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香港2024年2月29日 /美通社/ -- 環球全域電訊（「HGC環電」或「集團」）高級技術方案與服務副總裁何子聰 (Daniel) 榮獲「網絡安全精英嘉許計劃2023」–– 電訊服務業銀獎，對其於網絡安全的創新和貢獻予以肯定，同時展現集團於業界的強悍實力。 圖說：HGC環電集團高級技術方案與服務副總裁何子聰榮獲「網絡安全精英嘉許計劃2023」–– 電訊服務業銀獎。 Daniel在ICT及電訊業擁有逾20年經驗，在貢獻建設及維護網絡安全不遺餘力。憑藉對網絡安全管理及ICT專業知識和實戰經驗，他致力設計及實施持續監控和應對網絡攻擊的托管安全服務，達致推動客戶業務增長，充分展示了其管理網絡風險的雄厚實力。同時，Daniel作為HGC環電代表榮獲此殊榮，進一步彰顯集團擁有廣泛而深厚的網絡安全領域知識，鞏固為客戶提供頂尖一站式電訊和ICT解決方案的承諾。 HGC環電集團高級技術方案與服務副總裁Daniel 表示：「我感到非常榮幸能夠在『網絡安全精英嘉許計劃』獲得獎項，肯定我在網絡安全領域方面的表現和專業能力，同時能夠在此領域有積極正面影響，我感到非常感激。此外，我非常感謝集團的鼎力支持，就推動網絡安全持續投入資源，使我和HGC強大團隊能專注推動及策劃，為廣泛業務客戶提供先進網絡安全保護解決方案。」 HGC環電集團ICT 業務、技術方案及產品營運總裁黃振華 表示：「我們替Daniel獲得獎項感到非常高興。網絡安全是全球關注的議題，同時是企業數碼轉型和發展可持續智慧城市的重要一環。HGC環電明白網絡安全對企業和社會所帶來的正面影響，因此非常重視策劃及提供網絡安全保護解決方案予我們的客戶，並積極提供資源於培訓網絡安全人才。」 「網絡安全精英嘉許計劃」於2016年起首次舉辦，旨在表彰不同界別的網絡安全人員在維護網絡安全方面的創新和貢獻、促進各行業交流網絡安全經驗和最佳實踐、鼓勵網絡安全人員持續提升他們的技能和知識，以及推廣企業在網絡安全方面的投入、創新、領導力，促進行業持續進步。今年獎項更囊括銀行與金融、政府部門與公營機構、電訊服務業等八個指家界別，以嘉獎人員在領域內所呈現的卓越表現、創新思維及領導能力。 環球全域電訊有限公司簡介 環球全域電訊有限公司（HGC 環電）是香港及國際電訊營辦商及 ICT 方案供應商，於香港及國際市場擁有廣闊的網絡覆蓋及基礎設施，提供各種不同服務，除了提供電訊網絡基礎設施予其他營辦商外，亦是企業及住宅用戶的服務供應商。HGC 環電設 19 個海外辦事處，並有同事駐守全球 31 個城市。HGC 環電為本地、海外、企業、中小企及大眾市場提供全面的電訊服務、數據中心服務、資訊科技方案及寬頻服務。HGC 環電擁有及營運覆蓋廣泛的光纖網絡，與中 國內地頂級電訊商開通了五條跨境分流路由，更與過百間世界級的國際電訊網絡營辦商互連。 HGC 環電亦是香港其中一個最大規模的 Wi-Fi 服務供應商，於全港共有逾 29,000 個 Wi-Fi 熱 點。本公司致力增強現有基礎設施，發展最新技術，並開發基礎設施服務和方案。HGC 環電 於 2019 年完成收購高端數碼科技及 IT 基礎架構解決方案供應商高威電信，進一步促進 HGC 環電集團轉型成為 ICT 解決方案供應商。HGC 環電是 I Squared Capital 的投資組合公司。I Squared Capital 是獨立的環球基建投資管理基金，主要於北美、歐洲以及其他高增長經濟體地區進行能源、公共設施及運輸業等投資。 如欲瞭解詳情，請瀏覽環球全域電訊網站：www.hgc.com.hk
- Earnings Conference Call to be Held on Monday, March 18, 2024 at 8:00 pm (Hong Kong Time) / 8:00 am (U.S. Eastern Time) HONG KONG, Feb. 29, 2024 /PRNewswire/ -- China Literature Limited ("China Literature" or "the Company", 0772.HK), a leading online literature and intellectual property ("IP") incubation platform in China, will announce its financial results for the full year of 2023 on Monday, March 18, 2024. China Literature's management team will host a conference call to present an overview of the Company's financial performance and business operations. A live webcast of the call can be accessed on the Company's investor relations website at http://ir.yuewen.com. Details of the conference call and webcast are as follows: Time: 8:00 pm (Hong Kong Time) / 8:00 am (U.S. Eastern Time)Language: EnglishLive and archived webcast: https://ir-api.yuewen.com/calendar/WebcastsCalls/2023FY For participants who wish to join the conference using dial-in numbers, please register in advance using the link provided below and dial in 10 minutes prior to the call. Upon registering, your dial-in numbers, passcode, and unique access PIN will be provided. Pre-registration at: https://s1.c-conf.com/diamondpass/10037200-lo01q3.html A replay of the conference call will be available after the conclusion of the event through March 25, 2024. U.S.: +1 855 883 1031Hong Kong: 800 930 639Singapore: 800 101 3223International: +61 7 3107 6325Replay PIN: 10037200 Contact For investors / analysts:Maggie ZhouTel: +8621 6187 0500 ext. 80605Email: IR@yuewen.com For media:Vivian WangTel: +852 2232 3978Email: vwang@Christensenir.com
HANGZHOU, China, Feb. 29, 2024 /PRNewswire/ -- Youdao, Inc. ("Youdao" or the "Company") (NYSE: DAO), an intelligent learning company with industry-leading technology in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2023. Fourth Quarter 2023 Financial Highlights Total net revenues were RMB1.5 billion (US$208.5 million), representing a 1.8% increase from the same period in 2022.- Net revenues from learning services were RMB784.0 million (US$110.4 million), representing a 2.8% decrease from the same period in 2022.- Net revenues from smart devices were RMB222.4 million (US$31.3 million), representing a 45.3% decrease from the same period in 2022.- Net revenues from online marketing services were RMB474.1 million (US$66.8 million), representing a 96.9% increase from the same period in 2022. Gross margin was 49.9%, compared with 53.3% for the same period in 2022. Fiscal Year 2023 Financial Highlights Total net revenues were RMB5.4 billion (US$759.1 million), representing a 7.5% increase from 2022.- Net revenues from learning services were RMB3.1 billion (US$443.4 million), representing a 2.1% increase from 2022.- Net revenues from smart devices were RMB909.2 million (US$128.1 million), representing a 27.6% decrease from 2022.- Net revenues from online marketing services were RMB1.3 billion (US$187.6 million), representing a 98.1% increase from 2022. Gross margin was 51.4%, keeping flat as compared with 51.6% for 2022. "Our financial performance was solid in the fourth quarter, producing all-time high income from operations and operating cash inflow. In terms of business operations, since the introduction of AI writing refinement, we have efficiently and effectively provided over 25,000 tailored recommendations. The integration of AI technology has further empowered our online marketing services, expanding the application of RTA (Real-Time API) technology and broadening our customer base, resulting in record high net revenues of this segment and over 50% year-over-year growth for five consecutive quarters. Additionally, the launch of the Mr. P AI Tutor, powered by our proprietary large language model Ziyue, has been well received by our users. In 2023, Youdao's fundamentals strengthened, with key financial indicators improving on a year-over-year basis," said Dr. Feng Zhou, Chief Executive Officer and Director of Youdao. "Looking ahead, I am confident in the further improvement of our fundamentals and long-term development. We will continue to leverage our AI advantages and upgrade our large language model Ziyue, further exploring applications in the areas of learning services, smart devices, and online marketing services. By accelerating the implementation of our products and applications, we are committed to better assisting users in enhancing their learning and work efficiency and effectiveness," Dr. Zhou concluded. Fourth Quarter 2023 Financial Results Net Revenues Net revenues for the fourth quarter of 2023 were RMB1.5 billion (US$208.5 million), slightly increased compared with the same period of 2022. Net revenues from learning services were RMB784.0 million (US$110.4 million) for the fourth quarter of 2023, representing a 2.8% decrease from RMB806.3 million for the same period of 2022. Net revenues from smart devices were RMB222.4 million (US$31.3 million) for the fourth quarter of 2023, representing a 45.3% decrease from RMB407.0 million for the same period of 2022, primarily due to our continuous efforts to streamline marketing channels with low return on investment for intelligent learning products in the fourth quarter of 2023. Net revenues from online marketing services were RMB474.1 million (US$66.8 million) for the fourth quarter of 2023, representing a 96.9% increase from RMB240.8 million for the same period of 2022. The year-over-year increase in revenues from online marketing services was mainly attributable to the increased demand for performance-based advertisements through third parties' internet properties. Gross Profit and Gross Margin Gross profit for the fourth quarter of 2023 was RMB738.8 million (US$104.1 million), representing a 4.6% decrease from RMB774.7 million for the same period of 2022. Gross margin decreased to 49.9% for the fourth quarter of 2023 from 53.3% for the same period of 2022. Gross margin for learning services was 63.6% for the fourth quarter of 2023, largely flat as compared with 64.1% for the same period of 2022. Gross margin for smart devices decreased to 38.3% for the fourth quarter of 2023 from 46.2% for the same period of 2022, which was mainly attributable to a lower revenue base of smart devices. Gross margin for online marketing services increased to 32.7% for the fourth quarter of 2023, from 29.2% for the same period of 2022. The increase was mainly attributable to improved gross margin profile of performance-based advertisements through third parties' internet properties compared with the same period of last year. Operating Expenses Total operating expenses for the fourth quarter of 2023 were RMB662.5 million (US$93.3 million), compared with RMB750.0 million for the same period of last year. Sales and marketing expenses for the fourth quarter of 2023 were RMB441.4 million (US$62.2 million), representing a decrease of 14.4% from RMB515.9 million for the same period of 2022. This decrease was attributable to the reduced marketing expenditures in learning services and smart devices in the fourth quarter of 2023. Research and development expenses for the fourth quarter of 2023 were RMB168.1 million (US$23.7 million), representing a decrease of 6.3% from RMB179.5 million for the same period of 2022. The decrease was primarily due to the decreased headcount for research and development employees, which led to payroll-related cost savings in the fourth quarter of 2023. General and administrative expenses for the fourth quarter of 2023 were RMB53.0 million (US$7.5 million), representing a decrease of 2.9% from RMB54.6 million for the same period of 2022. Income from Operations As a result of the foregoing, income from operations for the fourth quarter of 2023 was RMB76.3 million (US$10.7 million), compared with RMB24.7 million for the same period of 2022. The margin of income from operations was 5.2%, compared with 1.7% for the same period of last year. Others, Net Others, net for the fourth quarter of 2023 were RMB2.6 million (US$0.4 million) net loss, compared with RMB3.8 million net gain for the same period of 2022. Others, net for the fourth quarter of 2023 mainly included an impairment loss of long-term investments of RMB10.0 million (US$1.4 million), partially offset by the gains from government grants. The gain for the same period of last year was mainly from government grants. Net Income from Continuing Operations Attributable to Youdao's Ordinary Shareholders Net income from continuing operations attributable to Youdao's ordinary shareholders for the fourth quarter of 2023 was RMB56.5 million (US$8.0 million), compared with RMB12.3 million for the same period of last year. Non-GAAP net income from continuing operations attributable to Youdao's ordinary shareholders for the fourth quarter of 2023 was RMB69.3 million (US$9.8 million), compared with RMB31.1 million for the same period of last year. Basic and diluted net income from continuing operations per American depositary share ("ADS") attributable to ordinary shareholders for the fourth quarter of 2023 was RMB0.47 (US$0.07), compared with RMB0.10 for the same period of 2022. Non-GAAP basic and diluted net income from continuing operations per ADS attributable to ordinary shareholders was RMB0.58 (US$0.08), compared with RMB0.25 for the same period of 2022. Other Information As of December 31, 2023, Youdao's cash, cash equivalents, restricted cash, time deposits and short-term investments totaled RMB527.1 million (US$74.2 million), compared with RMB1.0 billion as of December 31, 2022. For the fourth quarter of 2023, net cash provided by continuing operating activities was RMB160.6 million (US$22.6 million), capital expenditures totaled RMB5.9 million (US$0.8 million). Youdao's ability to continue as a going concern is dependent on management's ability to implement an effective business plan in future periods in light of the changing regulatory environment, generate operating cash flows and continue to be able to obtain outside sources of financing as necessary for Youdao's future development. In support of Youdao's future business, NetEase Group has agreed to provide financial support for Youdao's continuing operations. As of the date of this release, Youdao