Tencent Music Entertainment Group

Good evening and good morning. Welcome to Tencent Music Entertainment Group's second quarter 2023 earnings webinar. TME announces quarterly financial results today before the U.S. market opens. An earnings release is now available on our IR website at ir.tencentmusic.com, as well as via Newswire services. Today, you'll hear from Mr. Kashan Pang, our executive chairman, who will start the call with an overview of our recent updates. Next, Mr. Ross Liang, our CEO, and I, Tony Yip, a CSO, will offer additional thoughts on our product strategies, operations, and business developments. Finally, Ms. Shirley Hu, our CFO, will address our financial results before we open the call for questions. Before we continue, I refer you to our safe harbor statements in our earnings press release, which applies to this call as we will make forward-looking statements. 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 IFRS in the company's earnings release and filings with the SEC. At this time, all participants are muted. After management's presentation, there will be a Q&A session, and please be advised that today's webinar is being recorded. With that, I'm pleased to turn the call over to Kushan, Executive Chairman of TME. Kushan?

Thank you, Tony. Hello, everyone, and thank you for joining our call today. We are pleased to report a solid second quarter, with total revenues increasing by 6% and adjusted net profit of 48% year-over-year. These solid results were once again supported by our online music service's strong momentum. Many years, D&E has been dedicated to driving the healthy development of China's online music industry. Following our long-standing efforts, we are pleased to see users becoming increasingly accustomed and willing to pay for copyrighted music. whether for songs they want to listen to or for the premium listening features they enjoy. Right in this way, we are happy to see that our online music paying ratio and monthly ARPPU reached an all-time high of 16.7% and 9.7% RMB respectively. Such achievements drove revenues from this business pillar in the recorded quarter to exceed that of social entertainment services for the first time in our history. This is a strong testament to our progress in developing a robust online music business model and marks a significant step along T&E's growth path. Looking at our social entertainment services, starting from the later part of the second quarter, We have proactively implemented several service-intensive and risk-control measures to provide users with a more music-centric, live-streaming atmosphere, as well as to reinforce risk controls. While these measures are expected to put pressure on revenues from our social entertainment services throughout the second half of 2023, and first, investing the impact on the total revenue for this year, We believe they will provide users with an optimised user experience, as well as pave the way for the group's healthier and more resilient development in the long term. Moving on to our operation focus on content. As the key components fostering our music ecosystem, our comprehensive content ecosystem sets us apart from other industry players. During the quarter, we continue pushing the vibrancy of our content ecosystems among actors, creators, and labels. On the front of top tier labels and artists, we strengthened our partnership with them to expand our industry influence and content appeal. In July, we held the Tencent Music Entertainment Awards 2023, also known as TMDA, in Macau. It was a two-day event, comprising of two music ceremonies and two music festivals, joined by a prominent nightclub of over 80 well-known domestic and overseas musical groups and singers. such as JJ Lin, Lin Junjie, Zhou Linsai, Cai Mingling, Laura Shang, Shangwen Jie, Zhou Sen, Tia Ray, Yuan Yawei, and Seventeen. Being able to successfully organize such a large-scale offline performance of all music events over a single weekend, coupled with an exceptional roster of musicians, demonstrates our strong industry influence and organizational capabilities, with an audience of nearly 40,000 people offline, participating in our two-day event. Our TMEA also inspired a social media bust of over 10 billion views, once again creating a national music sensation. Furthermore, we remained the partner of choice for famous labels and artists on a wider range of content offerings and merchandise. This enabled us to provide music lovers a rich selection of music content and products, as well as a unique and trendy experience at TME. For example, in the second quarter of 2023, we renewed our strategic cooperation with Forward Music, allowing us to offer a wider variety of Chinese pop music to users in China and abroad. In addition, we cooperated with Jackson Yi, Liang Tianxi, on the release of his new physical album, Liu Yanfen, featuring a headstart release with TME. This partnership delivered an outstanding sales record of Niu Yanfen on our platform. Another highlight was the debut of Chris Lee's Lee Yuchun's brand new digital album, Have a Nice Weekend, So More You Cry, plus the sales of her album's limited edition merchandise. In addition, we continue expanding our vertical music content to attract a more younger audience. For example, Mind Stone Records, a key hip-hop label, recently joined our platform, adding over 440 songs to our hip-hop music library, some of which include 30-day head-start releases. On the front of up-and-coming musicians, we are helping new artists rise their visibility within the industry by providing critical technological assistance and integrated resources that support their growth throughout their entire music journey. In July, we upgraded Venice, our all-in-one music production and promotion destination to better help indie musicians improve their efficiencies in producing, transacting, and promoting songs. Winner's latest iteration and integrated our full suite of AIGC music networking tools into Winner's. As an AI-enabled music separation, sheet music generation, line rep writing, and creations of cover for songs, significantly improving creators' efficiencies at each step of the music creation process, and elevating their music quality. Venice is also creating enhanced efficiencies of resources called consolidation as it gathers a wealth of demos on its platform and empowers convenience music transaction and promotion processes. Having attracted a diverse range of creators and labels, Venice has recorded music transactions with a total value of over 10 million RMB as of the second quarter. Furthermore, we've leveraged our differentiated and comprehensive set of resources and opportunities to nurture up-and-coming musicians and foster creativity. For example, our Tencent Musician platform strengthened its holistic support system for musicians. which ranges from offering additional exposure for offline performances to launching theme programs to promote creative content production, and even extends to helping musicians find commercial opportunities. In the second quarter, our Immersion Force program sends several of its emerging artists to seven offline music events. We also offer them more film and indie band the opportunity to produce a film song for Beyond This Car sales and production events. Our deep involvement across the music value chain enable us to be in a unique position of having extensive insights in China's music industry, which we, in turn, hope to give back to the industry by contributing to its advancement. In June this year, our TME Research Institute released its first consecutive annual edition of 2022 year-end report of digital music in China. Through in-depth data analysis and multifaceted interpretation, we provided comprehensive and pioneering insights as well as case studies aiming to promote healthier and more sustainable industry development. That concludes the overview of our second quarter and the progress we have made across our growing content capabilities. I'll now have to turn the call over to Ross. He will share more about our platform strategies. Ross, please go ahead.

