Tencent Holdings Limited

Good day and good evening. Thank you for standing by. Welcome to Tencent Holdings Limited 2023 first quarter results announcement webinar. I'm Wendy Huang from Tencent IR team. At this time, all participants are in a listen-only mode. After the management's presentation, there will be a question and answer session. For participants who dial in by phone, if you wish to ask a question, please press five on your telephone to raise your hand. If you are accessing from the Tencent meeting or VOOC meeting application, please click the raise hand button at the bottom left. And please be advised that today's webinar is being recorded. Before we start our presentation, we would like to remind you that it includes forward-looking statements, which are underlined by a number of risks and uncertainties and may not be realized in the future for various reasons. Information about general market conditions is coming from a variety of sources outside of Tencent. This presentation also contains some un-audited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, measures of the group's financial performance propelled in accordance with IFRS. For a detailed discussion of risk factors in non-IFRS measures, please refer to our disclosure documents on the IR section of our website. Now let me introduce the management team on the floor tonight. Our chairman and CEO, Pony Ma, will kick off with a short overview. President Martin Lau and Chief Strategy Officer James Mitchell will provide a business review. Chief Financial Officer John Lau will conclude with financial discussion before we open the floor for questions. Now I will pass it to Pony.

Thank you, Wendy. Good evening. Thank you for joining us. During the first quarter, we resumed a double-digit revenue growth rate as our payment volumes benefited from and facilitated domestic consumption recovery. Our games revenue improved, and our advertising revenue sustained rapid growth. Our non-IFIS net profit increased at a fast pace, reflecting a positive revenue mix shift, operational efficiency, and an easy base period. We are investing in our AI capabilities and cloud infrastructure to embrace the opportunities brought by foundation models and expect AI to be a growth multiplier that enabled us to better serve our users, customers, and society at large. Now let me go through the headline financial numbers for the quarter. Total revenue was 150 billion RMB up 11% year-on-year and 3% quarter-on-quarter. Gross profit was 68 billion RMB up 19% year-on-year and 10% quarter-on-quarter. Non-IFRS operating profit was 48 billion RMB up 32% year-on-year and 23% quarter-on-quarter. Non IFRS net profit attributable to equity holders was 33 billion RMB up 27% year-on-year and 10% quarter-on-quarter. With our key services, we focused on upgrading our technologies and product innovations. Our franchise in communications and social networks remains strong. combined the MAU of WeChat and WeChat grew 2% year-on-year to 1.3 billion, while QQ mobile devices MAU grew 6% year-on-year to 597 million. For games, we expand our leadership via extending popularity of established franchise and success of newly released in China and international market. For digital content, we became our first place position by subscription account with high quality content across video, music, and literature. In FinTech services, commercial payment volume rebound sharply as consumption activities recovered in China. For cloud, we operate one of China's largest infrastructure as a service platforms and announced our high performance computing cluster in April, which will significantly enhance the efficiency of our foundation model chain. We are the second biggest provider of PaaS in China by revenue, and we operate leading SaaS tools such as Tencent Meeting, the most widely used video conferencing app. I will now hand over to Marty and James for business reviews.

Thank you, Pony. Good evening and good morning to everybody. For the first quarter of 2023, our total revenue was up 11% year-on-year. VAS represented 53% of our total revenue, within which social networks subsegment was 21%, domestic games subsegment was 23%, and international games was 9%. Online advertising was 14% of total revenue and FinTech and business services was 32% of total revenue. For our value added service segment, the revenue was 79 billion RMB, up 9% year on year. Social networks revenue was up 6% year on year to 31 billion RMB, reflecting growth of in-game item sales and music subscription revenue. A long-form video subscription revenue decreased 6% year-on-year due to delayed content releases during the first quarter. However, we have taken steps to address this situation, including, number one, enhancing our content to cater to evolving user demands. For example, we released our self-commissioned drama series, The Long Season, in April, which became the highest-rated series domestic drama series in the past five years for the DOBA and RED review aggregator sites. And number two, extending our collaboration with short form video services, which would help long form content reach more users and capture more monetization opportunities. Music subscription revenue increased 30% year-on-year, driven by growth in paying users in Apple. We upgraded the listening experience and strengthened cooperation with labels and artists, which resulted in higher user engagement and paying propensity. Domestic games revenue resumed growth to 6% year-on-year and reached 35 billion RMB, on top of solid performance from key titles such as Honor of Kings, DNF, and Crossfire Mobile. New game Arena Breakout, which we released in third quarter last year, also contributed notably to the growth. International games revenue increased by 25% year on year or 18% in constant currency terms to 13 billion RMB. The robust performance of Valorant, as well as contributions from 2022 releases, Nikkei and Triple Match 3D drove up revenue. For communications and social networks, vision video accounts, consumption continues to grow with rapid increases in time spent and video views. In order to drive its continued organic growth, we are nurturing a healthy and active creator community. First, in order to attract more creators and help them reach their target audience more efficiently, we have upgraded our onboarding programs with greater traffic incentives, wider creator coverage, and more effective content creation tools. Second, we have enhanced the e-commerce infrastructure, enabling creators to be benefiting from sales commissions associated with e-commerce transactions. For example, we enriched the customer management functionalities in video accounts shop, facilitating creators to better engage with customers and increase sales conversion. As a result, our creative community is increasingly vibrant. In the first quarter, daily active creators and daily video uploads more than doubled year on year, while the number of creators with over 10,000 followers more than tripled year on year. On QQ, we deployed a new architecture to optimize development efficiency across operating systems on a unified code base. This new technology foundation also enhances user security with strengthened data encryption mechanisms and improved users' graphical experience with more advanced rendering solutions. We believe this upgrade will enable faster innovation in QQ's user experience going forward. Moving on to domestic games. Before discussing product and financial trends, I want to highlight that as a result of our continued and dedicated minor protection program, users aged under 18 contributed less than 1% of total time spent and gross proceeds. in the quarter. Time spent and gross receipts from users aged under 18 reduced by 96% and 90% from three years ago respectively. We'll continue to take our societal responsibility with regard to games content and minor protection very seriously. Looking into the performance of our most popular games, Honor of Kings launched highly appealing Shan Hai Jing themed outfits with targeted marketing programs during the Chinese New Year season, contributing to record high quarterly gross receipts. Crossfire, a PC game we have operated since 2008, successfully attracted returning players with promotions targeting internet cafes. Crossfire Mobile, which we launched in 2015, released a popular themed map, outfit, and weapon items based on the virtual idol group created for the game. Both Crossfire and Crossfire Mobile achieved record high gross receipts in the quarter. Additionally, new games we launched recently in high potential genres have generated strong traction. The fight of Golden Spatula, which has stayed as the number one auto battle game since launch in 2021, increased its gross receipts by more than 30% year on year in the quarter. We recently launched a fast paced game mode that appeals to returning and new players, driving average DAU to a record high of over 10 million in April, 2023. With Arena Breakout, the most popular extraction shooter game in China. We have been nurturing a highly engaged user base since launch in July 2022 and stepped up marketing activities during the Chinese New Year. In the first quarter, the title grew and achieved new milestones in DAU and gross receipts. We launched Metal Slug Awakening in April, moving at classic arcade game IP to a mobile and multiplayer experience. Metal Slug ranked number one among new action games released year to date. Now with that, I'll pass on to James.