest 3,511 19,020 18,217 2,666
Net income
attributable
to the
Company’s
shareholders 269,350,246 575,853,731 416,720,842 60,987,405
Earnings per
share, basic 0.09 0.18 0.13 0.02
Earnings per
ADS, basic 2.22 4.49 3.25 0.48
Earnings per
share,
diluted 0.08 0.18 0.13 0.02
Earnings per
ADS, diluted 2.08 4.46 3.23 0.47
Weighted
average
number of
ordinary
shares
outstanding,
basic 3,028,995,782 3,209,693,009 3,207,759,573 3,207,759,573
Weighted
average
number
of ADS
outstanding,
basic 121,159,831 128,387,720 128,310,383 128,310,383
Weighted
average
number of
ordinary
shares
outstanding,
diluted 3,233,744,526 3,227,031,848 3,224,599,184 3,224,599,184
Weighted
average
number
of ADS
outstanding,
diluted 129,349,781 129,081,274 128,983,967 128,983,967
The accompanying notes are an integral part of this press release.
NETEASE.COM, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter Ended
March 31, December 31, March 31, March 31,
2008 2008 2009 2009
RMB RMB RMB USD (Note 1)
Cash flows
from operating
activities:
Net income 269,346,735 575,834,711 416,702,625 60,984,739
Adjustments
to reconcile
net profit
to net cash
provided by
operating
activities:
Depreciation
and
amortization 24,085,433 21,214,759 21,979,596 3,216,730
Share-based
compensation
cost 19,282,517 11,712,364 10,814,590 1,582,723
Allowance/
(reversal) of
provision
for doubtful
debts (1,202,665) 1,768,291 6,134,584 897,801
(Gain)/Loss
on disposal
of property,
equipment
and software (53,816) (192,511) 16,800 2,459
Unrealized
exchange
losses 50,399,867 21,131,801 47,547,400 6,958,597
Net equity
share of
losses (gains)
from associated
companies 386,123 (113,653) 1,051,010 153,816
Others -- (9,014) (25) (4)
Changes in
operating assets
and liabilities:
Accounts
receivable 53,521,635 (14,699,446) 111,878,097 16,373,443
Prepayments
and other
current
assets (5,467,334) (37,373,232) (31,374,284) (4,591,650)
Deferred
tax assets (6,896,626) 4,597,642 (17,159,400) (2,511,291)
Deferred
tax assets -
non-current (84,913) 6,364,324 (189,657) (27,756)
Accounts
payable (900,446) (39,605,453) (18,372,015) (2,688,758)
Salary and
welfare
payables (17,343,345) 41,161,456 (37,516,094) (5,490,508)
Taxes
payable 68,672,447 (73,972,379) 29,202,544 4,273,814
Deferred
revenue 40,579,198 3,858,634 7,047,026 1,031,337
Accrued
liabilities 635,974 (7,672,623) 20,021,583 2,930,174
Net cash
provided by
operating
activities 494,960,784 514,005,671 567,784,380 83,095,666
Cash flows
from investing
activities:
Purchase of
property,
equipment
and
software (15,418,337) (47,987,508) (23,031,133) (3,370,623)
Proceeds from
sale of
property,
equipment
and software 56,540 11,603 15,755 2,306
Prepayment for
land use right (822,182) -- -- --
Prepayment for
royalties -- (13,687,749) -- --
Investment in
an associated
company -- (2,559,525) -- --
Transfer to
restricted
cash -- -- (82,000,000) (12,000,761)
Net change
in time
deposits
with terms
of three
months (252,686,082) 974,552,227 913,788,700 133,733,656
Placement/
rollover
of matured
time
deposits (422,426,062) (1,817,119,582) (2,099,024,248) (307,193,761)
Uplift of
matured time
deposits 126,035,000 290,674,696 718,163,495 105,103,762
Net change
in other
assets (412,578) (5,682,050) (634,380) (92,842)
Net cash
used in
investing
activities(565,673,701) (621,797,888) (572,721,811) (83,818,263)
Cash flows
from financing
activities:
Capital
contribution
from non-
controlling
interest -- 23,641 640 94
Proceeds
from employees
exercising
stock options 642,039 1,426,708 2,524,853 369,514
Repurchase
of company
shares (76,433,652) (88,868,640) -- --
Net cash
provided by
(used in)
financing
activities (75,791,613) (87,418,291) 2,525,493 369,608
Effect of
exchange
rate changes
on cash held
in foreign
currencies (74,851,929) 3,579,775 1,200,805 175,739
Net decrease
in cash (221,356,459) (191,630,733) (1,211,133) (177,250)
Cash,
beginning of
the quarter 2,482,820,821 985,038,655 793,407,922 116,115,840
Cash, end of
the quarter 2,261,464,362 793,407,922 792,196,789 115,938,590
Supplemental
disclosures
of cash flow
information:
Cash paid
for income
tax, net of
tax refund 33,512,049 16,023,949 45,079,890 6,597,475
Supplemental
schedule of
non-cash
investing
and financing
activities:
Treasury stock
cancellation -- 89,293,078 -- --
Fixed asset
purchases
financed by
accounts
payable and
accrued
liabilities 9,716,130 37,302,324 35,955,208 5,262,071
The accompanying notes are an integral part of this press release.
