Tencent Music Entertainment Group

Ladies and gentlemen, good evening and good morning, and thank you for standing by. Welcome to the Tencent Music Entertainment Group 2020 First Quarter Earnings Conference Call. Today you will hear discussions from the management team of Tencent Music Entertainment Group, followed by a question and answer session. Please be advised that this conference is being recorded today. Now, I will turn the conference over to your speaker host today, Ms. Millicent Tu. Please go ahead, ma'am.

Thank you, operator. Hello, everyone, and thank you all for joining us on today's call. Tencent Music announced its quarterly financial results today after the market closed. An earnings release is now available on our IR website at ir.tencentmusic.com, as well as via Newswire Services. Today you will hear from Mr. Kar Shun Pang, our CEO, who will start the call with an overview of our recent achievements and growth strategies. He will be followed by Mr. Tony Yip, our CSO, who will offer more details on the operations and business development. Lastly, Ms. Shirley Hu, our CFO, will address our financial results before we open the call for questions. Before we proceed, Please note that this call may contain forelooking statements made pursuant to the safe harbor provisions of the Private Security Litigation Reform Act of 1995. These forelooking statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties, and other factors not under the company's control, which may cause actual results, performance, or achievements of the company to be materially different from the results Performance, or expectations implied by these forelooking statements. All forelooking statements are expressly qualified in their entirety by the cautionary statements, risk factors, and details of the company's filings with the SEC. The company does not assume any obligation to revise or update any forelooking statements as a result of new information, future events, changes in market conditions, or otherwise, except as required by law. Please also note that the company will discuss non-IFRS measures today which are more thoroughly explained and reconciled to the most comparable measures reported under the International Financial Reporting Standard in the company's earnest release and filings with the SEC. We are reminded that such non-IFRS measures should not be viewed in isolation or as an alternative to the equivalent IFRS measure and other non-IFRS measures are not uniformly defined by all companies, including those in the same industry. With that, I'm now very pleased to turn over the call to Mr. Kar Shun Pang, our CEO. Kar Shun.

Thank you, Millicent. Hello, everyone, and thank you for joining our call today. I'm glad to be meeting everyone of you again after we released our 2019 annual results two months ago. Even though I'm still wearing a mask like last time, but we still have a smiling face under the mask and every one of us at TME remain very positive. It is because we truly believe that what we have been doing is very valuable to our users and society. Music is really the medicine that can heal and accompany with people no matter what the situation is. I hope to see every one of you well during the pandemic period and we are all together. In the first quarter of 2020, our online music subscription revenues further accelerated its growth, increasing 70% year over year, compared with 60% and 48% in the fourth and first quarter of 2019. Online music paying users reached 42.7 million, up 50% year over year. Paying ratio expanded to 6.5%, up from 4.3% for the same quarter of 2019. ARTPU for our online music services increased 13% year over year, primarily benefiting from users increasing willingness to pay for premium subscription package. Our outstanding online music subscription revenues growth mitigated the sharpness in other non-subscription revenues primarily arising from the COVID-19 pandemic, resulting 27% overall year-over-year revenue growth for our online music services. Some of our key strategic focus during the first quarter include further enriching our leading content offering, darkening our capabilities in content discovery and promotion, and supporting indie musicians. In terms of further enriching content, To begin with, we have made significant progress in long-form audio, an under-penetrated but fast-growing market in China that we are committed to serve. Recently, through the strategic partnership with China Literature and others, we have gained quick access to an extensive library of high-quality IPs and exclusive licenses for some page-turning online literature series with a tremendous fan base in China. Now we have obtained the audio application right of the majority of China literature's top 100 most favorite online books. In addition to audio books, we will also produce high quality audio drama to help super IPs to realize more drive to value. Such fast progress is starting to position us at the forefront of the game. As we aggressively scale up content offering, the development of our podcast ecosystem has also achieved initial success. By the end of April 2020, our platform attracted approximately 10,000 new podcasters and many established KOLs, including well-known artists, writers, and online broadcasters to produce more premium UGC audio work. Our self-produced audio programs, our Idol Reads, Bang Yang Ying Le Du, has achieved over one billion total streams by the end of last month and become a very popular audio show, particularly for the young demographic. On April 21st, we launched a new application for long-form audio, Cool Chang Ting. taking another important step to provide dedicated audio entertainment services to our users. We also began to roll out a separate long-form audio membership package. All of these developments will help us build a solid foundation for our future development and realize more valuable synergies between online music and long-form audio business. Second, We continue to solidify our content leadership with popular genres enjoyed by the younger demographic. The cooperation with Billion Group, one of Japan's largest, one of Japan's highest selling record companies in the 20th century, enabled us to seek more opportunities and rebuild a closer relationship. Apart from offering highly popular content by renowned Japanese artists, We also actively explored new interactive game page such as a J-pop singing contest to bring an interactive and comprehensive music experience of listening, watching, singing, and socializing. As a result, our platform has become a popular destination for J-pop fans in China. Third, on supporting original content creation, time and again, we demonstrated our unique capability and know-how in talent discovery, cultivation, and promotion. Thanks to our fast-growing indie musician program, the number of participating musicians and original songs produced doubled year over year in the first quarter of 2020. We rolled out an attractive financial incentive plan earlier this year. This has led to impressive growth in the number of indie musicians' songs that are exclusively licensed to us, which increased by more than 800% year over year. We went an extra mile to promote indie music. We launched a program galaxy, Ying He Ji Hua, targeting emerging musicians and also formed a strategic alliance with Bilibili through the launch of program Ganbei Ji Hua to further enhance the cooperation with Independence Musicians and KOL. Additionally, we continuously leverage our profound user insight and powerful promotional capabilities to support indie musicians to reach hundreds of millions of music lovers. Last quarter, we shared the success story of Hai Lun, a grassroots singer, and his song, Girl by the Bridge. This quarter, I'm pleased to share two more successful stories. The world is so big to meet you. Xizhejianmaoda haishiyujianli, a song from echo-chung Cheng Xiang, and You, Shao Nian, a song produced by Mira Meng, Meng Ran. Both songs were released during the first quarter and have already achieved almost 5 billion cumulative streams on our platform. Their success is our success. as a fast-growing and leading indie musicians program with the largest music user base, we are very pleased to say as of March 31st, 2020, we have successfully promoted indie musicians content to hundreds of millions of users on our platform. While the COVID-19 global pandemic has changed the businesses and the ways of life in different aspects, It has also brought emerging opportunities in the digital era. We have seen some behavioral changes during the lockdown and observed an increasing number of users listening to music with home appearance, especially TVs and smart devices. As a result, in the first quarter of 2020, our online music MAU for mobile devices and in-home appearances increased it by 3.5% on the year-over-year basis. Such behavior patterns could persist even after the live returns to normal post the COVID-19 pandemic and potentially provide additional avenues for our paying user growth. The launch of TME Live is a great example of how we quickly and innovatively deploy technology to bring offline concert experience online through live streaming. Within five weeks after its launch in March 2020, we successfully held five online concerts. These include ones for established artists like JJ Lin, Lin Junjie, and Renee Liu, Liu Ruoyin, and special themes such as an OST concert for the popular web drama series, Someday or One Day, Xiangjianli, leveraging our solid partnership with labels and artists. We are very excited to have built a strong and diversified pipeline to anchor our events. We are also pleased that the user response PME Live received exceeded our expectations and affirmed the virtuous value creation cycle between online music and social entertainment services. This concludes my prepared remarks. and now Tony will discuss the first quarter result of our social entertainment services as well as our other focus area.