has received various financial support from the NetEase Group, including, among others, RMB878.0 million short-term loans, and US$94.0 million long-term loans with maturity dated March 31, 2027 drawn down under the US$300.0 million revolving loan facility. As of December 31, 2023, the Company's contract liabilities, which mainly consisted of deferred revenues generated from Youdao's learning services, were RMB1.1 billion (US$148.3 million), keeping stable as compared with RMB1.1 billion as of December 31, 2022. Fiscal Year 2023 Financial Results[1] Net Revenues Net revenues for 2023 were RMB5.4 billion (US$759.1 million), representing a 7.5% increase from RMB5.0 billion for 2022. Net revenues from learning services were RMB3.1 billion (US$443.4 million) for 2023, keeping flat as compared with RMB3.1 billion for 2022. Net revenues from smart devices were RMB909.2 million (US$128.1 million) for 2023, representing a 27.6% decrease from RMB1.3 billion for 2022. The decrease was primarily due to our continuous efforts to streamline marketing channels with low return on investment for intelligent learning products starting from the second half of 2023. Net revenues from online marketing services were RMB1.3 billion (US$187.6 million) for 2023, representing a 98.1% increase from RMB672.4 million for 2022. The increase was mainly attributable to the increased demand for performance-based advertisements through third parties' internet properties. Gross Profit and Gross Margin Gross profit for 2023 was RMB2.8 billion (US$389.8 million), compared with RMB2.6 billion for 2022. Gross margin for 2023 was 51.4%, compared with 51.6% for 2022. Gross margin for learning services was 63.2% for 2023, compared with 62.0% for 2022. Gross margin for smart devices was 39.2% for 2023, compared with 39.1% for 2022. Gross margin for online marketing services increased to 31.7% for 2023 from 27.4% for 2022. The increase was mainly attributable to improved gross margin profile of performance-based advertisements through third parties' internet properties compared with last year. Operating Expenses Total operating expenses for 2023 were RMB3.2 billion (US$455.5 million), representing a decrease of 3.8%, compared with RMB3.4 billion for 2022. Sales and marketing expenses for 2023 were RMB2.3 billion (US$319.5 million), keeping stable as compared with RMB2.3 billion for 2022. Research and development expenses for 2023 were RMB743.4 million (US$104.7 million), representing a decrease of 7.5%, compared with RMB803.8 million for 2022. The decrease was primarily due to the decreased headcount for research and development employees, which led to payroll-related cost savings in 2023. General and administrative expenses for 2023 were RMB222.0 million (US$31.3 million), representing a decrease of 3.1%, compared with RMB229.2 million for 2022. Loss from Operations Loss from operations for 2023 was RMB466.3 million (US$65.7 million), compared with RMB774.7 million for 2022. The margin of loss from operations was 8.7%, compared with 15.5% for 2022. Others, Net Others, net for 2023 were RMB11.6 million (US$1.6 million) net loss, compared with RMB81.4 million net gain for 2022. Others, net for 2023 mainly included impairment losses of long-term investments of RMB43.7 million (US$6.2 million), partially offset by the gains from government grants. The gain for last year was mainly from government grants. Net Loss from Continuing Operations Attributable to Youdao's Ordinary Shareholders Net loss from continuing operations attributable to Youdao's ordinary shareholders for 2023 was RMB549.9 million (US$77.5 million), compared with RMB720.9 million for 2022. Non-GAAP net loss from continuing operations attributable to Youdao's ordinary shareholders for 2023 was RMB475.4 million (US$67.0 million), compared with RMB639.9 million for 2022. Basic and diluted net loss from continuing operations per American depositary share ("ADS") attributable to ordinary shareholders for 2023 was RMB4.53 (US$0.64), compared with RMB5.83 for 2022. Non-GAAP basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders was RMB3.92 (US$0.55), compared with RMB5.18 for 2022. Operating Cash Flow from Continuing Operations For 2023, net cash used in continuing operating activities was RMB438.1 million (US$61.7 million) and capital expenditures totaled RMB17.9 million (US$2.5 million). [1] As previously disclosed, in compliance with applicable regulatory requirements, the Company had ceased to offer the after-school tutoring services on academic subjects in China's compulsory education system (the "Academic AST Business") at the end of December 2021. The Academic AST Business met the criteria of discontinued operations. Retrospective adjustments to the historical statement of operations have also been made to provide a consistent basis of comparison for the financial results of the continuing operations. The financial information and non-GAAP financial information included in this press release are presented on a continuing operations basis, unless otherwise specifically stated. Share Repurchase Program On November 17, 2022, the Company announced that its board of directors had authorized the Company to adopt a share repurchase program in accordance with applicable laws and regulations for up to US$20.0 million of its Class A ordinary shares (including in the form of ADSs) during a period of up to 36 months. This amount was subsequently increased to US$40.0 million in August 2023. As of December 31, 2023, the Company has accumulatively repurchased an aggregate of approximately 5.2 million ADSs for approximately US$24.8 million in the open market under the share repurchase program. Conference Call Youdao's management team will host a teleconference call with simultaneous webcast at 5:00 a.m. Eastern Time on Thursday, February 29, 2024 (Beijing/Hong Kong Time: 6:00 p.m., Thursday, February 29, 2024). Youdao's management will be on the call to discuss the financial results and answer questions. Dial-in details for the earnings conference call are as follows: United States (toll free): +1-888-346-8982 International: +1-412-902-4272 Mainland China (toll free): 400-120-1203 Hong Kong (toll free): 800-905-945 Hong Kong: +852-3018-4992 Conference ID: 1578305 A live and archived webcast of the conference call will be available on the Company's investor relations website at http://ir.youdao.com. A replay of the conference call will be accessible by phone one hour after the conclusion of the live call at the following numbers, until March 7, 2024: United States: +1-877-344-7529 International: +1-412-317-0088 Replay Access Code: 1578305 About Youdao, Inc. Youdao, Inc. (NYSE: DAO) is an intelligent learning company with industry-leading technology in China dedicated to developing and using technologies to provide learning content, applications and solutions to users of all ages. Building on the popularity of its online knowledge tools such as Youdao Dictionary and Youdao Translation, Youdao now offers smart devices, STEAM courses, adult and vocational courses, and education digitalization solutions. In addition, Youdao has developed a variety of interactive learning apps. Youdao was founded in 2006 as part of NetEase, Inc. (NASDAQ: NTES; HKEX: 9999), a leading internet technology company in China. For more information, please visit: http://ir.youdao.com. Non-GAAP Measures Youdao considers and uses non-GAAP financial measures, such as non-GAAP net income/(loss) from continuing operations attributable to the Company's ordinary shareholders and non-GAAP basic and diluted net income/(loss) from continuing operations per ADS, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Youdao defines non-GAAP net income/(loss) from continuing operations attributable to the Company's ordinary shareholders as net income/(loss) from continuing operations attributable to the Company's ordinary shareholders excluding share-based compensation expenses and impairment of long-term investments. Non-GAAP net income/(loss) from continuing operations attributable to the Company's ordinary shareholders enables Youdao's management to assess its operating results without considering the impact of these items, which are non-cash charges in nature. Youdao believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does, if they so choose. Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools, which possibly do not reflect all items of expense that affect our operations. In addition, the non-GAAP financial measures Youdao uses may differ from the non-GAAP measures uses by other companies, including peer companies, and therefore their comparability may be limited. For more information on these non-GAAP financial measures, please see the table captioned "Unaudited Reconciliation of GAAP and non-GAAP Results" set forth at the end of this release. The accompanying table has more details on the reconciliation between our GAAP financial measures that are mostly directly comparable to non-GAAP financial measures. Youdao encourages you to review its financial information in its entirety and not rely on a single financial measure. Exchange Rate Information This announcement contains translations of certain RMB amounts into U.S. dollars ("US$") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to US$ were made at the rate of RMB7.0999 to US$1.00, the exchange rate on December 29, 2023 set forth in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or US$ amounts referred could be converted into US$ or RMB, as the case may be, at any particular rate or at all. Safe Harbor Statement This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. The Company may also make written or oral forward-looking statements in its reports filed with, or furnished to, the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. Further information regarding such risks, uncertainties or factors is included in the Company's filings with the SEC. The announced results of the fourth quarter and full year of 2023 are preliminary and subject to adjustments. