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 2021 First Quarter Earnings Conference Call. Today, you will hear a discussion from the management team on Tencent Music Entertainment Group, followed by a question and answer session. For the benefit of all the participants on today's call, please limit yourself to one question. And if you have additional questions, you can re-enter the queue. Please be advised that the conference is being recorded today. Now, I will turn the conference over to your speaker host today, Ms. Millicent T. Please go ahead, ma'am.

Thank you, Amanda. Hello, everyone, and thank you all for joining us on today's call. Tencent News announced its quarterly financial results today after the market closed. And any release is now available on our IR website at ir.pensamuses.com, as well as via Newswire services. Today, you'll hear from Mr. Kashan Palm, our Executive Chairman, who will start the call with an overview of our recent achievements. He'll be followed by Mr. Ross Leon, our CEO, and Mr. Tony Heap, our CFO, who will offer more thoughts on our product strategy, operations, and business development. Lastly, Ms. Shirley Hu, our CFO, will address our financial results before we open the call for questions. Please note that this call may contain follow-up statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These follow-up statements are based on management's current expectations and observations that involve known and unknown risks, uncertainties, and other factors not under management'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 statement, risk factors, and details of the company's filings with the SEC. The company does not assume any opportunity to revise or update any forelooking statements as a result of new information, future events, changes market conditions, or otherwise is set as required by law. Please also note that the company will discuss non-IFRS measures today, which are more thorough, explained, and reconciled to the most comparable measures reported under the International Financial Reporting Standards in the company's earnings release and filings with the SEC. You are reminded that such non-IFRS measures should not be viewed in isolation or as an alternative to the equivalent IFRS measures and other non-IFRS measures are not uniformly defined by all companies, including those in the same industry. With that, I'm very pleased to turn over the call to Queshen, Executive Chairman of Tencent Music. Queshen.

Thank you, Melissa, and hello, everyone, and thank you for joining our call today. Echoing the reorganization of the Tencent digital content ecosystem and expecting TME towards the next phase of development, we recently announced a change of leadership. As the executive chairman of TME, I will be responsible for setting our long-term strategy and TME's overall coordination and management of the board and also the company. I will also focus more on building the most comprehensive music and audio content ecosystem in China. Also joining us on today's call is Mr. Ross Liang, TME's new CEO, who will oversee QQ Music, WhoGo, WhoWall, WeSing, and the long-form audio business. Having worked closely with Ross for a number of years in the past, Ross and myself share the same vision in TME's strategic goal. As a GM of QQ Music from 2014 to 2016, and one of the key members of WeSing's founding team, Ross has a deep understanding of the nature of our businesses. A warm welcome of Ross back to the TME family, and I look forward to working with him again as we continue to execute our strategy and grow the business. Since TME's establishment in 2016, we have stated true to our original aspiration of creating more value for users, musicians, the industry, and society as a whole. We pioneered and defined a model benefiting for the long-term development of China's music and entertainment industry. Our established and comprehensive services now include online music, online audio, and social entertainment, positioning us as an all-in-one music and audio entertainment destination for hundreds of millions of users. We are not only great believers in upholding digital music copyrights, but also strong advocates for effectively rising income levels for China's indie musicians and cultivating China's original music ecosystem. We have been pushing the boundaries of the music entertainment ecosystem, committing to explore innovative ways to promote upstream content production. This has resulted in numerous chart-topping songs originating from our platform, alongside our growing capabilities in artist intubation and additional channels for distribution and promotion. We also pioneered TME Live, which has earned a solid standing in the industry. Although the impact of the COVID-19 pandemic still lingers and some uncertainties remain, China's music industry is thriving and flourishing. With a steadfast focus to create a one-stop shop online music and audio ecosystem, we will unite our efforts to drive the next phase of development for TME. Moving to the quarterly discussions, in the first quarter of 2021, we achieved robust performance with 24% year-over-year growth in total revenues while hitting multiple milestones across the spectrum of our business. Net addition of music-paying users reached a record high of 4.9 million in the first quarter, demonstrating our strong momentum and further inspiring us to unlock the value of music and elevate its role in people's lives. For our long-form audio business, we have also made significant breakthroughs, with MAU's surprising 100 million at the end of 2020 and MAU penetration crossing the 20% milestone in the first quarter