Thank you, Kajit. Hello, everyone. We are excited to have reached an important milestone of 100 million online music paying users in June. This demonstrates our strength as China's leading online music platform and reflects our growing appeal to music lovers. As we see an increase in growth potential materializing from users involving music consumption mindset. We are continually elevating our music experience to meet users' higher standards and a stronger desire for quality. On top of the progress in our content ecosystem, as Kashin shared earlier, we are continuing to optimize user experience on our platform in order to reinforce the traction of our lovely and passionate music community among music lovers. Along with ongoing refinements to our distinctive and immersive listening experience, we are also exploring more innovative and personalized means of entertainment and interaction. In terms of user experience, we optimized premium feature and the product experience to attract higher user engagement and stickiness to our platform. For example, QQ Music upgraded its series of QQ Music audio to ensure optimal sound quality and the effects, which are now also available in our in-car service. We also launched QQ Music Audio Certification, which sets industry standards for sound quality across hardware devices such as earphones, speakers, music players, and car audio speakers, allowing access to superior sound quality among users in their daily lives. QQ Music also expanded in 3D music player offerings such as players customized for subscribes or designed for classical music to bolster product attractiveness and thus user use. In Google Music flagship apps recently upgraded, we highlighted a more intuitive interface and an engaging unlimited music discovery function. Google also unveiled its Viper 3D, Queerious Quan Jing Sheng, bringing an immersive live concert-like listening experience to users. Furthermore, we introduced a brand new function in drone that enhances users' recording and singing experience, including optimized vocal details, enhanced balance between human voice and accompaniment, and a wider selection of sound effects as well as recording skins. Coupled with these enhancements, we also stressed our ability to recommend music through refined user preference analysis and optimized algorithms, allowing a convenient and individualized music discovery. All of these efforts contributed to higher DAOs derived from various recommendation scenarios and a larger portion of recommendation-related streaming share. In terms of listening scenarios, we expanded our music services to additional use cases, such as various IoT scenarios, to serve a large audience in a more immersive way. specifically for the in-car use case. We improved user experience across sound quality and the effects, music recommendation and the interactive functions. For example, QQ Music launched its in-car version 2.0 in June this year and forged partnerships with more car makers, such as SAIC, Volkswagen, FAW, Volkswagen, and Volvo, among others. We also expanded the collaborations with more car makers and embedded our in-car offerings in more car models, potentially typing into a wider base of users who then can enjoy a seamless native in-car music listening experience. Alongside the recovery of offline tourism, driving times have length, thus increasing the use of in-car music services As a case in point, during the holiday period on the summer vacations, we saw a notable uptick in user activities and stickiness for our in-car service. In terms of user engagement and interaction, we created a highly individualized and the defragmentation agent in music entertainment experience for users through our AIGC endeavors. We are fulfilling their desires for trendy filters to keep up with the AIGC bomb. On the online music side, we started test AI-enabled listening together that allows Xiaoqin, our AI music company, to join users' music listening journey, share a variety of topics, include their views on music, and recommend songs or playlists based on their real-time interaction. This new function will offer users an interactive, fun way of discovering music as well as a more personalized and engaging music listening experience. On the live streaming side, we innovated AIGC import virtual gifts to facilitate a more trendsetting interaction between users and anchors. Such virtual gifts can be automatically virtualized quickly as users input text descriptions, promoting a more creative and unique user-performer bonding during live streaming. All these efforts have in turn reinforced our platform's traction among users. As we continue exploring opportunities and possibilities in China's online music arena, our dedication to copyrighted music will position us to better ride the wave of users changing music consumption habits. Promoting great prosperity across the music industry, we are creating long-term value for our shareholders. With that, I'd like to give the floor to Tony to review our business options.