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law. For investor and media inquiries, please contact: In China:Jeffrey WangYoudao, Inc.Tel: +86-10-8255-8163 ext. 89980E-mail: IR@rd.netease.com Piacente Financial CommunicationsHelen WuTel: +86-10-6508-0677E-mail: youdao@thepiacentegroup.com In the United States:Piacente Financial Communications Brandi PiacenteTel: +1-212-481-2050E-mail: youdao@thepiacentegroup.com YOUDAO, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (RMB and USD in thousands) As of December 31, As of December 31, As of December 31, 2022 2023 2023 RMB RMB USD (1) Assets Current assets: Cash and cash equivalents 783,611 454,536 64,020 Time deposits 273 277 39 Restricted cash 873 395 56 Short-term investments 232,152 71,848 10,120 Accounts receivable, net 405,139 354,006 49,861 Inventories 232,260 217,067 30,573 Amounts due from NetEase Group 7,888 26,117 3,679 Prepayment and other current assets 207,777 175,705 24,747 Total current assets 1,869,973 1,299,951 183,095 Non-current assets: Property, equipment and software, net 92,116 70,906 9,987 Operating lease right-of-use assets, net 78,405 89,022 12,538 Long-term investments 90,703 51,396 7,239 Goodwill 109,944 109,944 15,485 Other assets, net 35,015 44,976 6,335 Total non-current assets 406,183 366,244 51,584 Total assets 2,276,156 1,666,195 234,679 Liabilities, Mezzanine Equity and Shareholders' Deficit Current liabilities: Accounts payables 282,354 159,005 22,395 Payroll payable 266,340 282,679 39,815 Amounts due to NetEase Group 68,809 82,430 11,610 Contract liabilities 1,067,285 1,052,622 148,259 Taxes payable 50,908 52,781 7,434 Accrued liabilities and other payables 564,922 591,770 83,349 Short-term loans from NetEase Group 878,000 878,000 123,664 Total current liabilities 3,178,618 3,099,287 436,526 Non-current liabilities: Long-term lease liabilities 43,635 49,337 6,949 Long-term loans from NetEase Group 522,345 630,360 88,784 Other non-current liabilities 8,832 16,314 2,298 Total non-current liabilities 574,812 696,011 98,031 Total liabilities 3,753,430 3,795,298 534,557 Mezzanine equity 64,571 37,961 5,347 Shareholders' deficit: Youdao's shareholders' deficit (1,535,089) (2,186,736) (307,996) Noncontrolling interests (6,756) 19,672 2,771 Total shareholders' deficit (1,541,845) (2,167,064) (305,225) Total liabilities, mezzanine equity and shareholders' deficit 2,276,156 1,666,195 234,679 Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.0999 on the last trading day of December (December 29, 2023) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. YOUDAO, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (RMB and USD in thousands, except share and per ADS data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 RMB RMB RMB USD (1) RMB RMB Net revenues: Learning services 806,270 950,761 784,012 110,426 3,084,375 3,148,114 Smart devices 406,956 251,879 222,407 31,325 1,256,446 909,192 Online marketing services 240,756 336,143 474,102 66,776 672,361 1,331,902 Total net revenues 1,453,982 1,538,783 1,480,521 208,527 5,013,182 5,389,208 Cost of revenues (2) (679,295) (679,147) (741,720) (104,469) (2,426,766) (2,621,746) Gross profit 774,687 859,636 738,801 104,058 2,586,416 2,767,462 Operating expenses: Sales and marketing expenses (2) (515,944) (674,173) (441,399) (62,170) (2,328,095) (2,268,428) Research and development expenses (2) (179,474) (187,328) (168,130) (23,681) (803,791) (743,364) General and administrative expenses (2) (54,597) (55,822) (52,989) (7,463) (229,210) (221,996) Total operating expenses (750,015) (917,323) (662,518) (93,314) (3,361,096) (3,233,788) Income/(Loss) from operations 24,672 (57,687) 76,283 10,744 (774,680) (466,326) Interest income 3,072 2,167 1,733 244 12,908 8,348 Interest expense (14,643) (17,753) (18,869) (2,658) (45,607) (69,472) Others, net 3,767 (21,097) (2,589) (364) 81,445 (11,578) Income/(Loss) before tax 16,868 (94,370) 56,558 7,966 (725,934) (539,028) Income tax expenses (13,833) (2,557) (441) (62) (13,844) (11,089) Net income/(loss) from continuing operations 3,035 (96,927) 56,117 7,904 (739,778) (550,117) Net loss from discontinued operations - - - - (6,105) - Net income/(loss) 3,035 (96,927) 56,117 7,904 (745,883) (550,117) Net loss/(income) attributable to noncontrolling interests 9,263 (5,978) 365 51 18,851 182 Net income/(loss) attributable to ordinary shareholders of the Company 12,298 (102,905) 56,482 7,955 (727,032) (549,935) Including: Net income/(loss) from continuing operations attributable to ordinary shareholders of the Company 12,298 (102,905) 56,482 7,955 (720,927) (549,935) Net loss from discontinued operations attributable to ordinary shareholders of the Company - - - - (6,105) - Basic net income/(loss) per ADS 0.10 (0.85) 0.47 0.07 (5.88) (4.53) -Continuing operations 0.10 (0.85) 0.47 0.07 (5.83) (4.53) -Discontinued operations - - - - (0.05) - Diluted net income/(loss) per ADS 0.10 (0.85) 0.47 0.07 (5.88) (4.53) -Continuing operations 0.10 (0.85) 0.47 0.07 (5.83) (4.53) -Discontinued operations - - - - (0.05) - Shares used in computing basic net income/(loss) per ADS 123,584,460 121,275,391 119,764,891 119,764,891 123,597,604 121,381,857 Shares used in computing diluted net income/(loss) per ADS 124,345,717 121,275,391 120,426,624 120,426,624 123,597,604 121,381,857 Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is based on the noon buying rate of USD1.00=RMB7.0999 on the last trading day of December (December 29, 2023) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. Note 2: Share-based compensation in each category: Cost of revenues 1,231 2,312 (2,975) (419) 5,984 1,645 Sales and marketing expenses 3,249 1,659 865 122 12,669 6,071 Research and development expenses 5,702 (2,071) (312) (44) 30,578 8,020 General and administrative expenses 6,845 3,255 5,224 736 21,478 15,061 YOUDAO, INC. UNAUDITED ADDITIONAL INFORMATION (RMB and USD in thousands) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 RMB RMB RMB USD RMB RMB Net revenues Learning services 806,270 950,761 784,012 110,426 3,084,375 3,148,114 Smart devices 406,956 251,879 222,407 31,325 1,256,446 909,192 Online marketing services 240,756 336,143 474,102 66,776 672,361 1,331,902 Total net revenues 1,453,982 1,538,783 1,480,521 208,527 5,013,182 5,389,208 Cost of revenues Learning services 289,829 305,694 285,383 40,195 1,172,703 1,159,357 Smart devices 218,969 144,528 137,150 19,317 765,641 552,810 Online marketing services 170,497 228,925 319,187 44,957 488,422 909,579 Total cost of revenues 679,295 679,147 741,720 104,469 2,426,766 2,621,746 Gross margin Learning services 64.1 % 67.8 % 63.6 % 63.6 % 62.0 % 63.2 % Smart devices 46.2 % 42.6 % 38.3 % 38.3 % 39.1 % 39.2 % Online marketing services 29.2 % 31.9 % 32.7 % 32.7 % 27.4 % 31.7 % Total gross margin 53.3 % 55.9 % 49.9 % 49.9 % 51.6 % 51.4 % YOUDAO, INC. UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS (RMB and USD in thousands, except per ADS data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 RMB RMB RMB USD RMB RMB Net income/(loss) from continuing operations attributable to ordinary shareholders of the Company 12,298 (102,905) 56,482 7,955 (720,927) (549,935) Add: share-based compensation 17,027 5,155 2,802 395 70,709 30,797 impairment of long-term investments 1,800 30,500 10,000 1,408 10,300 43,740 Non-GAAP net income/(loss) from continuing operations attributable to ordinary shareholders of the Company 31,125 (67,250) 69,284 9,758 (639,918) (475,398) Non-GAAP basic net income/(loss) from continuing operations per ADS 0.25 (0.55) 0.58 0.08 (5.18) (3.92) Non-GAAP diluted net income/(loss) from continuing operations per ADS 0.25 (0.55) 0.58 0.08 (5.18) (3.92)
HANGZHOU, China, Feb. 29, 2024 /PRNewswire/ -- NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase" or the "Company"), a leading internet and game services provider, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2023. Fourth Quarter 2023 Financial Highlights Net revenues were RMB27.1 billion (US$3.8 billion), an increase of 7.0% compared with the fourth quarter of 2022. Games and related value-added services net revenues were RMB20.9 billion (US$2.9 billion), an increase of 9.6% compared with the fourth quarter of 2022. Youdao net revenues were RMB1.5 billion (US$208.5 million), an increase of 1.8% compared with the fourth quarter of 2022. Cloud Music net revenues were RMB2.0 billion (US$279.7 million), a decrease of 16.4% compared with the fourth quarter of 2022. Innovative businesses and others net revenues were RMB2.8 billion (US$387.7 million), an increase of 12.9% compared with the fourth quarter of 2022. Gross profit was RMB16.8 billion (US$2.4 billion), an increase of 27.0% compared with the fourth quarter of 2022. Total operating expenses were RMB10.0 billion (US$1.4 billion), an increase of 13.0% compared with the fourth quarter of 2022. Net income attributable to the Company's shareholders was RMB6.6 billion (US$927.1 million). Non-GAAP net income from continuing operations attributable to the Company's shareholders was RMB7.4 billion (US$1.0 billion).[1] Basic net income per share was US$0.29 (US$1.44 per ADS). Non-GAAP basic net income from continuing operations per share was US$0.32 (US$1.62 per ADS).[1] [1] As used in this announcement, non-GAAP net income from continuing operations attributable to the Company's shareholders and non-GAAP basic and diluted net income from continuing operations per share and per ADS are defined to exclude share-based compensation expenses. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. Fourth Quarter 2023 and Early 2024 Operational Highlights Leading franchises, such as Fantasy Westward Journey and Westward Journey Online, maintained enduring user appeal, supported by periodic new content introductions. Eggy Party's broad popularity has engaged over 500 million cumulative registered players since its launch in 2022 and made a significant breakthrough of 40 million daily active users during the Lunar New Year. Justice franchises reached a new milestone of 100 million active users with densely packed content and widely embraced in-game events for players. Racing Master achieved superb performances in Hong Kong, Macau and Taiwan, including topping the local iOS download and grossing charts in Taiwan within the first week of its launch. Cloud Music considerably enhanced its music-centric monetization and further improved profitability, while continuing to cultivate its music community and introduce new premium content and features. Youdao further improved its profitability and achieved record-high operating cash flow, driven by the robust performance of digital content services and online marketing services. "2023 proved to be another landmark year for NetEase Games with continuous cross-category innovations that expand and diversify our robust game portfolio," said Mr. William Ding, Chief Executive Officer and Director of NetEase. "The success of games like Eggy Party and our heralded new titles, such as Racing Master and Dunk City Dynasty, highlights our ability to bring players dynamic and original products in multiple genres. At the same time, we have maintained a strategic advantage with our MMO roots, propelling Justice mobile game to transcend the boundaries of conventional MMO gaming. "Alongside our business's momentum, we have assumed increasing social responsibility. By integrating a 'Minors Mode' across our domestic game lineup, we have strengthened our existing anti-addiction system and continue to steer the gaming ecosystem toward a healthier trajectory with innovative products and technology. "Besides games, our diverse business segments, such as Cloud Music and Youdao, remain on course, consistently delivering premium content. Throughout the NetEase family, we prioritize the creation of novel and high-quality products and services that grow our global appeal and elevate user experiences while pushing innovation forward," Mr. Ding concluded. Fourth Quarter 2023 Financial Results Net Revenues Net revenues for the fourth quarter of 2023 were RMB27.1 billion (US$3.8 billion), compared with RMB27.3 billion and RMB25.4 billion for the preceding quarter and the fourth quarter of 2022, respectively. Net revenues from games and related value-added services were RMB20.9 billion (US$2.9 billion) for the fourth quarter of 2023, compared with RMB21.8 billion and RMB19.1 billion for the preceding quarter and the fourth quarter of 2022, respectively. Net revenues from the operation of online games accounted for approximately 93.4% of the segment's net revenues for the fourth quarter of 2023, compared with 93.7% and 91.8% for the preceding quarter and the fourth quarter of 2022, respectively. Net revenues from mobile games accounted for approximately 76.7% of net revenues from the operation of online games for the fourth quarter of 2023, compared with 77.6% and 66.4% for the preceding quarter and the fourth quarter of 2022, respectively. Net revenues from Youdao were RMB1.5 billion (US$208.5 million) for the fourth quarter of 2023, compared with RMB1.5 billion each for the preceding quarter and the fourth quarter of 2022. Net revenues from Cloud Music were RMB2.0 billion (US$279.7 million) for the fourth quarter of 2023, compared with RMB2.0 billion and RMB2.4 billion for the preceding quarter and the fourth quarter of 2022, respectively. Net revenues from innovative businesses and others were RMB2.8 billion (US$387.7 million) for