网易-S(09999) - 2023 - 年度财报

Financial Performance - Net revenue increased to RMB 103,468,159 thousand in 2023 from RMB 96,495,809 thousand in 2022, representing a growth of 7.2%[5] - Gross profit rose to RMB 63,063,394 thousand in 2023 from RMB 52,766,126 thousand in 2022, marking a 19.5% increase[5] - Net profit attributable to the company's shareholders grew to RMB 29,416,552 thousand in 2023 from RMB 20,337,600 thousand in 2022, a 44.6% increase[5] - Net revenue for 2023 reached RMB 103,468,159 thousand (USD 14,573,185 thousand), a 7.2% increase from 2022[22] - Gross profit for 2023 was RMB 63,063,394 thousand (USD 8,882,293 thousand), up 19.5% from 2022[22] - Operating profit for 2023 increased to RMB 27,709,144 thousand (USD 3,902,751 thousand), a 41.2% rise from 2022[22] - Net profit attributable to the company's shareholders for 2023 was RMB 29,416,552 thousand (USD 4,143,234 thousand), a 44.7% increase from 2022[22] - Net profit increased to RMB 29,357,223 thousand in 2023, up from RMB 19,843,290 thousand in 2022, representing a growth of 47.96%[23] - Total comprehensive income reached RMB 29,579,095 thousand in 2023, compared to RMB 21,284,704 thousand in 2022, a 38.97% increase[23] - Net profit increased from RMB 16,976,190 thousand in 2021 to RMB 29,357,223 thousand in 2023, representing a growth of 72.9%[25] - NetEase's total net revenue for 2023 reached RMB 90.789 billion, up from RMB 83.367 billion in 2022[33] - NetEase's net profit for 2023 was RMB 328.357 million, a significant improvement from a net loss of RMB 81.329 million in 2022[33] - Net profit attributable to the company's shareholders increased to RMB 29,077,216 in 2023, up from RMB 20,724,629 in 2022[172] Assets and Liabilities - Total assets increased to RMB 185,924,978 thousand in 2023 from RMB 172,760,985 thousand in 2022, a 7.6% rise[5] - Total liabilities decreased to RMB 57,840,897 thousand in 2023 from RMB 63,887,505 thousand in 2022, a 9.5% reduction[5] - Shareholders' equity increased to RMB 127,968,322 thousand in 2023 from RMB 108,737,040 thousand in 2022, a 17.7% growth[5] - Total assets as of December 31, 2023, were RMB 185,924,978 thousand (USD 26,186,985 thousand), up 7.6% from 2022[19] - Total liabilities as of December 31, 2023, were RMB 57,840,897 thousand (USD 8,146,720 thousand), a 9.5% decrease from 2022[20] - Total equity attributable to the company's shareholders as of December 31, 2023, was RMB 124,285,776 thousand (USD 17,505,285 thousand), up 18.7% from 2022[21] - Total assets grew to RMB 188,620,527 in 2023, compared to RMB 175,901,186 in 2022[173] - Total liabilities rose to RMB 57,908,744 in 2023, up from RMB 64,083,689 in 2022[173] - Total equity attributable to shareholders reached RMB 130,711,783 in 2023, up from RMB 111,817,497 in 2022[173] Investments - Equity method investments totaled RMB 6,109.2 million as of December 31, 2023[12] - Long-term equity investments without readily determinable fair values amounted to RMB 12,021.5 million as of December 31, 2023[12] - Management conducts regular impairment tests on equity method investments and long-term equity investments[12] - The company evaluates the fair value of long-term equity investments qualitatively to identify potential impairment indicators[12] - Long-term investments increased from RMB 18,544,358 thousand in 2022 to RMB 21,783,187 thousand in 2023, with significant growth in equity method investments and investments with readily determinable fair values[107] - Equity method investments generated profits of RMB 473.9 million in 2023, down from RMB 1.3 billion in 2022 and RMB 1.6 billion in 2021[108] - Investments with readily determinable fair values recorded a fair value gain of RMB 535.3 million in 2023, compared to a loss of RMB 3.4 billion in 2022 and a gain of RMB 91.1 million in 2021[109] - Impairment losses on investments without readily determinable fair values increased to RMB 274.2 million in 2023, up from RMB 85.2 million in 2022 and RMB 19.2 million in 2021[110] Revenue Streams - The company recognized RMB 81.6 billion in game and related value-added service revenue for the year ended December 31, 2023[11] - The company generates revenue through online gaming, tutoring services, smart hardware sales, online music, live streaming, advertising, e-commerce, and other paid value-added services[36] - The company's revenue is primarily derived from online game services, tutoring services, smart hardware sales, online music services, live streaming services, advertising services, e-commerce, and other paid value-added services[44] - Net revenue for games and related value-added services increased from RMB 67.8 billion in 