FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of April 2003
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Commission File Number: 333-100069
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NETEASE.COM, INC.
Suite 1901, Tower E3
The Towers, Oriental Plaza
Dong Cheng District
Beijing, People's Republic of China 100738
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
---------------- ---------------
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1):________________
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7):________________
Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
-------------- ------------
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b):
82- N.A.
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Page 1 of 9 Pages
The index of exhibits may be found at Page 2
NETEASE.COM, INC.
Form 6-K
TABLE OF CONTENTS
Page
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Signature Page 3
Press Release Regarding First Quarter Exhibit 99.1, Page 4
Results dated April 29, 2003
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NETEASE.COM, INC.
By: /s/ Ted Sun
-------------------------------------
Name: Mr. Ted Sun
Title: Chief Executive Officer and
Director
Date: April 29, 2003
3
Exhibit 99.1
Press Release
--------------------------------------------------------------------------------
Contact for Media and Investors:
Olive Wang
NetEase.com, Inc.
ir@corp.netease.com
(86) 10-8518-0163, ext. 8243
(86) 130-0192-3550
Jessica Barist Cohen
Ogilvy Public Relations Worldwide
jessica.cohen@ogilvy.com
(86) 21-6218-3009, ext. 238
NetEase.com Announces Strong First Quarter Results
Continued revenue growth of 23.2% over preceding quarter results in further
enhanced gross margins of 77.9%
Company achieves operating profit of RMB63.6 million (US$7.7 million) and net
profit of RMB68.9 million (US$8.3 million), or US$0.27 per American Depositary
Share (basic)
(Beijing - April 29, 2003) - NetEase.com, Inc. (Nasdaq: NTES), a leading
Internet technology provider in China, today announced financial results for its
first quarter ended March 31, 2003.
The Company reported total revenues of RMB117.9 million (US$14.2 million) for
the first quarter, a 23.2% increase over total revenues of RMB95.7 million
(US$11.6 million) for the preceding quarter ended December 31, 2002 and a 392.3%
increase over total revenues of RMB24.0 million (US$2.9 million) for the
corresponding period in 2002. The Company reported a net profit of RMB68.9
million (US$8.3 million), or US$0.27 and US$0.26 per basic and diluted American
Depositary Share respectively, compared to the previous quarter's net profit of
RMB43.1 million (US$5.2 million), or US$0.17 and US$0.16 per basic and diluted
American Depositary Share respectively. The same quarter in the previous year
had a net loss of RMB17.8 million (US$2.1 million).
Advertising revenues were RMB12.0 million (US$1.4 million) for the quarter ended
March 31, 2003, representing a 3.7% decrease over RMB12.5 million (US$1.5
million) for the preceding quarter but a 204.0% increase over RMB3.9 million
(US$0.5 million) for the corresponding period a year ago. Revenues from
e-commerce and other services for the quarter were RMB105.8 million (US$12.8
million), representing a 27.4% increase over the preceding quarter's RMB83.1
million (US$10.0 million) and a 429.7% increase over RMB20.0 million (US$2.4
million) for the
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corresponding period a year ago. The increase in revenues from e-commerce and
other services was primarily attributable to continued growing interest in
NetEase's proprietary online game, "Westward Journey Online Version 2.0," as
well as to steady growth in the Company's wireless short messaging services
(SMS) business.
The Company reported gross profit in the first quarter of RMB91.8 million
(US$11.1 million), increasing 31.9% over the previous quarter's RMB69.6 million
(US$8.4 million) and 1143.4% over RMB7.4 million (US$0.9 million) for the
corresponding period a year ago. Strong revenue growth also favorably impacted
gross margins, which increased from 72.7% in the preceding quarter to 77.9% in
the first quarter.
Total operating expenses were RMB28.3 million (US$3.4 million), a 7.8% decrease
from the previous quarter's RMB30.7 million (US$3.7 million) but a 7.0% increase
from the corresponding period a year ago of RMB26.4 million (US$3.2 million).
The Company reported an operating profit of RMB63.6 million (US$7.7 million) in
the first quarter, representing continued improvement over last quarter's
operating profit of RMB39.0 million (US$4.7 million) and the previous year's
first quarter's operating loss of RMB19.0 million (US$2.3 million).