the fourth quarter of 2023, compared with RMB2.0 billion and RMB2.4 billion for the preceding quarter and the fourth quarter of 2022, respectively. Gross Profit Gross profit for the fourth quarter of 2023 was RMB16.8 billion (US$2.4 billion), compared with RMB17.0 billion and RMB13.2 billion for the preceding quarter and the fourth quarter of 2022, respectively. The slight quarter-over-quarter decrease in games and related value-added services' gross profit was primarily due to decreased net revenues from online games. The year-over-year increase was primarily due to increased net revenues from online games such as Justice mobile game, which was launched in 2023, and Eggy Party, offset in part by the termination of certain licensed games. The quarter-over-quarter decrease in Youdao's gross profit was primarily due to decreased revenue contribution from its learning services. The slight year-over-year decrease was primarily due to reduced revenue contribution from its smart devices, which was partially offset by increased revenue contribution from its online marketing services. The quarter-over-quarter and year-over-year increases in Cloud Music's gross profit primarily resulted from increased net revenues from sales of membership subscriptions and continued improvement in cost control measures. The quarter-over-quarter and year-over-year increases in innovative businesses and others' gross profit were primarily due to increased gross profit contribution from Yanxuan and advertising services. Gross Profit Margin Gross profit margin for games and related value-added services for the fourth quarter of 2023 was 69.5%, compared with 69.0% and 59.1% for the preceding quarter and the fourth quarter of 2022, respectively. The slight quarter-over-quarter increase was primarily attributable to changes in the revenue contribution from different channels. The year-over-year increase was mainly attributable to a higher proportion of net revenues contributed by NetEase's self-developed games. Gross profit margin for Youdao for the fourth quarter of 2023 was 49.9%, compared with 55.9% and 53.3% for the preceding quarter and the fourth quarter of 2022, respectively. The quarter-over-quarter and year-over-year decreases were mainly due to decreased revenue contribution from its learning services and decreased gross profit margin from its smart devices. Gross profit margin for Cloud Music for the fourth quarter of 2023 was 30.3%, compared with 27.2% and 17.8% for the preceding quarter and the fourth quarter of 2022, respectively. The quarter-over-quarter and year-over-year improvements were mainly due to the factors enumerated above. Gross profit margin for innovative businesses and others for the fourth quarter of 2023 was 34.4%, compared with 27.3% and 31.5% for the preceding quarter and the fourth quarter of 2022, respectively. The quarter-over-quarter increase was mainly due to improved gross profit margin from advertising services. The year-over-year increase was mainly due to improved gross profit margin from Yanxuan and advertising services. Operating Expenses Total operating expenses for the fourth quarter of 2023 were RMB10.0 billion (US$1.4 billion), compared with RMB9.4 billion and RMB8.8 billion for the preceding quarter and the fourth quarter of 2022, respectively. The quarter-over-quarter and year-over-year increases were mainly due to increased marketing expenditures and research and development investments associated with games and related value-added services. Other Income/(Expenses) Other income/(expenses) consisted of investment (loss)/income, interest income, exchange (losses)/ gains and others. The quarter-over-quarter decrease was mainly due to a net investment loss resulting from fair value changes of equity investments with readily determinable fair value in the fourth quarter of 2023, compared with a net investment income recorded in the prior quarter, as well as a higher net exchange loss arising from the fluctuation of the exchange rate of the U.S. dollar against the RMB in the fourth quarter of 2023. The year-over-year increase was primarily attributable to higher interest income resulting from the improved net cash position. Income Tax The Company recorded a net income tax charge of RMB1.1 billion (US$150.5 million) for the fourth quarter of 2023, compared with RMB1.3 billion and RMB966.6 million for the preceding quarter and the fourth quarter of 2022, respectively. The effective tax rate for the fourth quarter of 2023 was 13.8%, compared with 14.2% and 20.2% for the preceding quarter and the fourth quarter of 2022, respectively. The effective tax rate represents certain estimates by the Company as to the tax obligations and benefits applicable to it in each quarter. Net Income and Non-GAAP Net Income Net income attributable to the Company's shareholders totaled RMB6.6 billion (US$927.1 million) for the fourth quarter of 2023, compared with RMB7.8 billion and RMB4.0 billion for the preceding quarter and the fourth quarter of 2022, respectively. NetEase reported basic net income of US$0.29 per share (US$1.44 per ADS) for the fourth quarter of 2023, compared with US$0.34 per share (US$1.72 per ADS) and US$0.17 per share (US$0.86 per ADS) for the preceding quarter and the fourth quarter of 2022, respectively. Non-GAAP net income from continuing operations attributable to the Company's shareholders totaled RMB7.4 billion (US$1.0 billion) for the fourth quarter of 2023, compared with RMB8.6 billion and RMB4.8 billion for the preceding quarter and the fourth quarter of 2022, respectively. NetEase reported non-GAAP basic net income from continuing operations of US$0.32 per share (US$1.62 per ADS) for the fourth quarter of 2023, compared with US$0.38 per share (US$1.89 per ADS) and US$0.21 per share (US$1.05 per ADS) for the preceding quarter and the fourth quarter of 2022, respectively. Fiscal Year 2023 Financial Results Net Revenues Net revenues for fiscal year 2023 were RMB103.5 billion (US$14.6 billion), compared with RMB96.5 billion for fiscal year 2022. Net revenues from games and related value-added services were RMB81.6 billion (US$11.5 billion) for fiscal year 2023, compared with RMB74.6 billion for fiscal year 2022. Net revenues from the operation of online games accounted for approximately 92.9% of the segment's total net revenues for fiscal year 2023, compared with 92.5% for fiscal year 2022. Net revenues from mobile games accounted for approximately 75.2% of net revenues from the operation of online games for fiscal year 2023, compared with 67.0% for fiscal year 2022. The higher percentage contribution from mobile games was mainly due to a higher proportion of net revenues generated by mobile games such as Eggy Party and Justice mobile game. Net revenues from Youdao were RMB5.4 billion (US$759.1 million) for fiscal year 2023, compared with RMB5.0 billion for fiscal year 2022. Net revenues from Cloud Music were RMB7.9 billion (US$1.1 billion) for fiscal year 2023, compared with RMB9.0 billion for fiscal year 2022. Net revenues from innovative businesses and others were RMB8.6 billion (US$1.2 billion) for fiscal year 2023, compared with RMB7.9 billion for fiscal year 2022. Gross Profit Gross profit for fiscal year 2023 was RMB63.1 billion (US$8.9 billion), compared with RMB52.8 billion for fiscal year 2022. The year-over-year increase in games and related value-added services gross profit was primarily due to increased net revenues from the operation of online games, mainly from certain newly launched mobile games. The year-over-year increase in Youdao gross profit was mainly due to increased revenue contribution from its online marketing services and learning services. The year-over-year increase in Cloud Music gross profit was primarily attributable to increased net revenues from sales of membership subscriptions and continued improvement in cost control measures. The year-over-year increase in innovative businesses and others gross profit was primarily due to increased gross profits from Yanxuan and several other businesses included within the segment. Operating Expenses Total operating expenses for fiscal year 2023 were RMB35.4 billion (US$5.0 billion), compared with RMB33.1 billion for fiscal year 2022. The year-over-year increase was primarily due to higher research and development investments and marketing expenditures for games and related value-added services. Other Income/(Expenses) The year-over-year increase was mainly due to higher interest income resulting from the Company's increased net cash position, and investment income arising from fair value changes of equity investments with readily determinable fair value. The foregoing was partially offset by the fact that the Company recorded a net exchange loss in fiscal year 2023, compared to a net exchange gain in fiscal year 2022, mainly resulting from the fluctuation of the exchange rate of the U.S. dollar against the RMB during the years. Income Taxes The Company recorded a net income tax charge of RMB4.7 billion (US$661.9 million) for fiscal year 2023, compared with RMB5.0 billion for fiscal year 2022. The effective tax rate was 13.8% for fiscal year 2023, compared with 20.7% for fiscal year 2022. The lower effective tax rate for fiscal year 2023 was partially due to tax benefits recognized in the year. Net Income and Non-GAAP Net Income Net income attributable to the Company's shareholders for fiscal year 2023 totaled RMB29.4 billion (US$4.1 billion), compared with RMB20.3 billion for fiscal year 2022. NetEase reported basic net income of US$1.29 per share (US$6.44 per ADS) for fiscal year 2023, compared with US$0.88 per share (US$4.39 per ADS) for fiscal year 2022. Non-GAAP net income from continuing operations attributable to the Company's shareholders for fiscal year 2023 totaled RMB32.6 billion (US$4.6 billion), compared with RMB22.8 billion for fiscal year 2022. NetEase reported non-GAAP basic net income from continuing operations of US$1.43 per share (US$7.14 per ADS) for fiscal year 2023, compared with US$0.98 per share (US$4.92 per ADS) for fiscal year 2022. Other Financial Information As of December 31, 2023, the Company's net cash (total cash and cash equivalents, current and non-current time deposits and restricted cash, as well as short-term investments balance, minus short-term and long-term loans) totaled RMB110.9 billion (US$15.6 billion), compared with RMB95.6 billion as of December 31, 2022. Net cash provided by operating activities was RMB35.3 billion (US$5.0 billion) for fiscal year 2023, compared with RMB27.7 billion for fiscal year 2022. Quarterly Dividend The board of directors has approved a dividend of US$0.21597 per share (US$1.07985 per ADS) for the fourth quarter of 2023 to holders of ordinary shares and holders of ADSs as of the close of business on March 14, 2024, Beijing/Hong Kong Time and New York Time, respectively, payable in U.S. dollars. For holders of ordinary shares, in order to qualify for the dividend, all valid documents for the transfer of shares accompanied by the relevant share certificates must be lodged for registration with the Company's Hong Kong branch share registrar, Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Wanchai, Hong Kong no later than 4:30 p.m. on March 14, 2024 (Beijing/ Hong Kong Time). The payment date is expected to be March 25, 2024 for holders of ordinary shares, and on or around March 28, 2024 for holders of ADSs. NetEase paid a dividend of US$0.0990 per share (US$0.4950 per ADS) for the third quarter of 2023 in December 2023. Under the Company's current dividend policy, the determination to make dividend distributions and the amount of such distribution in any particular quarter will be made at the discretion of its