1Q 2020 INVESTOR PRESENTATION - NETEASE, INC.
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1Q 2020
Investor Presentation
1
SAFE HARBOR STATEMENT
This presentation contains statements of a forward-looking nature. These statements are made under the "safe harbor"
provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements
by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar
statements. These forward-looking statements are based on the current assumptions, expectations and projections of the
Company's management about future events. Although the assumptions, expectations and projections reflected in these
forward-looking statements represent management's best judgment at the time of this presentation, the Company can
give no assurance that they will prove to be correct. Numerous factors, including those related to market conditions and
those detailed from time-to-time in the Company’s filings with the Securities Exchange Commission, may cause results of
the Company to differ materially from those anticipated in these forward-looking statements. Many of the factors that
will determine the Company’s future results are beyond the ability of the Company to control or predict. These forward-
looking statements are subject to risks and uncertainties and, therefore, actual results may differ materially. The Company
cautions you not to place undue reliance on these forward-looking statements. The Company undertakes no obligation
to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a
result of new information, future events or otherwise. All references to "Company" and "NetEase" as used throughout this
presentation refer to NetEase, Inc. and its subsidiaries.
2
COMPANY OVERVIEW
Founded in 1997 and listed on NASDAQ since 2000, NetEase, Inc. (NASDAQ: NTES) is a leading
China-based internet technology company that develops and operates some of China's most
popular online PC and mobile games, and offers other innovative services, including online
education, music streaming and its private label e-commerce platform.
Our online education business Youdao has been listed on NYSE since October 2019 (NYSE: DAO).
As of March 31, 2020, NetEase had around 21,000 employees, with offices globally.
3
MARKET SNAPSHOT
In USD
$51.1 131
$3.88
billion million
Market Cap ADS Outstanding, Basic net income per
(05/19/20) diluted ADS (GAAP) (1Q20)
(1Q20)
$2.4 $501 $11.2
billion million billion
Net Revenue Net income attributable to Cash, time deposits
(1Q20) the Company's shareholders and short-term investment
(GAAP) (1Q20) (03/31/20)
FX: 1 USD=7.0808 RMB
4
BUSINESS SEGMENTS
Online Games Online Education
• Leading developer and operator of self-developed PC • A leading intelligent learning service operated by Youdao,
and mobile games for internet users in China and our majority-controlled subsidiary dedicated to
internationally; developing and using technologies to provide learning
content, applications and solutions to users of all ages.
• Operator of licensed games from Blizzard
Entertainment, Mojang AB (a Microsoft subsidiary)
and other leading game developers internationally.
Online Music E-commerce and Others
• Leading interactive music streaming service • Leading service provider of private label e-commerce
providers in China with more than 800 million users; through Yanxuan, a platform offers access to a
comprehensive selection of affordable and high-quality
• One of China’s most active music platforms in products in China;
terms of user retention rate, user time spent on
the platform and the level of user-generated • Others include one of the largest providers of free e-
content. mail services in China, one of the most popular internet
media service providers in China, as well as our CC live-
streaming platform.
5
ONLINE GAMES
Online Games Net Revenue and Gross Margin
RMB million Gros s Margin Mobile Game Net Revenue PC Game Net Revenue
65.1%
64.3% 64.1%
63.7% 63.8%
62.8% 63.1% 63.1%
62.1%
13,518
11,850 11,535 11,604
11,433
11,020
10,348
10,061
8,761
70%
72% 72% 71% 70%
Mobile Games as a 75% 70%
68%
Percentage of 72%
Online Games Net
Revenue
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 6
ONLINE GAMES - PC GAMES
Flagship Self-Developed PC titles Flagship Licensed PC titles
7
ONLINE GAMES - MOBILE GAMES
• Over 100 mobile games offered in China
Self-Developed Mobile Games
Licensed Mobile Games From Overseas Developers
8
ONLINE GAMES - MOBILE GAMES
Launching Mobile Games in Overseas Markets
Overseas games revenue accounts for approximately 10% of total online games revenue in the first quarter.