Other income for the first quarter of 2003 of RMB5.5 million (US$0.7 million)
primarily represents the repayment of loans the Company made to four related
parties, the proceeds of which were used by those related parties to purchase
the Company's American Depositary Shares. The Company previously made full
provision for these loans in the Company's audited consolidated financial
statements for the year 2001, which impacted the Company's statement of
operations in that period.
As of March 31, 2003, the Company's total net cash balance was RMB639.3 million
(US$77.2 million), a 13.9% increase from the previous quarter's RMB561.3 million
(US$67.8 million). Operating cash flow was RMB81.4 million (US$ 9.8 million)
during the quarter.
Commenting on these first quarter results, Ted Sun, acting
Chief Executive Officer and Director of the Company said, "I am very pleased to
announce another strong quarter for NetEase, which we believe demonstrates the
continued success of our strategy of focusing on a diversified range of revenue
streams and innovative customer offerings. During the first quarter, our online
games business continued to exhibit good growth, due largely to the success of
our in-house-developed title, `Westward Journey Online Version 2.0.' We believe
that our proprietary online game development capabilities provide us with a
unique competitive advantage in this area and that this revenue segment will
continue to do well, especially as we improve our current games and develop new
ones for our customers.
Our wireless SMS business is also growing steadily. Taking advantage of the
fast-growing user rates for this service, we are continuously developing
additional applications for SMS, as well as for emerging telecommunication
technologies such as Multimedia Messaging Service (MMS), which leverage our
existing Internet and SMS products. We expect strong potential from this area
and we believe we are positioning ourselves well to capture future business
opportunities as the technology evolves.
5
Although advertising revenues, which are typically sluggish in the first quarter
of each year, had a less strong performance in comparison to last quarter, the
outlook for this segment is still positive and we will strive to achieve steady
growth going forward. We continue to see advertising as an important revenue
source and will continue to develop innovative marketing and promotion solutions
for our advertisers in order to leverage our advertising real estate."
Sun continued, "We remain dedicated to providing the highest quality service to
our consumers, as evidenced by the establishment of our 24 hour/7 day a week
customer service center during the quarter. This focus on service and customer
relations will continue in the future."
Denny Lee, NetEase's Chief Financial Officer added, "From a financial point of
view, this past quarter was a very healthy one for the Company, and revenue
growth favorably impacted our gross margins and operating margins. Looking
ahead, we will remain focused on controlling costs and maintaining sustainable,
long-term profitability."
Users of the NetEase Web sites continued to grow, with 114 million registered
accounts at the end of the first quarter, an increase of 19% over the 96 million
accounts at the end of the previous quarter and a 114% increase over the 53
million accounts at the same time a year ago.
Mr. Sun concluded, "Our goal is to build on the strength of this first quarter
to grow all business areas - Internet Portal, Wireless Value-added Services and
Online Games - while continuing to enhance value for shareholders."
NetEase will host a conference call to discuss first quarter earnings at 8:00pm
Eastern Time today (Beijing/Hong Kong time: April 29, 2003 at 8:00am). The
management team will discuss quarterly results and highlights, and answer
questions. The dial-in number for the call is 719-457-2727. A replay will be
available from 10:00pm Eastern time on April 28, 2003 until 10:00pm Eastern time
on May 5 2003, by dialing 719-457-0820 with access code 104390. Additionally, a
live and archived web cast of this call will be available on the NetEase
corporate web site at http://corp.netease.com.
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**Note: The conversion of Renminbi (RMB) into U.S. dollars in this release is
based on the exchange rate of US$1 = RMB8.2774. The percentages stated in this
press release are calculated based on RMB.**
About NetEase
NetEase.com, Inc. is a leading China-based Internet technology company that
pioneered the development of applications, services and other technologies for
the Internet in China. The NetEase Web sites, operated by a company affiliate,
organize and provide access to 18 content channels through distribution
arrangements with more than one hundred international and domestic content
providers. In addition, the NetEase Web sites offer a variety of products and
services, including Instant Messaging (Popo), Dating, Love, Alumni and Personal
Home Page. These products and services enable users to communicate about
interests and areas of expertise.