board of directors and will be based upon the Company's operations and earnings, cash flow, financial condition and other relevant factors. Share Repurchase Program On November 17, 2022, the Company announced that its board of directors had approved a share repurchase program of up to US$5.0 billion of the Company's ADSs and ordinary shares in open market transactions. This share repurchase program commenced on January 10, 2023 and will be in effect for a period not to exceed 36 months from such date. As of December 31, 2023, approximately 7.2 million ADSs had been repurchased under this program for a total cost of US$644.1 million. The extent to which NetEase repurchases its ADSs and its ordinary shares depends upon a variety of factors, including market conditions. These programs may be suspended or discontinued at any time. ** The United States dollar (US$) amounts disclosed in this announcement are presented solely for the convenience of the reader. The percentages stated are calculated based on RMB. Conference Call NetEase's management team will host a teleconference call with a simultaneous webcast at 7:00 a.m. New York Time on Thursday, February 29, 2024 (Beijing/ Hong Kong Time: 8:00 p.m., Thursday, February 29, 2024). NetEase's management will be on the call to discuss the quarterly results and answer questions. Interested parties may participate in the conference call by dialing 1-914-202-3258 and providing conference ID: 10036635, 15 minutes prior to the initiation of the call. A replay of the call will be available by dialing 1-855-883-1031 and entering PIN: 10036635. The replay will be available through March 6, 2024. This call will be webcast live and the replay will be available for 12 months. Both will be available on NetEase's Investor Relations website at http://ir.netease.com/. About NetEase, Inc. NetEase, Inc. (NASDAQ: NTES and HKEX: 9999, "NetEase") is a leading internet and game services provider centered around premium content. With extensive offerings across its expanding gaming ecosystem, the Company develops and operates some of the most popular and longest running mobile and PC games available in China and globally. Powered by one of the largest in-house game R&D teams focused on mobile, PC and console, NetEase creates superior gaming experiences, inspires players, and passionately delivers value for its thriving community worldwide. By infusing play with culture, and education with technology, NetEase transforms gaming into a meaningful vehicle to build a more entertaining and enlightened world. Beyond games, NetEase service offerings include its majority-controlled subsidiaries Youdao (NYSE: DAO), an intelligent learning company with industry-leading technology, and Cloud Music (HKEX: 9899), a well-known online music platform featuring a vibrant content community, as well as Yanxuan, NetEase's private label consumer lifestyle brand. NetEase's market-leading ESG initiatives are among the most recognized in the global media and entertainment industry, earning it inclusion in the 2022 Dow Jones Sustainability World Index, 2022 Dow Jones Sustainability Emerging Markets Index and 2023 Bloomberg Gender-Equality Index, as well as receiving an "A" rating from MSCI. For more information, please visit: http://ir.netease.com/. Forward Looking Statements This announcement 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 expressions. In addition, statements that are not historical facts, including statements about NetEase's strategies and business plans, its expectations regarding the growth of its business and its revenue and the quotations from management in this announcement are or contain forward-looking statements. NetEase may also make forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in announcements made on the website of The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange"), in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. 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 the online games market will not continue to grow or that NetEase will not be able to maintain its position in that market in China or globally; risks associated with NetEase's business and operating strategies and its ability to implement such strategies; NetEase's ability to develop and manage its operations and business; competition for, among other things, capital, technology and skilled personnel; potential changes in government regulation that could adversely affect the industry and geographical markets in which NetEase operates; the risk that NetEase may not be able to continuously develop new and creative online services or that NetEase will not be able to set, or follow in a timely manner, trends in the market; risks related to economic uncertainty and capital market disruption; risks related to the expansion of NetEase's businesses and operations internationally; risks associated with cybersecurity threats or incidents; and the risk that fluctuations in the value of the Renminbi with respect to other currencies could adversely affect NetEase's business and financial results. Further information regarding these and other risks is included in NetEase's filings with the SEC and announcements on the website of the Hong Kong Stock Exchange. NetEase does not undertake any obligation to update this forward-looking information, except as required under applicable law. Non-GAAP Financial Measures NetEase considers and uses non-GAAP financial measures, such as non-GAAP net income from continuing operations attributable to the Company's shareholders and non-GAAP basic and diluted net income from continuing operations per ADS and per share, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). NetEase defines non-GAAP net income from continuing operations attributable to the Company's shareholders as net income from continuing operations attributable to the Company's shareholders excluding share-based compensation expenses. Non-GAAP net income from continuing operations attributable to the Company's shareholders enables NetEase's management to assess its operating results without considering the impact of share-based compensation expenses. NetEase believes that this non-GAAP financial measure provide useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does, if they so choose. NetEase also believes that the use of this non-GAAP financial measure facilitates investors' assessment of its operating performance. Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP net income from continuing operations attributable to the Company's shareholders is that it does not reflect all items of expense/ income that affect our operations. Share-based compensation expenses have been and may continue to be incurred in NetEase's business and are not reflected in the presentation of non-GAAP net income from continuing operations attributable to the Company's shareholders. In addition, the non-GAAP financial measures NetEase uses may differ from the non-GAAP measures used by other companies, including peer companies, and therefore their comparability may be limited. NetEase compensates for these limitations by reconciling non-GAAP net income from continuing operations attributable to the Company's shareholders to the nearest U.S. GAAP performance measure, all of which should be considered when evaluating the Company's performance. See the unaudited reconciliation of GAAP and non-GAAP results at the end of this announcement. NetEase encourages you to review its financial information in its entirety and not rely on a single financial measure. Contact for Media and Investors:Email: ir@service.netease.comTel: (+86) 571-8985-3378 NETEASE, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) December 31, December 31, December 31, 2022 2023 2023 RMB RMB USD (Note 1) Assets Current assets: Cash and cash equivalents 24,889,000 21,428,902 3,018,198 Time deposits 84,947,679 100,856,034 14,205,275 Restricted cash 2,699,055 2,777,206 391,161 Accounts receivable, net 5,002,872 6,422,417 904,579 Inventories 993,636 695,374 97,941 Prepayments and other current assets, net 5,448,284 6,076,595 855,871 Short-term investments 7,622,673 4,436,057 624,806 Total current assets 131,603,199 142,692,585 20,097,831 Non-current assets: Property, equipment and software, net 6,342,330 8,075,044 1,137,346 Land use rights, net 4,121,767 4,075,143 573,972 Deferred tax assets 1,480,789 1,560,088 219,734 Time deposits 2,973,840 1,050,000 147,889 Restricted cash 270 550 77 Other long-term assets 26,238,790 28,471,568 4,010,136 Total non-current assets 41,157,786 43,232,393 6,089,154 Total assets 172,760,985 185,924,978 26,186,985 Liabilities, Redeemable Noncontrolling Interests and Shareholders' Equity Current liabilities: Accounts payable 1,507,141 881,016 124,089 Salary and welfare payables 4,732,941 4,857,206 684,123 Taxes payable 2,813,096 2,571,534 362,193 Short-term loans 23,875,704 19,240,163 2,709,920 Contract liabilities 12,518,890 13,362,166 1,882,022 Accrued liabilities and other payables 11,381,075 12,930,399 1,821,209 Total current liabilities 56,828,847 53,842,484 7,583,556 Non-current liabilities: Deferred tax liabilities 2,126,120 2,299,303 323,850 Long-term loans 3,654,964 427,997 60,282 Other long-term liabilities 1,277,574 1,271,113 179,032 Total non-current liabilities 7,058,658 3,998,413 563,164 Total liabilities 63,887,505 57,840,897 8,146,720 Redeemable noncontrolling interests 136,440 115,759 16,304 NetEase, Inc.'s shareholders' equity 104,731,317 124,285,776 17,505,285 Noncontrolling interests 4,005,723 3,682,546 518,676 Total equity 108,737,040 127,968,322 18,023,961 Total liabilities, redeemable noncontrolling interests and shareholders' equity 172,760,985 185,924,978 26,186,985 The accompanying notes are an integral part of this announcement. NETEASE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data or per ADS data) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 2023 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Net revenues 25,354,129 27,270,406 27,140,165 3,822,612 96,495,809 103,468,159 14,573,185 Cost of revenues (12,109,765) (10,304,106) (10,315,030) (1,452,842) (43,729,683) (40,404,765) (5,690,892) Gross profit 13,244,364 16,966,300 16,825,135 2,369,770 52,766,126 63,063,394 8,882,293 Operating expenses: Selling and marketing expenses (3,417,909) (3,567,153) (4,225,556) (595,157) (13,402,721) (13,969,460) (1,967,557) General and administrative expenses (1,302,932) (1,494,186) (1,251,869) (176,322) (4,695,798) (4,899,880) (690,134) Research and development expenses (4,090,076) (4,347,052) (4,479,219) (630,885) (15,039,014) (16,484,910) (2,321,851) Total operating expenses (8,810,917) (9,408,391) (9,956,644) (1,402,364) (33,137,533) (35,354,250) (4,979,542) Operating profit 4,433,447 7,557,909 6,868,491 967,406 19,628,593 27,709,144 3,902,751 Other income/(expenses): Investment (loss)/income, net (37,102) 556,603 (8,940) (1,259) 53,976 1,306,722 184,048 Interest income, net 629,290 1,147,227 1,261,583 177,690 2,149,673 4,120,418 580,349 Exchange (losses)/gains , net (594,241) (400,483) (810,904) (114,213) 1,571,207 (132,999) (18,733) Other, net 344,875 240,024 434,759 61,235 846,815 1,053,642 148,402 Income before tax 4,776,269 9,101,280 7,744,989 1,090,859 24,250,264 34,056,927 4,796,817 Income tax (966,574) (1,290,398) (1,068,657) (150,517) (5,031,838) (4,699,704) (661,939) Net income from continuing operations 3,809,695 7,810,882 6,676,332 940,342 19,218,426 29,357,223 4,134,878 Net income from discontinued operations - - - - 624,864 - - Net income 3,809,695 7,810,882 6,676,332 940,342 19,843,290 29,357,223 4,134,878 Accretion of redeemable noncontrolling interests (710) (895) (966) (136) (2,978) (3,589) (506) Net loss/(income) attributable to