Tencent Holdings Limited

Good day and good evening. Thank you for standing by. Welcome to Tencent Holdings Limited 2024 Third 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 VOO 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 four 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 propelled 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. Now let me introduce the management team on webinar 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. I will now pass it to Pony.

Thank you, Wendy. Good evening. Thank you, everyone, for joining us. During the third quarter of 2024, we delivered robust revenue growth in our games business, underpinned by consistent performance of evergreen games globally and contribution from new games with evergreen potential. We upgrade our e-commerce strategy around mini shops to create a unified and trustworthy transaction experience spanning the entire WeChat ecosystem. We are increasingly seeing a tangible benefit of deploying AI across our products and operations, including marketing services and cloud. And we'll continue investing in AI technology tools and solutions that assist users and partners. Looking at our financial numbers for the quarter, total revenue was 167 billion RMB up 8% year-on-year and 4% quarter-on-quarter. Growth profit was 89 billion RMB up 16% year-on-year and 3% quarter-on-quarter. Non-IFIs operating profit was 61 billion RMB up 19% quarter on quarter and 5% quarter on quarter a year ago. Turning to our key services, for communication and social networks, combined MAU operation and recheck with year-on-year and quarter-on-quarter to 1.38 billion. Mobile MAU of QQ resumed year-on-year to 562 million. For digital content, we reinforce our leadership in music and long-form video streaming, where Tencent Music and Tencent Video grew substantially year-on-year. For interactive entertainment, we successfully launched DNF Mobile and Delta Force. Both have potential to become evergreen titles. For cloud, we improve our traction in international markets, leveraging our competitive pricing and domain expertise in areas such as games and live streaming. I will now hand over to Martin and James for business review.

Thank you, Pony, and good morning, good evening to everybody. For the third quarter of 2024, our total revenue was up 8% year on year. VAS represented 49% of our total revenue, within which social networks subsegment was 18%, domestic games subsegment was 22%, and international games was 9%. Marketing services was 18% of total revenue, and fintech and business services was 32% of our total revenue. Moving on to gross profit, our overall gross profit growth was 16% year on year in the third quarter, primarily driven by growth in high margin revenue streams from domestic games, video accounts, and wage and search. Improved profitability of our cloud services also contributed to overall gross profit growth. By segment, vast gross profit increased 13% year on year to 48 billion RMB, representing 53% of our total gross profit. Marketing services gross profit increased 18% year on year to 16 billion RMB, contributing 18% of total gross profit. And fintech and business services gross profit increased 19% year on year to 25 billion RMB, contributing 29% of total gross profit. For value-added services, the segment revenue was 83 billion RMB, up 9% year-on-year. Social networks revenue was up 4% year-on-year to 31 billion RMB, driven by increased revenue from music subscriptions, app-based game item sales, and mini games platform service fees, which was offset partially by decreased revenue from music and games-related live streaming services. Music subscription revenue increased 20% year-on-year, primarily driven by 16% year-on-year growth in subscriptions to 119 million. TME enhanced recommendation algorithms and reached content offerings and upgraded audio quality during the period. Long-form video subscription revenue increased 4% year-on-year, Video subscriptions grew 6% year-on-year to 116 million, benefiting from popular animated and drama series. Our exclusive drama series, She and Her Girls, became the highest-rated domestic drama series industry-wide since 2015 per review aggregator site Dolban.com. Our domestic revenue, games revenues grew 14% year on year to 37 billion RMB, reflecting growth from Honor of Kings and Peacekeeper Elite, as well as a record setting performance from Valiant and full quarter contribution of DNF Mobile. International games revenue increased 9% year-on-year or 11% in constant currency terms to 15 billion RMB. The growth was driven by robust performance of PUBG Mobile and Brawl Stars. Revenue growth of international games substantially lacked gross receipt growth as improved retention rates for certain titles led to elongation of their revenue deferral periods. Now, moving on to communications and social network. Within the segment on the key products, mini programs has emerged as an increasingly powerful platform for users to connect with merchants and content providers. Mini programs facilitated over 2 trillion RMB of transaction GMB in the third quarter, benefiting from better coverage and solutions for use cases, including foot ordering, electric vehicle charging, and medical services. On the content side, we enriched our content offering beyond mini games with increasingly popular mini dramas. MiniShops now serves as our platform for indexed and standardized merchandise, where merchants can operate storefronts similar to those in e-commerce marketplaces, while leveraging wage and social interactions, content services, and payment capabilities. For consumers, when enhanced the user interface for order tracking, extended return periods, and provide express return services, For merchants, we lowered entry barriers with simplified onboarding exercises and enabled shoppable SKU-level links across official accounts, mini programs, version search, and video accounts. Recently, we introduced a standalone merchant-facing app for mini shops merchants to facilitate their store operation and management. As Tony mentioned earlier, QQ Mobile Device MAU returned to year-on-year growth in the third quarter of 2024. Over the past few years, the QQ team has comprehensively upgraded the platform's backend infrastructure and added and popularized new functionalities such as Tencent Channels, resulting in this meaningful achievement. So with that, I'll pass on to James.