NETEASE.COM, INC.
UNAUDITED SEGMENT INFORMATION
Quarter Ended
March 31, December 31, March 31, March 31,
2008 2008 2009 2009
RMB RMB RMB USD (Note 1)
Revenues:
Online game
services 555,859,907 672,491,424 724,023,597 105,961,392
Advertising
services 77,144,002 111,800,172 41,030,255 6,004,808
Wireless value-
added services
and others 18,919,553 17,424,193 16,640,705 2,435,380
Total revenues 651,923,462 801,715,789 781,694,557 114,401,580
Business taxes:
Online game
services (747,630) (892,846) (1,456,904) (213,220)
Advertising
services (6,557,240) (9,502,935) (4,161,980) (609,109)
Wireless value-
added services
and others (164,940) (114,173) (153,247) (22,427)
Total business
taxes (7,469,810) (10,509,954) (5,772,131) (844,756)
Net revenues:
Online game
services 555,112,277 671,598,578 722,566,693 105,748,172
Advertising
services 70,586,762 102,297,237 36,868,275 5,395,699
Wireless value-
added services and
others 18,754,613 17,310,020 16,487,458 2,412,953
Total net revenues 644,453,652 791,205,835 775,922,426 113,556,824
Cost of revenues:
Online game
services (54,290,222) (80,640,289) (72,363,943) (10,590,517)
Advertising
services (38,290,401) (49,984,535) (41,707,441) (6,103,915)
Wireless value-
added services and
others (19,914,453) (21,624,189) (20,157,077) (2,950,003)
Total cost of
revenues (112,495,076) (152,249,013) (134,228,461) (19,644,435)
Gross profit
(loss):
Online game
services 500,822,055 590,958,289 650,202,750 95,157,655
Advertising
services 32,296,361 52,312,702 (4,839,166) (708,216)
Wireless value-
added services and
others (1,159,840) (4,314,169) (3,669,619) (537,050)
Total gross profit 531,958,576 638,956,822 641,693,965 93,912,389
Gross profit (loss)
margin:
Online game
services 90.2% 88.0% 90.0% 90.0%
Advertising
services 45.8% 51.1% (13.1%) (13.1%)
Wireless value-
added services and
others (6.2%) (24.9%) (22.3%) (22.3%)
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 = RMB6.8329 on March 31, 2009
in The City of New York for cable transfers of Renminbi as certified for
customs purposes by the Federal Reserve Bank of New York.
Note 2: Share-based compensation cost reported in the Company’s unaudited
condensed consolidated statements of operations is set out as follows:
Quarter Ended
March 31, December 31, March 31, March 31,
2008 2008 2009 2009
RMB RMB RMB USD
(Note 1)
Share-based compensation cost
included in:
Cost of revenue 3,147,772 3,294,120 2,871,354 420,225
Operating expenses
- Selling and marketing expenses 2,548,679 1,328,916 952,155 139,349
- General and administrative
expenses 7,084,995 3,464,280 3,809,875 557,577
- Research and development
expenses 6,501,071 3,625,048 3,181,206 465,572