noncontrolling interests 143,752 26,901 (93,103) (13,113) 497,288 62,918 8,862 Net income attributable to the Company's shareholders 3,952,737 7,836,888 6,582,263 927,093 20,337,600 29,416,552 4,143,234 Including: -Net income from continuing operations attributable to the Company's shareholders 3,952,737 7,836,888 6,582,263 927,093 19,712,736 29,416,552 4,143,234 -Net income from discontinued operations attributable to the Company's shareholders - - - - 624,864 - - Basic net income per share * 1.22 2.44 2.05 0.29 6.23 9.15 1.29 -Continuing operations 1.22 2.44 2.05 0.29 6.04 9.15 1.29 -Discontinued operations - - - - 0.19 - - Basic net income per ADS * 6.10 12.19 10.25 1.44 31.16 45.73 6.44 -Continuing operations 6.10 12.19 10.25 1.44 30.20 45.73 6.44 -Discontinued operations - - - - 0.96 - - Diluted net income per share * 1.21 2.41 2.02 0.28 6.17 9.05 1.27 -Continuing operations 1.21 2.41 2.02 0.28 5.98 9.05 1.27 -Discontinued operations - - - - 0.19 - - Diluted net income per ADS * 6.05 12.06 10.12 1.42 30.85 45.23 6.37 -Continuing operations 6.05 12.06 10.12 1.42 29.90 45.23 6.37 -Discontinued operations - - - - 0.95 - - Weighted average number of ordinary shares used in calculating net income per share * Basic 3,239,282 3,213,834 3,212,328 3,212,328 3,263,455 3,216,475 3,216,475 Diluted 3,269,082 3,249,649 3,253,166 3,253,166 3,296,014 3,252,029 3,252,029 * Each ADS represents five ordinary shares. The accompanying notes are an integral part of this announcement. NETEASE, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 2023 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Cash flows from operating activities: Net income 3,809,695 7,810,882 6,676,332 940,342 19,843,290 29,357,223 4,134,878 Net income from discontinued operations - - - - (624,864) - - Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 769,141 651,856 659,772 92,927 2,858,209 3,055,260 430,324 Fair value changes of equity security investments 148,156 (382,132) 151,571 21,348 3,104,336 (535,316) (75,398) Impairment losses on investments and other long-term assets 45,401 280,641 140,648 19,810 300,249 469,159 66,080 Fair value changes of short-term investments (23,364) (72,875) (106,532) (15,005) (342,642) (414,207) (58,340) Share-based compensation cost 876,560 819,548 812,987 114,507 3,174,160 3,242,810 456,740 Allowance for expected credit losses 6,615 22,386 9,500 1,338 61,393 61,146 8,612 Losses on disposal of property, equipment and software 1,166 2,649 3,385 477 3,620 5,676 799 Unrealized exchange losses/(gains) 589,665 362,213 838,056 118,038 (1,604,260) 119,935 16,893 Gains on disposal of long-term investments, business and subsidiaries (62,922) (3,197) (38,437) (5,414) (1,791,355) (63,784) (8,984) Deferred income taxes 578,317 (305,703) 193,854 27,304 489,670 131,437 18,513 Share of results on equity method investees and revaluation results from previously held equity interest (54,746) (160,042) (88,805) (12,508) (1,259,941) (473,947) (66,754) Changes in operating assets and liabilities: Accounts receivable 224,197 (1,177,732) 53,089 7,477 554,340 (1,470,374) (207,098) Inventories (60,695) 84,970 25,054 3,529 (27,613) 296,764 41,798 Prepayments and other assets 1,095,882 (573,631) 542,593 76,423 731,100 87,556 12,332 Accounts payable 576,021 150,868 18,443 2,598 447,666 (559,419) (78,792) Salary and welfare payables 1,965,624 (588,217) 1,992,931 280,698 424,513 (62,917) (8,862) Taxes payable (928,071) 515,087 (500,172) (70,448) (917,614) (244,261) (34,403) Contract liabilities (1,396,523) 1,560,628 (847,562) (119,377) 385,396 1,161,861 163,645 Accrued liabilities and other payables 849,094 845,721 1,271,572 179,098 1,899,580 1,166,673 164,323 Net cash provided by operating activities 9,009,213 9,843,920 11,808,279 1,663,162 27,709,233 35,331,275 4,976,306 Cash flows from investing activities: Purchase of property, equipment and software (348,821) (643,144) (484,927) (68,300) (2,100,264) (2,301,554) (324,167) Proceeds from sale of property, equipment and software 2,257 3,101 405 57 41,467 10,302 1,451 Purchase of intangible assets, content and licensed copyrights (161,987) (742,523) (121,797) (17,155) (543,220) (1,974,323) (278,078) Net change in short-term investments with terms of three months or less (931,790) (1,993,921) (690,628) (97,273) 776,357 (1,777,687) (250,382) Purchase of short-term investments with terms over three months (4,700,000) - - - (5,950,000) - - Proceeds from maturities of short-term investments with terms over three months 6,966,682 376,950 4,897,291 689,769 10,175,160 5,378,510 757,547 Investment in long-term investments and acquisition of subsidiaries (1,694,928) (417,448) (914,962) (128,870) (5,129,680) (2,831,686) (398,834) Proceeds from disposal of long-term investments, businesses and subsidiaries 92,795 20,898 73,855 10,402 2,411,070 152,564 21,488 Placement/rollover of matured time deposits (22,975,014) (30,831,994) (46,666,670) (6,572,863) (98,973,884) (124,693,598) (17,562,726) Proceeds from maturities of time deposits 27,676,529 33,893,436 33,273,393 4,686,459 92,247,046 111,417,969 15,692,893 Change in other long-term assets (61,552) (181,263) (90,635) (12,766) (323,779) (423,928) (59,709) Net cash provided by/(used in) investing activities 3,864,171 (515,908) (10,724,675) (1,510,540) (7,369,727) (17,043,431) (2,400,517) Cash flows from financing activities: Net changes from loans with terms of three months or less (3,753,493) (7,501,788) 6,179,979 870,432 (1,274,043) (13,654,704) (1,923,225) Proceed of loans with terms over three months 2,765,086 7,607,060 2,511,000 353,667 6,392,695 13,569,160 1,911,176 Payment of loans with terms over three months (191,158) (4,250,550) (695,000) (97,889) (273,639) (8,219,472) (1,157,688) Net amounts received/(paid) related to capital contribution from or repurchase of noncontrolling interests shareholders 23,616 11,573 28,009 3,945 (30,921) 86,159 12,136 Cash paid for repurchase of NetEase's ADSs/purchase of subsidiaries' ADSs and shares (3,007,765) (296,495) (625,832) (88,147) (8,328,124) (5,234,294) (737,235) Dividends paid to NetEase's shareholders (2,018,984) (2,423,355) (2,258,892) (318,158) (6,723,667) (8,013,903) (1,128,735) Net cash (used in)/provided by financing activities (6,182,698) (6,853,555) 5,139,264 723,850 (10,237,699) (21,467,054) (3,023,571) Effect of exchange rate changes on cash, cash equivalents and restricted cash held in foreign currencies 53,237 4,197 (174,276) (24,546) 110,403 (202,457) (28,516) Net increase/(decrease) in cash, cash equivalents and restricted cash 6,743,923 2,478,654 6,048,592 851,926 10,212,210 (3,381,667) (476,298) Cash, cash equivalents and restricted cash, at the beginning of the period 20,844,402 15,679,412 18,158,066 2,557,510 17,376,115 27,588,325 3,885,734 Cash, cash equivalents and restricted cash, at end of the period 27,588,325 18,158,066 24,206,658 3,409,436 27,588,325 24,206,658 3,409,436 Supplemental disclosures of cash flow information: Cash paid for income tax, net 971,217 1,165,196 1,030,932 145,204 5,092,391 4,895,752 689,552 Cash paid for interest expenses 264,232 105,665 71,847 10,119 588,381 779,872 109,843 The accompanying notes are an integral part of this announcement. NETEASE, INC. UNAUDITED SEGMENT INFORMATION (in thousands, except percentages) Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 2023 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Net revenues: Games and related value-added services 19,085,708 21,779,851 20,921,355 2,946,711 74,566,471 81,565,449 11,488,253 Youdao 1,453,982 1,538,783 1,480,521 208,527 5,013,182 5,389,208 759,054 Cloud Music 2,376,257 1,973,064 1,985,548 279,659 8,992,221 7,866,992 1,108,043 Innovative businesses and others 2,438,182 1,978,708 2,752,741 387,715 7,923,935 8,646,510 1,217,835 Total net revenues 25,354,129 27,270,406 27,140,165 3,822,612 96,495,809 103,468,159 14,573,185 Cost of revenues: Games and related value-added services (7,805,578) (6,749,507) (6,383,474) (899,094) (27,784,419) (25,938,865) (3,653,413) Youdao (679,295) (679,147) (741,720) (104,469) (2,430,738) (2,621,746) (369,265) Cloud Music (1,953,900) (1,436,552) (1,384,537) (195,008) (7,699,103) (5,764,322) (811,888) Innovative businesses and others (1,670,992) (1,438,900) (1,805,299) (254,271) (5,815,423) (6,079,832) (856,326) Total cost of revenues (12,109,765) (10,304,106) (10,315,030) (1,452,842) (43,729,683) (40,404,765) (5,690,892) Gross profit: Games and related value-added services 11,280,130 15,030,344 14,537,881 2,047,617 46,782,052 55,626,584 7,834,840 Youdao 774,687 859,636 738,801 104,058 2,582,444 2,767,462 389,789 Cloud Music 422,357 536,512 601,011 84,651 1,293,118 2,102,670 296,155 Innovative businesses and others 767,190 539,808 947,442 133,444 2,108,512 2,566,678 361,509 Total gross profit 13,244,364 16,966,300 16,825,135 2,369,770 52,766,126 63,063,394 8,882,293 Gross profit margin: Games and related value-added services 59.1 % 69.0 % 69.5 % 69.5 % 62.7 % 68.2 % 68.2 % Youdao 53.3 % 55.9 % 49.9 % 49.9 % 51.5 % 51.4 % 51.4 % Cloud Music 17.8 % 27.2 % 30.3 % 30.3 % 14.4 % 26.7 % 26.7 % Innovative businesses and others 31.5 % 27.3 % 34.4 % 34.4 % 26.6 % 29.7 % 29.7 % The accompanying notes are an integral part of this announcement. NETEASE, 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 = RMB7.0999 on the last trading day of December 2023 (December 29, 2023) as set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on December 29, 2023, or at any other certain date. Note 2: Share-based compensation cost reported in the Company's unaudited condensed consolidated statements of comprehensive income is set out as follows in RMB and USD (in thousands): Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 2023 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Share-based compensation cost included in: Cost of revenues 195,793 210,533 216,717 30,524 758,413 823,765 116,025 Operating expenses Selling and marketing expenses 33,001 33,804 35,575 5,011 120,171 132,801 18,705 General and administrative expenses 349,444 280,581 262,830 37,019 1,214,995 1,119,018 157,610 Research and development expenses 298,322 294,630 297,865 41,953 1,080,581 1,167,226 164,400 The accompanying notes are an integral part of this announcement. Note 3: The financial information prepared and presented in this announcement might be different from those published and to be published by NetEase's listed subsidiaries to meet the disclosure requirements under U.S. GAAP or different accounting standards requirements. Note 4: The unaudited reconciliation of GAAP and non-GAAP results is set out as follows in RMB and USD (in thousands, except per share data or per ADS data): Three Months Ended Year Ended December 31, September 30, December 31, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 2023 RMB RMB RMB USD (Note 1) RMB RMB USD (Note 1) Net income from continuing operations attributable to the Company's shareholders 3,952,737 7,836,888 6,582,263 927,093 19,712,736 29,416,552 4,143,234 Add: Share-based compensation 858,637 808,276 797,194 112,282 3,095,693 3,191,753 449,549 Non-GAAP net income from continuing operations attributable to the Company's shareholders 4,811,374 8,645,164 7,379,457 1,039,375 22,808,429 32,608,305 4,592,783 Non-GAAP basic net income from continuing operations per share * 1.49 2.69 2.30 0.32 6.99 10.14 1.43 Non-GAAP basic net income from continuing operations per ADS * 7.43 13.45 11.49 1.62 34.95 50.69 7.14 Non-GAAP diluted net income from continuing operations per share * 1.47 2.66 2.27 0.32 6.92 10.03 1.41 Non-GAAP diluted net income from continuing operations per ADS * 7.36 13.30 11.34 1.60 34.60 50.14 7.06 * Each ADS represents five ordinary shares. The accompanying notes are an integral part of this announcement.