2021 to RMB 81.6 billion in 2023, representing a growth of 20.3%[158] - Net revenue for Youdao decreased from RMB 5.4 billion in 2021 to RMB 5.0 billion in 2022 but rebounded to RMB 5.4 billion in 2023[158] - Net revenue for Cloud Music peaked at RMB 8.99 billion in 2022 but declined to RMB 7.87 billion in 2023[158] - Total net revenue grew from RMB 87.6 billion in 2021 to RMB 103.5 billion in 2023, an increase of 18.1%[158] - Gross profit for games and related value-added services rose from RMB 41.8 billion in 2021 to RMB 55.6 billion in 2023, a 33.1% increase[158] - Total gross profit increased from RMB 47.0 billion in 2021 to RMB 63.1 billion in 2023, up 34.3%[158] Audit and Financial Reporting - The company's financial statements were prepared in accordance with U.S. GAAP and were audited by PricewaterhouseCoopers[7] - The company’s directors are responsible for preparing the consolidated financial statements in accordance with US GAAP[15] - The audit committee oversees the company’s financial reporting process[15] - The auditor’s responsibility is to obtain reasonable assurance that the consolidated financial statements are free from material misstatement[16] - The auditor evaluated the appropriateness of the accounting policies and the reasonableness of the accounting estimates made by the directors[17] - The audit partner for the independent auditor’s report is Tang Haobang[18] - The audit identified no material misstatements in the other information provided by the company[14] - The company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses[43] - The company's revenue recognition involves judgments on the estimated lifespan of virtual items purchased by game players, unredeemed game points, and sales returns[44] VIE Structure and Risks - The company has contractual arrangements with VIE entities for additional financial support or guarantees if needed[35] - The company believes that its contractual arrangements with VIE entities comply with Chinese law and are legally enforceable, but uncertainties in the Chinese legal system may limit its ability to enforce these arrangements[40] - The company consolidates VIE entities if it has the power to significantly influence their activities and the obligation or right to bear or obtain significant losses or benefits from them[42] - The company faces risks related to VIE entity arrangements, including potential government actions that could revoke business licenses, restrict operations, or require restructuring[41] - The company's VIE entity arrangements include irrevocable voting rights and exclusive purchase options, which are critical to its financial performance and cash flows[39] - The company acknowledges that changes in Chinese laws or regulations could lead to significant disruptions in its business operations and financial reporting[40] - The company's management considers the likelihood of losses related to its VIE entity arrangements to be minimal[39] - The company's VIE entity arrangements are designed to ensure control over economic activities and benefits, but legal uncertainties could impact their enforceability[40] - VIE entities accounted for 85.9%, 86.4%, and 87.7% of the company's total net revenue in 2021, 2022, and 2023 respectively[188] - VIE entities' total assets (excluding receivables from other NetEase Group companies) represented 7.1% of the company's consolidated total assets as of December 31, 2022 and 2023[188] - The company's operations are primarily conducted through subsidiaries in mainland China and contractual arrangements with VIE entities[188] - The company's structure poses unique risks to investors due to its Cayman Islands holding company status and VIE arrangements[183] - VIE structure contracts may not be as effective as direct ownership and could incur significant costs to enforce[189] - Uncertainty exists regarding the interpretation and application of current and future Chinese laws, regulations, and rules related to VIE structures[189] - If VIE entities or nominal shareholders fail to fulfill obligations, the company's ability to enforce contracts and consolidate financials may be limited[189] - The Foreign Investment Law in China does not explicitly list contractual arrangements as a form of foreign investment, creating potential future risks[190] - A significant portion of the company's revenue is generated by VIE entities, which hold necessary licenses for operations in China[190] - Chinese government actions could impact the enforceability of VIE contracts, potentially affecting financial performance[190] - The Chinese government has significant power to influence the company's operations, foreign