Netease saw healthy gains across its business in the second quarter of 2020, with total net revenues of RMB 18.2 billion (US$2.62 billion), up 25.9% year-over-year, driven by strong performances from its online game services and NetEase Cloud Music.
Netease launched new titles in Q2 including EVE Echoes, Fantasy Westward Journey H5, King of Hunters, PES Club Manager and MARVEL Duel.
It introduced PC game Justice’s two-year anniversary expansion pack in June, propelling high popularity and driving increased new and returning players and reinforced international games presence with strong performances from Knives Out and Life-After in Japan.
It continued popularity of Blizzard Entertainment’s World of Warcraft® in China, achieving a record number of peak concurrent users in the first half of this year.
Netease advanced near-term titles for release including Onmyoji: Yokai Koya, as well as other upcoming titles in the pipeline such as: The Lord of the Rings: Rise to War, Harry Potter: Magic Awakened, For All Time, Revelation mobile game, Ghost World Chronicle, Nightmare Breaker, Infinite Lagrange, Diablo® Immortal™ and Pokémon Quest.
It grew Youdao’s intelligent learning business steadily with net revenues from learning services and products reaching RMB520.1 million (US$73.6 million), up 190.0% year-over-year, and continued positive net operating cash flow of RMB93.0 million (US$13.2 million).
Netease maintained strong momentum for NetEase Cloud Music, with robust growth in net revenues from both membership and live streaming, and secured a multi-year licensing agreement with Universal Music Group recently.
It has completed listing on the main board of The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) in June 2020.
Netease Financial Results
Net revenues were RMB18.2 billion (US$2.6 billion) in Q2 2020, an increase of 25.9% compared with the second quarter of 2019.
- Online game services net revenues were RMB13.8 billion (US$2.0 billion), an increase of 20.9% compared with the second quarter of 2019.
- Youdao net revenues were RMB623.3 million (US$88.2 million), an increase of 93.1% compared with the second quarter of 2019.
- Innovative businesses and others net revenues were RMB3.7 billion (US$528.4 million), an increase of 38.7% compared with the second quarter of 2019.
The quarter-over-quarter increase in innovative businesses and others gross profit was primarily due to the improvement in gross profit from advertising services, Yanxuan (private label e-commerce platform) and NetEase Cloud Music.
Gross profit was RMB9.8 billion (US$1.4 billion), an increase of 26.6% compared with the second quarter of 2019. The gross profit margin for online game services for the second quarter of 2020 was 63.8%, compared to 64.1% and 63.1% for the preceding quarter and the second quarter of 2019, respectively.
Total operating expenses were RMB5.6 billion (US$795.8 million), an increase of 40.1% compared with the second quarter of 2019. Net income from continuing operations attributable to the Netease’s shareholders was RMB4.5 billion (US$642.3 million).
Non-GAAP net income from continuing operations attributable to the its shareholders was RMB5.2 billion (US$739.7 million).
Basic net income from continuing operations was US$4.95 per ADS (US$0.20 per share). Non-GAAP basic net income from continuing operations was US$5.70 per ADS (US$0.23 per share).
The board of directors has approved a dividend of US$1.485 per ADS (US$0.0594 per share) for the second quarter of 2020, comparing with US$1.16 per ADS in Q1 2020.