AD HOC ANNOUNCEMENT pursuant to Art. 53 Listing Rules of SIX Swiss Exchange ZURICH, Feb. 29, 2024 /PRNewswire/ -- Q4 & FULL YEAR 2023 RESULTS Continued growth and significant share gains amid tougher markets, strong profitability improvement Q4 HIGHLIGHTS Revenues +1% yoy, led by Adecco, +3%, with double-digit growth in Germany, Italy, Iberia and both LatAm and APAC regions Continued significant market share gains; Adecco's relative revenue growth +830 bps Healthy 20.2% gross margin, 80 bps lower yoy, reflecting current business mix and firm pricing Strong 4.3% EBITA margin excl. one-offs, up 60 bps yoy, driven by productivity gains, €23 million G&A savings Operating income €187 million, +74% yoy, constant currency Net income €68 million, +6% yoy, weighed by a higher effective tax rate reflecting current geographic mix Basic EPS €0.41, +5% yoy; Adjusted EPS €0.75, -1% lower yoy FULL YEAR HIGHLIGHTS Revenues +3% yoy to record level of €23,957 million Healthy 20.7% gross margin, 30 bps lower yoy, reflecting current business mix and firm pricing EBITA excl. one-offs +8% yoy organic; robust 3.6% margin, up 10 bps yoy, driven by productivity gains, G&A savings €150 million G&A savings plan on track; year-end savings run-rate €92 million, consistent with ~€90 million ambition AKKA synergies ahead of target at over €60 million; transaction delivers double-digit EPS accretion in year 2 Operating income €632 million, +21% yoy, constant currency Net income €325 million, -5% yoy, mainly driven by a higher effective tax rate reflecting current geographic mix Basic EPS €1.94, -5% lower yoy; Adjusted EPS €2.99, -9% lower yoy Solid Cash Flow from Operating Activities EUR 563 million, up EUR 20 million yoy Year-end Net debt/EBITDA ratio 2.5x, in line with management expectations Proposed dividend of CHF 2.50 per share Denis Machuel, Adecco Group CEO, commented: "The Group delivered a strong finish to 2023 in a challenging market environment, continuing to gain share while further improving profitability through productivity and disciplined cost reduction. Adecco achieved market share gains for the sixth consecutive quarter, while improving margin. Akkodis faced market headwinds yet still delivered growth in Consulting and a strong EBITA margin driven by excellent synergy capture. In LHH, both Career Transition and Ezra delivered further exceptional growth. Throughout 2023 we made encouraging progress against our Future@Work Reloaded plan to bring the Group to its full potential. We are simplifying the organisation and are on track to deliver on our €150 million G&A savings run-rate target by mid-year. Execution has improved through greater local empowerment and performance management rigour, and we are growing market share – while maintaining the proper balance between top and bottom line. My sincere thanks go to our incredible teams of colleagues, associates, and consultants around the world for a strong 2023. As we outlined at our Capital Markets Day in November 2023, we will continue to deliver on our Simplify-Execute-Grow plan methodically in 2024. We are harnessing technology to drive efficiencies and competitive edge, reinvigorating our winning culture, and remain laser focused on creating further value for our stakeholders." Full Press Release Webcast Details | Investors & Analysts Investor Relations, +41 (0)44 878 88 88
BEIJING, Feb. 29, 2024 /PRNewswire/ -- iHuman Inc. (NYSE: IH) ("iHuman" or the "Company"), a leading provider of tech-powered, intellectual development products in China, today announced its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2023. Fourth Quarter 2023 Highlights Revenues were RMB250.4 million (US$35.3 million), compared with RMB260.7 million in the same period last year. Gross profit was RMB178.2 million (US$25.1 million), compared with RMB181.0 million in the same period last year. Operating income was RMB21.9 million (US$3.1 million), compared with RMB39.1 million in the same period last year. Net income was RMB33.3 million (US$4.7 million), compared with RMB35.4 million in the same period last year. Average total MAUs[1] reached a record-high of 25.38 million, a year-over-year increase of 14.2%. Fiscal Year 2023 Highlights Revenues were RMB1,018.1 million (US$143.4 million), compared with RMB985.5 million in fiscal year 2022. Gross profit was RMB721.3 million (US$101.6 million), compared with RMB691.2 million in fiscal year 2022. Operating income was RMB159.9 million (US$22.5 million), compared with RMB111.6 million in fiscal year 2022. Net income was RMB180.9 million (US$25.5 million), compared with RMB109.8 million in fiscal year 2022. Average total MAUs were 23.04 million, a year-over-year increase of 16.0%. [1] "Average total MAUs" refers to the monthly average of the sum of the MAUs of each of the Company's apps during a specific period, which is counted based on the number of unique mobile devices through which such app is accessed at least once in a given month, and duplicate access to different apps is not eliminated from the total MAUs calculation.[2] "Paying users" refers to users who paid subscription fees for premium content on any of the Company's apps during a specific period; a user who makes payments across different apps using the same registered account is counted as one paying user, and a user who makes payments for the same app multiple times in the same period is counted as one paying user. Dr. Peng Dai, Director and Chief Executive Officer of iHuman, commented, "As we look back on 2023, I am truly inspired by the accomplishments that we have achieved, especially considering the decline in China's newborn population over the past few years. In response to the challenges posed by the declining birth rate, we have been actively expanding our presence in the international markets, diversifying our product portfolio, and developing products that cover a broader age demographic. These strategic efforts have helped us achieve remarkable progress. For instance, our globally-oriented app, Aha World, delivered impressive performance in 2023. By the end of the year, its YouTube and TikTok accounts collectively attracted over 200 million views. It also earned YouTube's Silver Creator Award and rose to rank among the top three most popular children's apps on the U.S. Apple app store in the fourth quarter. Meanwhile, our flagship product, iHuman Chinese, has consistently held the No.1 spot in the top-grossing category for children's apps on the Apple app store in China for iPad users for nearly 4.5 years, according to Appfigures, a reputable American data analytics company. This past year has been marked by revenue growth and sustained profitability, and we once again set a new record for average total MAUs in the fourth quarter which further solidified our position as an industry leader." "We are also thrilled to announce the acquisition of intellectual property assets related to "Cosmicrew" from Kunpeng, an animation production studio within the Perfect World Group. This strategic acquisition is expected to generate significant synergies with our business. Firstly, "Cosmicrew" is a popular cartoon adventure series that has established a strong presence in the children's entertainment sector. The light-hearted and delightful nature of this cartoon IP seamlessly compliments our overall product style and aesthetic. With the IP already integrated into some of our products before the acquisition, we now have greater autonomy over our creative content. In addition, we now can expand our product range further by developing additional IP offerings and derivatives, including animations, toys, and more. At the market level, "Cosmicrew" is a popular cartoon with a large audience base, and this acquisition will enable us to further extend our market reach and engage with a broader audience." "As we continue to progress on our strategic initiatives, we remain fully dedicated to strengthening our core competencies through ongoing product enhancement. We have been enriching the content and functionality of our app products to elevate the digital experience of our users and have made further strides in integrating our online and offline offerings to create a more immersive and holistic journey for users. For example, we rolled out both multi-leveled physical books and a specially developed smart reading pen that complement our leveled English reading app, iHuman Fantastic Friends. This combination allows kids to explore captivating original English stories tailored to their proficiency level in physical and digital formats, offering them a flexible and simple reading experience while enhancing their understanding and engagement with the content." "In 2023, we further strengthened our comprehensive product suite, significantly expanded our international presence, and earned increased market recognition with several prestigious industry accolades. We achieved all these milestones despite a highly volatile and challenging macroeconomic climate, which I believe is a testament to the caliber of our products, the effectiveness of our strategies, and the resilience of our team in overcoming diverse economic challenges. As we enter 2024, I am filled with anticipation for the continued success that lies ahead." Ms. Vivien Weiwei Wang, Director and Chief Financial Officer of iHuman, added, "Our fourth quarter results ended 2023 on a positive note despite a turbulent global economic environment. While our fourth quarter results saw a marginal decrease year-over-year, it reflected a normalization from the exceptional fourth quarter performance last year, which was caused by a heightened demand driven by more indoor activities during the pandemic. From a full year perspective in 2023, despite the fact that everybody shifted back to regular routines and spent less time at home after the pandemic, we still achieved satisfactory growth as both revenues and MAUs increased compared to fiscal year 2022. We are also proud to announce our eighth consecutive quarter of profitability, with annual net income reaching RMB180.9 million. This achievement marks our second straight year of profitability since our IPO in 2020 and demonstrates that we have successfully charted a path of healthy and sustainable growth. The momentum we have sustained in our business operations has further solidified our financial position, which not only bolsters our capacity for ongoing growth and innovation, but also enables us to enhance returns to our shareholders through issuing a special cash dividend of US$0.02 per ordinary share, or US$0.10 per ADS. The approval of the special dividend by our board of directors reflects our confidence in our long-term growth potential and strong balance sheet. Moving forward, we will continue to execute on our strategic priorities and maintain a growth-oriented approach to create even greater value for our users and shareholders." Fourth Quarter 2023 Unaudited Financial Results Revenues Revenues were RMB250.4 million (US$35.3 million), compared with RMB260.7 million in the same period last year. Average total MAUs for the quarter were 25.38 million, an increase of 14.2% year-over-year from 22.22 million in the same period last year. The number of paying users[2] was 1.45 million. Cost of Revenues Cost of revenues was RMB72.2 million (US$10.2 million), a decrease of 9.4% from RMB79.7 million in the same period last year, primarily due to decreased channel costs. Gross Profit and Gross Margin Gross profit was RMB178.2 million (US$25.1 million), compared with RMB181.0 million in the same period last year. Gross margin was 71.2%, compared with 69.4% in the same period last year. Operating Expenses Total operating expenses were RMB156.4 million (US$22.0 million), an increase of 10.2% from RMB141.9 million in the same period last year. Research and development expenses were RMB66.3 million (US$9.3 million), compared with RMB66.8 million in the same period last year. Sales and marketing expenses were RMB64.5 million (US$9.1 million), an increase of 40.8% from RMB45.8 million in the same period last year, primarily due to increased strategic spending on promotional activities and brand enhancement. General and administrative expenses were RMB25.5 million (US$3.6 million), a decrease of 12.7% from RMB29.3 million in the same period last year, primarily due to payroll related cost-savings and other decreased expenses as a result of the continued optimization of our operational efficiency. Operating Income Operating income was RMB21.9 million (US$3.1 million), compared with RMB39.1 million in the same period last year. Net Income Net income was RMB33.3 million (US$4.7 million), compared with RMB35.4 million in the same period last year. Basic and diluted net income per ADS were RMB0.63 (US$0.09) and RMB0.61 (US$0.09), respectively, compared with RMB0.67 and RMB0.66 in the same period last year. Each ADS represents five Class A ordinary shares of the Company. Deferred Revenue and Customer Advances Deferred revenue and customer advances were RMB318.6 million (US$44.9 million) as of December 31, 2023, compared with RMB379.1 million as of December 31, 2022. Cash and Cash Equivalents Cash and cash equivalents were RMB1,213.8 million (US$171.0 million) as of December 31, 2023, compared with RMB1,050.0 million as of December 31, 2022. Fiscal Year 2023 Unaudited Financial Results Revenues Revenues were RMB1,018.1 million (US$143.4 million), an increase of 3.3% from RMB985.5 million in fiscal year 2022. Average total MAUs were 23.04 million, an increase of 16.0% year-over-year from 19.86 million in fiscal year 2022. The number of paying users for the year was 4.27 million. Cost of Revenues Cost of revenues was RMB296.9 million (US$41.8 million), compared with RMB294.3 million in fiscal year 2022. Gross Profit and