NetEase, Inc. (NASDAQ:NTES) Q2 2016 Earnings Conference Call - Final Transcript

Aug 18, 2016 • 10:00 am ET

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NetEase, Inc. (NASDAQ:NTES) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good day and welcome to the NetEase's Second Quarter 2016 Earnings Conference Call. Today's conference is being recorded. And at this time, I would like to turn the conference over to Brandi Piacente. Please go ahead, ma'am.

Executive
Brandi Piacente

Good day everyone and thank you operator. Please note that the discussion today will contain forward-looking statements relating to future performance of the Company and are intended to qualify for the Safe Harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the Company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion.

A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the Company with the Securities and Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligation to update this forward-looking information except as required by law.

During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the second quarter 2016 financial results news release issued earlier today.

As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com.

I will now turn the call over to Mr. Onward Choi, Acting Chief Financial Officer, who will read the prepared remarks on behalf of Mr. William Ding, Chief Executive Officer of NetEase.

Executive
Onward Choi

Thank you, Brandi. Before I begin, please note that, for the purposes of these discussions, all percentages are based on renminbi.

Our outstanding second quarter results reflect our leadership in China's dynamic online games industry where we continue to introduce premium game content, innovative technology and effective marketing strategies. Each of our business segments delivered a strong financial performance and is positioned to sustain success in the second half of the year. Our total second quarter net revenues grew 96% compared with the second quarter of 2015.

Online game services revenue increased 76% year over year, highlighted by the strength of legacy IP titles and new mobile games. We grew advertising services revenue by 24.2%, driven by our proven ability to provide a more effective return on advertisers' budgets. Our e-mail, e-commerce and others business is leveraging new opportunities to accelerate growth and increase the revenue by 310.6% year over year.

As we have noted previously, the dominant trend in our business and for the entire online game industry is the popularity and demand for mobile games. We are very well positioned to exploit this trend with a mobile game portfolio that now includes more than 100 titles. We are very pleased with the market's response to our new and classic mobile