investment, and ability to list on U.S. exchanges[191] - Recent regulatory actions by the Chinese government, including those related to overseas securities issuance, could adversely affect the company[191] - The company faces risks related to antitrust investigations, cybersecurity, and data privacy compliance in China[191] Cash Flow and Financing - Operating cash flow rose from RMB 24,926,727 thousand in 2021 to RMB 35,331,275 thousand in 2023, an increase of 41.7%[25] - Investment cash outflow increased from RMB 7,078,294 thousand in 2021 to RMB 17,043,431 thousand in 2023, a significant rise of 140.8%[26] - Financing cash outflow grew from RMB 12,585,569 thousand in 2021 to RMB 21,467,054 thousand in 2023, up by 70.6%[26] - Cash and cash equivalents decreased by RMB 3,381,667 thousand in 2023, compared to an increase of RMB 10,212,210 thousand in 2022[27] - Net cash inflow from third-party transactions increased from RMB 61,272,031 in 2021 to RMB 72,325,460 in 2023[34] - Net cash outflow from technology consulting and services with group companies rose from RMB 59,439,552 in 2021 to RMB 73,298,667 in 2023[34] - Net cash outflow from investment activities increased from RMB 39,430 in 2021 to RMB 82,645 in 2023[34] - Net cash outflow from financing activities decreased from RMB 1,301,096 in 2021 to RMB 37,166 in 2023[34] - The company canceled a $500 million unsecured syndicated loan facility in early 2024[132] - The company declared cash dividends of RMB 6.3 billion and RMB 11.7 billion ($1.7 billion) for the fiscal years 2022 and 2023, respectively[153] - The company completed a $3 billion share repurchase plan, repurchasing approximately 33.6 million ADS by January 9, 2023[154] - A new share repurchase plan of up to$5 billion was approved, with 7.2 million ADS repurchased for approximately $644.1 million by December 31, 2023[154] - The company repurchased approximately 2.7 million ADS of Youdao for about$22.0 million under a separate repurchase plan by December 31, 2023[154] Taxation - Hong Kong subsidiaries are subject to a profits tax rate of 16.5%, with a reduced rate of 8.25% for the first HKD 2 million of profits starting from the 2021 tax year[114] - The company's subsidiaries, including Bo Guan and NetEase Hangzhou, qualified as high-tech enterprises and enjoyed a preferential tax rate of 15% for 2021, 2022, and 2023[115] - The total impact of corporate income tax exemptions and rate reductions was RMB 3,228,359 thousand in 2023, up from RMB 2,631,764 thousand in 2022 and RMB 2,238,907 thousand in 2021[117] - The company's actual effective tax rate decreased to 13.8% in 2023, down from 20.7% in 2022 and 19.6% in 2021, primarily due to the impact of lower tax rates for high-tech enterprises[120] - The company's deferred tax assets related to net operating tax losses amounted to RMB 3,424,344 thousand as of December 31, 2023, down from RMB 3,781,233 thousand in 2022[123] - The company's deferred tax liabilities for withholding tax increased to RMB 2,165,573 thousand in 2023, up from RMB 1,947,190 thousand in 2022[123] - The company's total income tax expense was RMB 4,699,704 thousand in 2023, down from RMB 5,031,838 thousand in 2022 and RMB 4,128,269 thousand in 2021[118] - The company's payable corporate income tax decreased to RMB 1,790,393 thousand in 2023, down from RMB 2,116,014 thousand in 2022[128] - The company's deferred tax asset impairment provision decreased to RMB 3,718,678 thousand in 2023, down from RMB 3,971,516 thousand in 2022[125] - The company's withholding tax liabilities were RMB 1.5 billion in 2023, down from RMB 2.1 billion in 2022 and RMB 1.1 billion in 2021[126] Operational Risks - The company faces risks related to the development and popularity of new online games and the enhancement of existing ones[195] - Risks associated with the Chinese government implementing more restrictions on online gaming[196] - Risks related to the internationalization of the company's online gaming operations[196] - Risks concerning the maintenance of existing game copyrights or intellectual property[196] - Risks related to the company's overall operational expansion and internationalization[197] - Risk of delisting from NASDAQ if PCAOB fails to inspect the company's independent registered public accounting firm for two consecutive years under the Holding Foreign Companies Accountable Act[200] - Risk of volatility in the trading price of the company's American Depositary Shares (ADS) and shares[200] - Risk associated with different listing rules and regulations applicable to the company[200] - Risk related to the voting, inspection, and other rights of ADS holders[200]