Gross Margin Gross profit was RMB721.3 million (US$101.6 million), an increase of 4.4% from RMB691.2 million in fiscal year 2022. Gross margin was 70.8%, compared with 70.1% in fiscal year 2022. Operating Expenses Total operating expenses were RMB561.4 million (US$79.1 million), a decrease of 3.1% from RMB579.6 million in fiscal year 2022. Research and development expenses were RMB257.5 million (US$36.3 million), a decrease of 17.8% from RMB313.5 million in fiscal year 2022, primarily due to cost savings in payroll-related expenses and outsourcing expenses. Sales and marketing expenses were RMB199.5 million (US$28.1 million), an increase of 27.1% from RMB156.9 million in fiscal year 2022, primarily due to increased strategic spending on promotional activities and brand enhancement. General and administrative expenses were RMB104.3 million (US$14.7 million), a decrease of 4.5% from RMB109.2 million in fiscal year 2022. Operating Income Operating income was RMB159.9 million (US$22.5 million), compared with RMB111.6 million in fiscal year 2022. Net Income Net income was RMB180.9 million (US$25.5 million), compared with RMB109.8 million in fiscal year 2022. Basic and diluted net income per ADS were RMB3.43 (US$0.48) and RMB3.30 (US$0.46), respectively, compared with RMB2.06 and RMB2.03 in fiscal year 2022. Each ADS represents five Class A ordinary shares of the Company. Special Cash Dividend To deliver return of capital to shareholders, the Company's board of directors (the "Board") approved a special cash dividend of US$0.02 per ordinary share, or US$0.10 per ADS, to holders of ordinary shares and holders of ADSs as of the close of business on March 28, 2024 New York Time, payable in U.S. dollars. The aggregate amount of the special dividend will be approximately US$5.3 million. The payment date is expected to be on or around May 8, 2024 and May 15, 2024 for holders of ordinary shares and holders of ADSs, respectively. Acquisition of IP Assets The Company, through one of its consolidated affiliated entities, entered into an asset transfer agreement (the "Asset Transfer Agreement") with Kunpeng, an animation production studio within the Perfect World Group (the "Transferors"). Pursuant to the Asset Transfer Agreement, the Company will acquire intellectual property assets related to "Cosmicrew" from Kunpeng, including copyrights and trademarks, among others, for a total consideration of RMB64.0 million. The consideration of the transaction was determined with the assistance of an independent third-party valuation firm. As the Transferors are related parties of the Company, the transaction has been approved by the Board and the audit committee of the Board, and is subject to customary closing conditions. Exchange Rate Information The U.S. dollar (US$) amounts disclosed in this press release, except for those transaction amounts that were actually settled in U.S. dollars, are presented solely for the convenience of the reader. The conversion of Renminbi (RMB) into US$ in this press release is based on the exchange rate set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System as of December 29, 2023, which was RMB7.0999 to US$1.00. The percentages stated in this press release are calculated based on the RMB amounts. Non-GAAP Financial Measures iHuman considers and uses non-GAAP financial measures, such as adjusted operating income, adjusted net income and adjusted diluted net income per ADS, as supplemental metrics in reviewing and assessing its operating performance and formulating its business plan. The presentation of non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). iHuman defines adjusted operating income, adjusted net income and adjusted diluted net income per ADS as operating income, net income and diluted net income per ADS excluding share-based compensation expenses, respectively. Adjusted operating income, adjusted net income and adjusted diluted net income per ADS enable iHuman's management to assess its operating results without considering the impact of share-based compensation expenses, which are non-cash charges. iHuman believes that these non-GAAP financial measures provide useful information to investors in understanding and evaluating the Company's current operating performance and prospects in the same manner as management does, if they so choose. Non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. Non-GAAP financial measures have limitations as analytical tools, which possibly do not reflect all items of expense that affect our operations. Share-based compensation expenses have been and may continue to be incurred in our business and are not reflected in the presentation of the non-GAAP financial measures. In addition, the non-GAAP financial measures iHuman uses may differ from the non-GAAP measures used by other companies, including peer companies, and therefore their comparability may be limited. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from or as a substitute for the financial information prepared and presented in accordance with GAAP. Safe Harbor Statement This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Statements that are not historical facts, including statements about iHuman's beliefs and expectations, are forward-looking statements. Among other things, the description of the management's quotations in this announcement contains forward-looking statements. iHuman may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials, and in oral statements made by its officers, directors or employees to third parties. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: iHuman's growth strategies; its future business development, financial condition and results of operations; its ability to continue to attract and retain users, convert non-paying users into paying users and increase the spending of paying users, the trends in, and size of, the market in which iHuman operates; its expectations regarding demand for, and market acceptance of, its products and services; its expectations regarding its relationships with business partners; general economic and business conditions; regulatory environment; and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in iHuman's filings with the SEC. All information provided in this press release is as of the date of this press release, and iHuman does not undertake any obligation to update any forward-looking statement, except as required under applicable law. About iHuman Inc. iHuman Inc. is a leading provider of tech-powered, intellectual development products in China that is committed to making the child-upbringing experience easier for parents and transforming intellectual development into a fun journey for children. Benefiting from a deep legacy that combines over two decades of experience in the parenthood industry, superior original content, advanced high-tech innovation DNA and research & development capabilities with cutting-edge technologies, iHuman empowers parents with tools to make the child-upbringing experience more efficient. iHuman's unique, fun and interactive product offerings stimulate children's natural curiosity and exploration. The Company's comprehensive suite of innovative and high-quality products include self-directed apps, interactive content and smart devices that cover a broad variety of areas to develop children's abilities in speaking, critical thinking, independent reading and creativity, and foster their natural interest in traditional Chinese culture. Leveraging advanced technological capabilities, including 3D engines, AI/AR functionality, and big data analysis on children's behavior & psychology, iHuman believes it will continue to provide superior experience that is efficient and relieving for parents, and effective and fun for children, in China and all over the world, through its integrated suite of tech-powered, intellectual development products. For more information about iHuman, please visit https://ir.ihuman.com/. For investor and media enquiries, please contact: iHuman Inc.Mr. Justin ZhangInvestor Relations DirectorPhone: +86 10 5780-6606E-mail: ir@ihuman.com Christensen In ChinaMs. Alice LiPhone: +86-10-5900-1548E-mail: alice.li@christensencomms.com In the USMs. Linda BergkampPhone: +1-480-614-3004E-mail: linda.bergkamp@christensencomms.com iHuman Inc. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$") except for number of shares, ADSs, per share and per ADS data) December 31, December 31, December 31, 2022 2023 2023 RMB RMB US$ ASSETS Current assets Cash and cash equivalents 1,049,999 1,213,767 170,956 Accounts receivable, net 79,614 60,832 8,568 Inventories, net 19,127 16,518 2,327 Amounts due from related parties 2,286 1,810 255 Prepayments and other current assets 102,765 89,511 12,607 Total current assets 1,253,791 1,382,438 194,713 Non-current assets Property and equipment, net 9,205 6,169 869 Intangible assets, net 24,872 23,245 3,274 Operating lease right-of-use assets 12,782 3,648 514 Long-term investment 26,333 26,333 3,709 Other non-current assets 6,416 8,662 1,218 Total non-current assets 79,608 68,057 9,584 Total assets 1,333,399 1,450,495 204,297 LIABILITIES Current liabilities Accounts payable 24,206 22,139 3,118 Deferred revenue and customer advances 379,063 318,587 44,872 Amounts due to related parties 6,944 4,428 624 Accrued expenses and other current liabilities 144,717 143,677 20,236 Current operating lease liabilities 6,123 1,927 271 Total current liabilities 561,053 490,758 69,121 Non-current liabilities Non-current operating lease liabilities 2,894 1,933 272 Total non-current liabilities 2,894 1,933 272 Total liabilities 563,947 492,691 69,393 SHAREHOLDERS' EQUITY Ordinary shares (par value of US$0.0001 per share, 700,000,000 Class A shares authorized as of December 31, 2022 and December 31, 2023; 125,122,382 Class A shares issued and 121,722,467 outstanding as of December 31, 2022; 125,122,382 Class A shares issued and 119,704,787 outstanding as of December 31, 2023; 200,000,000 Class B shares authorized, 144,000,000 Class B ordinary shares issued and outstanding as of December 31, 2022 and December 31, 2023; 100,000,000 shares (undesignated) authorized, nil shares (undesignated) issued and outstanding as of December 31, 2022 and December 31, 2023) 185 185 26 Additional paid-in capital 1,079,099 1,088,628 153,330 Treasury stock (7,123) (16,665) (2,347) Statutory reserves 7,967 8,164 1,150 Accumulated other comprehensive income 10,497 17,955 2,529 Accumulated deficit (321,173) (140,463) (19,784) Total shareholders' equity 769,452 957,804 134,904 Total liabilities and shareholders' equity 1,333,399 1,450,495 204,297 iHuman Inc. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$") except for number of shares, ADSs, per share and per ADS data) For the three months ended For the year ended December 31, September 30, December 31, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 2023 RMB RMB RMB US$ RMB RMB US$ Revenues 260,704 261,496 250,447 35,275 985,517 1,018,139 143,402 Cost of revenues (79,707) (74,871) (72,201) (10,169) (294,343) (296,868) (41,813) Gross profit 180,997 186,625 178,246 25,106 691,174 721,271 101,589 Operating expenses Research and development expenses (66,796) (66,168) (66,293) (9,337) (313,481) (257,546) (36,275) Sales and marketing expenses (45,811) (53,994) (64,511) (9,086) (156,916) (199,504) (28,100) General and administrative expenses (29,253) (26,070) (25,547) (3,598) (109,195) (104,334) (14,695) Total operating expenses (141,860) (146,232) (156,351) (22,021) (579,592) (561,384) (79,070) Operating income 39,137 40,393 21,895 3,085 111,582 159,887 22,519 Other income, net 5,315 19,507 8,965 1,263 21,190 42,686 6,012 Income before income taxes 44,452 59,900 30,860 4,348 132,772 202,573 28,531 Income tax (expenses) / benefits (9,019) (7,984) 2,411 340 (22,953) (21,666) (3,052) Net income 35,433 51,916 33,271 4,688 109,819 180,907 25,479 Net income per ADS: - Basic 0.67 0.98 0.63 0.09 2.06 3.43 0.48 - Diluted 0.66 0.95 0.61 0.09 2.03 3.30 0.46 Weighted average number of ADSs: - Basic 53,205,925 52,747,426 52,740,067 52,740,067 53,307,044 52,810,587 52,810,587 - Diluted 54,033,560 54,772,536 54,753,503 54,753,503 54,040,908 54,753,025 54,753,025 Total share-based compensation expenses included in: Cost of revenues 168 67 64 9 348 299 42 Research and development expenses 2,564 1,160 1,115 157 6,377 4,055 571 Sales and marketing expenses 559 147 122 17 1,599 707 100 General and administrative expenses 1,757 1,105 817 115 4,720 4,374 616 iHuman Inc. UNAUDITED RECONCILIATION OF GAAP AND NON-GAAP RESULTS (Amounts in thousands of Renminbi ("RMB") and U.S. dollars ("US$") except for number of shares, ADSs, per share and per ADS data) For the three months ended For the year ended December 31, September 30, December 31, December 31, December 31, December 31, December 31, 2022 2023 2023 2023 2022 2023 2023 RMB RMB RMB US$ RMB RMB US$ Operating income 39,137 40,393 21,895 3,085 111,582 159,887 22,519 Share-based compensation expenses 5,048 2,479 2,118 298 13,044 9,435 1,329 Adjusted operating income 44,185 42,872 24,013 3,383 124,626 169,322 23,848 Net income 35,433 51,916 33,271 4,688 109,819 180,907 25,479 Share-based compensation expenses 5,048 2,479 2,118 298 13,044 9,435 1,329 Adjusted net income 40,481 54,395 35,389 4,986 122,863 190,342 26,808 Diluted net income per ADS 0.66 0.95 0.61 0.09 2.03 3.30 0.46 Impact of non-GAAP adjustments 0.09 0.04 0.04 0.00 0.24 0.18 0.03 Adjusted diluted net income per ADS 0.75 0.99 0.65 0.09 2.27 3.48 0.49 Weighted average number of ADSs – diluted 54,033,560 54,772,536 54,753,503 54,753,503 54,040,908 54,753,025 54,753,025 Weighted average number of ADSs – adjusted 54,033,560 54,772,536 54,753,503 54,753,503 54,040,908 54,753,025 54,753,025
2023
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