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At the end of March 2003, the number of registered users of the NetEase Web
sites reached 114 million. The average number of daily pageviews was over 370
million in March 2003.
NetEase also offers online multi-player games, short messaging and e-mail
services, as well as auction and online mall technology services that provide
opportunities for e-commerce and traditional businesses to establish an online
e-commerce presence on the NetEase Web sites.
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* * *
This press release 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. 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 impact of the outbreak
of severe acute respiratory syndrome, or SARS, in China; the risk that the
settlement of the class action litigation involving NetEase will not become
final for whatever reason, in which case NetEase may have to incur significant
additional expenses in defending against the litigation and possibly pay damages
in excess of the settlement amount; the risk that the online advertising market
in China will not continue to grow and will remain subject to intense
competition; the risk that NetEase will not be able to continue to successfully
monetize the user base of the NetEase Web sites and that its e-commerce and
other fee-based services revenues will not continue to grow; the risk that the
current popularity of SMS in China will not continue for whatever reason,
including SMS being superseded by other technologies for which NetEase is unable
to offer attractive products and services; the risk that NetEase may not be able
to continuously develop new and creative online services; the risk that the
online game market will not continue to grow or that NetEase will not be able to
maintain its leading position in that market; the risk that NetEase will not be
able to control its expenses in future periods; the risk that the trading price
of NetEase's American Depositary Shares may decrease for a variety of reasons,
some of which may be beyond the control of management; the possibility that
NetEase and its board of directors have not implemented effective or complete
steps to ensure that the circumstances which led to the restatement of NetEase's
financial statements for the year ended December 31, 2000 will not recur; the
risk that current or future appointees to management are not effective in their
respective positions; the difficulty in locating and recruiting suitable
candidates for middle and senior management positions; NetEase's ability to
develop and implement additional operational and financial systems to manage
NetEase's operations; competition in NetEase's existing and potential markets;
governmental uncertainties, general competition and price pressures in the
marketplace; uncertainty as to future profitability; the risk that security,
reliability and confidentiality concerns may impede broad use of the Internet
and e-commerce and other services; and other risks outlined in NetEase's filings
with the Securities and Exchange Commission, including its registration
statement on Form F-1, as amended. NetEase does not undertake any obligation to
update this forward-looking information, except as required under applicable
law.
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NETEASE.COM, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
December 31, March 31, March 31,
2002 2003 2003
---------------- ------------- -------------
RMB RMB USD (Note 1)
Assets
Current assets:
Cash 560,069,711 638,087,620 77,087,929
Restricted cash 1,208,305 1,212,761 146,515
Prepayments and other current assets 6,110,689 9,381,194 1,133,350
Due from related parties, net 22,448,509 14,289,740 1,726,356
------------ ------------ -------------
Total current assets 589,837,214 662,971,315 80,094,150
Non-current rental deposit 1,065,912 1,107,201 133,762
Property, equipment and software, net 26,379,182 27,063,932 3,269,617
Deferred tax assets 2,395,888 5,500,000 664,460
------------ ------------ -------------
Total assets 619,678,196 696,642,448 84,161,989
============ ============ =============
Liabilities & Shareholders' Equity
Current liabilities:
Accounts payable 3,814,614 3,814,600 460,845
Salary and welfare payable 16,023,380 14,968,043 1,808,302
Taxes payable 8,252,950 13,345,476 1,612,279
Deferred revenue 165,115 8,250 997
Accrued liabilities 10,398,385 12,741,118 1,539,266
------------ ------------ -------------
Total current liabilities 38,654,444 44,877,487 5,421,689
------------ ------------ -------------
Shareholders' equity:
Ordinary shares, US$0.0001 par value:
1,000,000,000,000 shares
authorized, 3,100,162,537 shares
issued and outstanding as of
December 31, 2002, and
3,117,037,889 shares issued and
outstanding as of March 31, 2003 2,566,543 2,580,108 311,705
Additional paid-in capital 1,049,651,354 1,051,231,308 127,000,182
Less: Subscriptions receivable (33,113,848) (33,113,848) (4,000,513)
Deferred compensation (474,739) (224,479) (27,120)
Translation adjustments 228,910 210,839 25,472
Accumulated deficit (437,834,468) (368,918,967) (44,569,426)
------------ ------------ -------------
Total shareholders' equity 581,023,752 651,764,961 78,740,300
------------ ------------ -------------
Total liabilities and shareholders' 619,678,196 696,642,448 84,161,989
============ ============ =============
Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is
based on the noon buying rate of USD1.00=RMB8.2774 on March 31, 2003 in The City
of New York for cable transfers of Renminbi as certified for customs purposes by
the Federal Reserve Bank of New York.