• Extended international recognition for games in Japan with notable increases in active user numbers for games such
as Knives Out and Identity V
• Knives Out and Identity V remained at the forefront of Japan’s top grossing games chart
• Began operating Invincible in Japan ourselves at the end of 2019, and saw a steady increase in Invincible’ s revenue
in the first quarter
9
ONLINE EDUCATION
Youdao Net Revenue and Gross Margin
RMB million Gross Margin Net Revenue
43.5%
36.3%
29.7% 32.9% 29.8%
28.0% 25.8%
23.3% 23.4%
541
410
346
323
230 226
193
174
134
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 10ONLINE EDUCATION
Youdao Premium Courses
Dual-teacher Live Streaming Class & Interactive Learning Experience Empowered by AI
STEAM China University MOOC
Learning NetEase Cloud Classroom
Gamified Learning Certificates & Career Advancement
Youdao Youdao
Fun Reading Maths
Youdao Youdao Manual Youdao
U-Dictionary
Dictionary Translation Translation Cloudnote
Serving Diversified Demands Across All Age Groups
Age of Students
0 6 15 18 22
Pre-School K-12 Adult
• Youdao is a leading intelligent learning company in China with over 100 million average total MAUs
• Gross billings generated by online courses increased 287% year-over-year in the first quarter
11INNOVATIVE BUSINESSES AND OTHERS
Innovative Businesses and Others
Net Revenue and Gross Margin
RMB million Gros s Margin Net Revenue NetEase
NetEase Yanxuan
20.6% Cloud Music
15.8%
5.7%
3,721
3,003 NetEase E-mail NetEase Media
2,346
NetEase CC
1Q19 4Q19 1Q20
12INNOVATIVE BUSINESSES AND OTHERS
NetEase Cloud Music NetEase Yanxuan
• Launched in April 2013, NetEase Cloud Music is • Our innovative private label e-commerce business,
one of the largest online music streaming targeting middle-class consumers in China with a
platforms in China with more than 800 million strong emphasis on quality of life
users
• Upgrade our membership systems to include more
• China's most active music platform, with more benefits, and new memberships rose by 138% year-
than 160,000 independent artists over-year owing to innovative marketing
approaches
• Continues to ramp up the monetization efforts,
Cloud Music reached record high membership • Continue to maintain our inventory at a healthy
revenue and subscriber rates in the first quarter level, as we continuously optimize the procurement
of 2020 and reduce obsolete inventory
13INNOVATIVE BUSINESSES AND OTHERS
Internet Media
• www.163.com is one of China’s most visited internet portals, with
strong user diversity, reach and stickiness
• Mobile News App is one of the most popular news apps in China
Live Streaming
• CC live streaming platform offers various live streaming content
with a primary focus on games
E-mail Services
• China's leading e-mail service provider since 1997
• Around 620 million annual active users as of March 31, 2020
14FINANCIAL HIGHLIGHTS
Net Revenue Net Income attributable to shareholders
RMB billion (Continuing) (GAAP)
RMB billion 17.1
3.6
3.1
15.7 2.7
14.4
1Q19 4Q19 1Q20 1Q19 4Q19 1Q20
RMB billion Operating Cash Flow Value Returned to Shareholders
US$ 2019FY 1Q19 2Q19 3Q19 4Q19 1Q20
6.5 Dividend per
$10.34 $0.69 $1.04 $7.59 $1.02 $1.16
5.5 ADS
Dividend paid $62 m $89 m $129 m
3.4 (during the period)
$1,270 m $990 m $131 m
Share Buyback
(during the period) $0.2 m $0 $0 $0.2m $0 $341.9m
1Q19 4Q19 1Q20
15BALANCE SHEET SUMMARY
16INCOME STATEMENT SUMMARY
17CONTACT US
Margaret Shi Brandi Piacente
NetEase, Inc. The Piacente Group, Inc.
E-mail: ir@service.netease.com E-mail: netease@thepiacentegroup.com
Tel: (+86) 571-8985-3378 Tel: (+1) 212-481-2050
18THANK YOU
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