Tencent Holdings Limited

Good day and good evening. Thank you for standing by. Welcome to Tencent Holdings Limited 25 for Second Quarter Results Announcement Webinar. I'm Wendy Huang from Tencent IR team. At this time, all participants are in a listen-only mode. After 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 5 or raise your hand. If you are accessing from the Tencent 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 the presentation, we would like to remind you that it includes forward-looking statements, which are underlined by a number of risks and uncertainties, and it 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 unaudited non-IFRS financial measures that should be considered in addition to, but not as a substitute for, measures of the group's financial performance repelled in accordance with IFRS. For a detailed discussion of risk factors and non-IFRS measures, please refer to our disclosure documents on the IR section of our website. Let me introduce the team on the webinar tonight. Our chairman and the CEO Pony Ma will kick off with a short overview. President Martin Lau and the Chief Strategy Officer James Mitchell will provide a business review. Chief Financial Officer John Lau will conclude with financial discussions before we open up for questions. I will now pass it to Pony.

Great. Thank you, Wendy. Good evening. Thank you everyone for joining us. Our second quarter 2024 results demonstrate the strength of our platform plus content strategy. Our domestic games revenue assumed growth and our international game revenue accelerated growth due to increased user engagement as several of our evergreen titles. And the successful launch of certain new games Tencent Video achieved a notable audience and subscriber growth with drama series developed from China literature, IP and produced internationally. Looking forward, we continue to invest in our platforms and technologies, including AI, enabling us to create new business value and better serve youth needs. Looking at our financial number for the quarter, total revenue was 161 billion RMB, up 8% year-on-year and 1% quarter-on-quarter. Gross profit was 86 billion RMB, up 21% year-on-year and 2% quarter-on-quarter. Non-IFRS operating profit was 58 billion RMB, up 27% year-on-year, all flat quarter-on-quarter. Turning to our key services, For communication and social networks, combine MAU of WeChat, WeChat year-on-year and quarter-on-quarter to 1.37 billion. For digital content, Tencent Video led the industry in terms of audience and subscriptions. For games, our proactive judgment to several of our leading games earlier in the year yielding positive results with healthy user chain for our evergreen games and substantial popularity for several new games. For cloud enterprise SaaS, we count an intensive meeting, increase their penetration in major industry verticals, and absorb more pay functionalities. I will now hand over to Martin and James for business review.

Thank you, Pony, and good evening and good morning to everybody. For the second quarter of 2024, our total revenue was up 8% year on year. VAS represented 49% of our total revenue, within which social network subsegment was 19%, domestic games subsegment was 21%, and international games was 9%. Online advertising was 19% of total revenue. And fintech and business services was 31% of total revenue. Turning to gross profit, our overall gross profit growth was 21% year-on-year in the second quarter, driven by growth in high-margin revenue streams, such as domestic games revenues, video accounts advertising revenues, mini games platform service fees, and e-commerce technology service fees within video accounts, as well as cost-saving initiatives. By segment, vast gross profit increased 12% year-on-year to 45 billion RMB, representing 52% of our total gross profit. Online advertising gross profit increased 36% year-on-year to 17 billion RMB, contributing 19% of total gross profit. And FinTech and business services gross profit increased 29% year-on-year to 24 billion RMB, contributing 28% of total gross profit. Moving into business by segment, for value added services, segment revenue was 79 billion RMB, up 6% year on year. Social network revenue returned to positive growth, up 2% year on year, driven by increased revenue from music and video subscriptions, mini games platform service fees, and app-based game item sales, which was partially offset by decreased revenue from music and games related live streaming services. Long form video subscription revenue increased 12% year on year as average daily video subscriptions increased 13% year on year to 117 million. Consumers are increasingly seeking out high quality IP and high production value in drama series. Our novel comics and games platforms nurture high quality IPs while our studios, including New Classic Media, create high production value video content. During the first half of 2024, out of the top three most watched drama series on China's online video platforms, the first and second were produced by New Classic Media and broadcast by Tencent Video, and all three were based on China literature web novel IPs. Music subscription revenue increased 29% year on year, supported by growth in subscriptions in Apple. TMU strengthened cooperation with labels and artists, releasing original soundtracks for Tencent Video popular drama series, and provided live music experiences through offline events and concert tours. Domestic games revenue resumed growth up by 9% year on year to 35 billion RMB, mainly driven by Valorant and new title DNF Mobile. Total gross receipts of domestic games grew faster than revenue in the second quarter. International games revenue increased by 9% year-on-year in both reported and constant currency terms to 14 billion RMB, benefiting from the robust performance of PUBG Mobile, as well as contributions from Supercell Games. Total gross receipts of international games grew substantially faster than revenue in the second quarter. For communications and social network, we enhanced functionalities and enriched content across our platforms, including video accounts, mini programs, and Tencent channels. For video accounts, the user time spent increased significantly year on year in the second quarter, benefiting from enhanced algorithms and more local content. Our thriving content ecosystem enabled creators to reach a wider audience and generate increased revenue. The number of creators that generate closed-loop revenue from their video accounts more than tripled year on year, showing a much more vibrant content ecosystem. To facilitate e-commerce activity, we're enhancing transaction capabilities in a systematic way to deliver a seamless shopping experience to users and drive sales for merchants. Mini programs have become an increasingly powerful platform for users to connect with merchants and content providers offline and online. Total user time spent on mini programs increased over 20% year-on-year in the second quarter. GME facilitated by mini programs grew a double-digit percentage year-on-year. For mini games, total gross receipts increased over 30% year-on-year. And as a testimony to the diversity of the games, more than 140 mini games each achieved total gross receipts of over 10 million RMB during the quarter. Lastly, Tencent Channels served as a community-based platform in which moderators can manage and present content and events via customizable tools, while users can interact via text, image, and live streaming. We recently upgraded and rebranded Tencent channels, previously known as QQ channels, and now users can join channels from Weixin and from game apps in addition to QQ. Tencent channels have gained notable popularity among game players and university students, who are early adopters and promoters of channels' advanced functionalities. With that, I'll pass to James.