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NETEASE.COM, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended
------------------------------------------------------------
March 31, December 31, March 31, March 31,
2002 2002 2003 2003
------------------------------------------------------------
RMB RMB RMB USD (Note 1)
Revenues:
Advertising services 3,946,530 12,454,490 11,997,296 1,449,404
E-commerce and other
services 19,968,083 83,052,025 105,775,901 12,778,880
Software licensing and
related integration
projects 39,385 226,348 156,865 18,951
------------------------------------------------------------
Total revenues 23,953,998 95,732,863 117,930,062 14,247,235
Sales and value-added taxes (1,197,700) (4,809,943) (5,896,988) (712,420)
------------------------------------------------------------
Net revenues 22,756,298 90,922,920 112,033,074 13,534,815
------------------------------------------------------------
Cost of revenues:
Advertising, e-commerce
and other services (14,894,747) (20,826,355) (20,216,951) (2,442,428)
Share compensation cost (477,032) (477,029) - -
------------------------------------------------------------
Total cost of revenues (15,371,779) (21,303,384) (20,216,951) (2,442,428)
------------------------------------------------------------
Gross profit 7,384,519 69,619,536 91,816,123 11,092,387
------------------------------------------------------------
Operating expenses:
Selling, general and
administrative
expenses (22,202,753) (26,717,117) (23,844,491) (2,880,674)
Research and development
expenses (3,565,372) (3,643,946) (4,159,767) (502,545)
Share compensation cost (645,657) (296,612) (250,260) (30,234)
------------------------------------------------------------
Total operating expenses (26,413,782) (30,657,675) (28,254,518) (3,413,453)
------------------------------------------------------------
Operating profit (loss) (19,029,263) 38,961,861 63,561,605 7,678,934
Other income (expenses):
Interest income 1,949,086 1,611,700 1,738,018 209,971
Interest expense (996,735) - - -
Other, net 283,199 111,430 5,518,548 666,701
------------------------------------------------------------
Profit (loss) before tax (17,793,713) 40,684,991 70,818,171 8,555,606
Income tax (charge) credit - 2,395,888 (1,902,670) (229,863)
------------------------------------------------------------
Net profit (loss) (17,793,713) 43,080,879 68,915,501 8,325,743
============================================================
Earnings (Net loss) per
share, basic (0.01) 0.01 0.02 0.01
============================================================
Earnings (Net loss) per ADS,
basic (0.59) 1.39 2.22 0.27
============================================================
Earnings (Net loss) per
share, diluted (0.01) 0.01 0.02 0.01
============================================================
Earnings (Net loss) per ADS,
diluted (0.59) 1.35 2.15 0.26
============================================================
Weighted average number of
ordinary shares
outstanding, basic 3,024,318,700 3,091,650,900 3,102,842,755 3,102,842,755
============================================================
Weighted average number of
ADS outstanding, basic 30,243,187 30,916,509 31,028,428 31,028,428
============================================================
Weighted average number of
ordinary shares
outstanding, diluted 3,024,318,700 3,185,313,400 3,207,939,611 3,207,939,611
============================================================
Weighted average number of
ADS outstanding,
diluted 30,243,187 31,853,134 32,079,396 32,079,396
============================================================
Note 1: The conversion of Renminbi (RMB) into United States dollars (USD) is
based on the noon buying rate of USD1.00=RMB8.2774 on March 31, 2003 in The City
of New York for cable transfers of Renminbi as certified for customs purposes by
the Federal Reserve Bank of New York.
9