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Netease.com Q3 Results Show Profit Increase

Netease.com (NTES) has announced its financial results for the third quarter ended September 30, 2005.

Netease reported total revenues of CNY462.6 million for the third quarter, representing an 11.0% increase over CNY416.9 million for the preceding quarter, and an 82.6% increase over CNY253.4 million for the corresponding period a year ago.

Revenues from online game services for the quarter increased 8.4% quarter- over-quarter and 119.4% year-over-year to CNY372.7 million, which was driven by the continued increase in popularity in the company's games, Fantasy Westward Journey and Westward Journey Online II.

Netease says Fantasy Westward Journey continued to be the most popular game in China in terms of user numbers and its peak and average concurrent user numbers reached approximately 827,000 and 345,000, respectively, for the third quarter of 2005. In addition, Westward Journey Online II reported peak and average concurrent users of approximately 515,000 and 198,000, respectively, for the third quarter of 2005.

Revenues from advertising services increased by 37.3% to CNY73.4 million over the preceding quarter's CNY53.4 million and 43.8% over CNY51.0 million for the corresponding period a year ago. The increase was mainly due to increased spending from our existing advertisers as they increased their marketing activities during the summer and new advertisers gained in the quarter.

Revenues from wireless value-added services and others decreased from CNY19.7 million for the preceding quarter to CNY16.5 million for the third quarter. Revenues from wireless value-added services and others in the third quarter of 2004 were CNY32.5 million.

Netease reported gross profit in the third quarter of CNY370.9 million, representing a 13.5% increase over the previous quarter's CNY326.8 million and a 95.4% increase over CNY189.8 million for the corresponding period a year ago.

Total operating expenses for the quarter were CNY94.7 million, representing an 18.3% increase from the previous quarter's CNY80.1million and a 17.0% increase from CNY81.0 million in the corresponding period a year ago.

Netease reported net profit for the third quarter of CNY258.6 million. This represents a 6.5% increase over net profit of CNY242.8 million for the preceding quarter and a 137.2% increase over net profit of CNY109.1 million for the corresponding period in 2004.

As of September 30, 2005, the company's total cash, time deposits and held-to-maturity investments balance was CNY3.2 billion, a 16.5% increase from the previous quarter's CNY2.7 billion.

The company generated an operating cash flow of CNY424.9 million for the quarter, a 66.4% increase from the previous quarter's CNY255.3 million.

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