of this year, making us one of the leading players in China's online audio industry. Our content ecosystem is becoming increasingly robust, dynamic, and powerful. In the past quarter, we were very excited to see increasing user engagement from young users, thanks to a broader offering of genres such as hip-hop, Chinese-Asian style, and music for a wide range of entertainment, including popular television programs, variety shows, and online games through both licensing or self-production. Also, in the hip-hop category, QQ Music launched the Rappers Alliance in January, attracting participation from both uprising and top-tier established rappers. By providing a stage to perform and shine, We helped the rapper Lambert, Lin Jie, be enlisted by the Treasure Voice, Tian Shi de Sheng Ying, a well-recognized music variety show in China. These efforts have brought increasing engagement from young users and on QQ Music. The penetration of young users among hip-hop listeners is more than 15% higher than their overall platform presence. As another example, in the first quarter, we worked with Tencent Games, to create the highly-praised theme song, Battle for Glory, for PUBG Mobile, one of the most popular mobile games in the world. In 2021, as an essential component of Tencent's platform and content group, we plan to strengthen and develop additional ways to collaboration with the broader Tencent ecosystem. Cultivating indie musicians is another strategic talent of us In the first quarter, the scale of the Tencent Musician program, as indicated by the original songs uploaded, continued with industry-leading growth. On a year-over-year basis, the number of artists on our Tencent Musician platform more than doubled to over 200,000. And the music streaming volume of Tencent Musician's witnesses and increasing share in our platform on a sequential and year-over-year basis. This demonstrates Lucision Plus in our promotional capabilities, platform support, incentive plans, and other comprehensive services, as well as our ability to drive influence in the industry by successfully incubating and promoting hit original sounds. Tencent Lucision Platform also serves public welfare with its social influence. For example, it cooperated with a leading logistic company using music to promote the virtualization in the southwest of China, namely Sichuan, Guizhou, and Yunnan offices. Also, we further expanded our content ecosystem to live concerts. TME Live celebrated its first anniversary in March this year. In just a year's time, It hosted 60 live concerts for over 100 artists with 18 billion social buds, building and cementing TME Live's strong industry influence as a brand. In 2021, we will innovate more interactive features such as ticketing, VIP privileges, reserved camera, and virtual gifting to create a holistic and more immersive user experience that will get us one step closer to unlocking the massive value and market potential for online live performances. Apart from music content, long-form audio forms a core building block for us as we evolve into a leading all-in-one music and audio entertainment platform in China. We emerged as the key players in China's fast-growing long-form audio market. We provide a broad spectrum of audio categories, expanding into diversified audio genres such as drama, comics, Chinese comedy, history, parenting, relationship and education, among others. The consolidation of lazy audio in March further allowed us to gain access to an extensive library of high-quality audio books. In the first quarter, license titles more than quarterly year-over-year. We are also accelerating the addition of PUGC and UGC long-form audio content, bringing both professional and long-tail podcasting content to users. Our initial efforts have included QQ Music's in-depth collaboration with Xiao Yu Zhou, a leading podcasting app in China. In February, QQ Music initiated the Ground Zero podcast program, under which we aim to continue introducing various features and widening support to facilitate podcast creation. Secondly, our adoption of a valuable two-pronged product strategy evolves to unlock significant value from our music and standalone long-form audio applications. This approach allows us to leverage our massive music user base, and nearly quadrupled our long-form audio MAU penetration to 20% in the first quarter, compared to 5.5% for the same period last year. Long-form audio content also contributes positively to time spent per user. It inspires incremental listening of audio content in addition to music, and newly converted audio users stream even more music content than before. Our standalone application launched in April, Lan Lan Chang Ting, pioneers a well-rounded visual and audio experience through comics, surround sound, and bullet chats to offer an immersive and interactive user experience and aim to address the needs of heavy audio users. Lastly, we commenced the app-based monetization, which gives us our users ease access to a vast amount of high-quality audio content. Users are able to gain membership privileges or title rights by watching advertisements or completing certain tasks. We believe that such a model will not only be effective in scaling our user base quickly, but also unlocking additional monetization methods. China's long-form audio market remains extremely undeserved as compared to the online music and video market. And we are eager to continue cultivating users' listening habits to ultimately accelerate the penetration of online audio in China. Now I would like to pass the call to Ross, who will share more about the strategy of our key business lines. Ross, please go ahead.