Tencent Music Entertainment Group

Good evening and good morning, and welcome to Tencent Music Entertainment Group's fourth quarter and full year 2024 earnings conference call. I'm Nelson Tu, head of IR. We announced our quarterly financial results earlier today before the U.S. market opened. The earnings release is now available on our IR website and via newswire services. During today's call, you'll hear from Mr. Tashin Pang, our executive chairman, and Mr. Ross Liang, our CEO, who will share an overview of our operations and business strategy updates. Then Ms. Shirley Hu, our CFO, will discuss our financial results before we open the call for questions. Before we continue, I refer you to the Safe Harbor Statement in our earnings release, which applies to this call, as we are made for looking forward. Please note that we'll discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS in our earnings release and filings with the SEC. All participants are muted at this time. After management's remarks, there will be a Q&A session. And please be advised that today's call is being recorded. With that, I'm very pleased to turn the call over to Prashant, Executive Chairman of TME. Prashant?

Thank you, Madison. Hello, everyone, and thank you for joining our call today. 2024 marked a year of significant progress for TME, characterized by a return to top-line growth and impressive profit margin expansion, fueled by robust performance in online music services, Our pioneering initiatives to grow and diversify our services across the music value chain have successfully reshaped the industry landscape and enriched our ecosystem. This, in turn, has effectively boosted our subscriber conversion efficiencies and lifetime value. We close the fourth quarter with advancements across key areas of online music business. As an example, in addition to continued strength in music subscriptions, our advertising and artist-related services will deliver strong growth, laying a stronger foundation for future development As we enter 2025, we are building on this momentum to unlock further value for both creators and users alike. Our dual engine strategy, combining rich content and platform innovation, positions us to capture emerging opportunities and efficiency gains across our platform. We are optimistic in the company's future growth prospects, which is reflected in our announcement of an annual dividend of $273 million, and a new and expanded share repurchase program of up to $1 billion. At the heart of our mission is empowering musicians and delighted users with exceptional content. Our vast library of content covers all music genres and almost every aspect of the music industry, providing a seamless and holistic user experience on our platform. By the end of 2024, our music and audio library exceeded 260 million licensed and co-created tracks from domestic and international labels, up from 200 million at the end of the prior year. To enhance our users' music listening experience, here are a few highlights worth sharing, which help contribute to a new record highs of users' average daily time spent. First, we recently renewed our strategic contract with international labels, including SM Entertainment and Kakao Entertainment, expanding our coverage of high quality music content libraries. These collaborations have also fostered a deeper cooperation in areas such as premium sound effects, live concerts, and artist merchandise. Additionally, we have established the partnerships with renowned Chinese artists such as Tao Lang and Luo Dayou, enriching our music library with hundreds of Chinese classics and providing TME users headstart access to new songs releases. Our industry insights and extensive resources continue to support artists in their creative journey. For example, in the fourth quarter, we collaborated with our strategic partner, artist Angela Zhang, Zhang Shaohan, to produce, release, and promote her album, Conflict. With our platform elevated influence, we expanded her reach to a broader audience of music lovers. earning widespread acclaim. Additionally, we produced theme song and original soundtracks for Tencent Video blockbusters, including Bloomsom , and Guardians of the Dafeng , as well as for movies such as A Tapestry of a Legendary Land , and Tiger, Wolf, Rabbit . These songs quickly garnered praise from music lovers and movie viewers alike. Second, we remain at the forefront in music consumption when it comes to innovation. As an example, we transform the fan engagement through unique digital and physical experiences such as artist merchandise and live experiences. In the fourth quarter, while we produce physical albums for Shao Zhan and Lei Zhang, we also provide the options for users to purchase as they use Yu Suxin merchandise along with her digital albums and create immersive experience. Such an approach not only boosted album sales, but also opened new avenues for artists to connect with fans. We also partnered with Mayday, WuYueTian, to host a groundbreaking online New Year's Eve concert, which was promoted across multiple short video platforms and social media channels. The concert's success and popularity earned us broad recognition and reinforced our commitment to delivering innovative music experiences. Third, our SVIP membership remains a cornerstone of our strategy. Catering to the unique needs of our most dedicated users by adding comprehensive privileges to our SVIP experience, we saw a strong sequential growth in membership and ARPPU. For example, JJ Lin, Lin Junjie's latest album, Turn of a Page, Guangying Fuban, is now available to SVIP members. We have also introduced new SVIP pearls, including high-definition viewing of May Day Wu Yutian's and Jackson Yi Yang Qianxi's online concerts. delivering an unparalleled experience for our most loyal members. We will roll out more VIP access, meet and greet opportunities, limited additions merchandise, personalized experiences and more, while empowering artists and record label to explore new ways to interact with targeted audience. Last but not least, we recognize that our success is deeply tied to the wellbeing of our planet, people and communities. As such, our commitment to ESG excellence is ingrained in our culture and business practice. In 2024, we make significant strides in supporting female musicians to foster a more diverse and inclusive music community. The number of female artists we supported reached 192,000. Additionally, in the fourth quarter, we partnered with the Ministry of Education and multiple NGOs to launch the Writing Songs for Pandas initiative. designed to promote the public biodiversity awareness through the influence of music. Overall, we are pleased with solid performance that we have achieved in 2024. We are looking forward to delivering more high-quality growth in 2025 and will continue to collaborate with industry partners to nurture a vibrant music ecosystem that brings people together. Now, I would like to turn the call over to Ross for more details on your overall platform development. Ross, please go ahead. Thank you.

Thank you, Kashen. Hello, everyone. In addition to our enriched content offering, our unvarying focus on exceptional user experiences and the music consumption scenarios innovation has been a key driver of our growth. These efforts have prepared us to the forefront of China music streaming industry and will remain central to our future growth strategy, further enhancing the value of music. Benefiting from our ever-expanding content ecosystem and a stronger user engagement, our online music services must again deliver robust growth in the fourth quarter. Our subscriber base continued to expand and ARPPU showed solid growth year-over-year and quarter-over-quarter. Our SVIP membership has also made good progress with user stickiness notable higher and ARPPU steadily expanding. To foster user loyalty, we have optimized the efficiency of our accommodation algorithm. harnessed AI to buster novel user experiences, and enriched music consumption scenarios to expand our reach. These efforts led to a substantial increase in user time spent on our platform in the first quarter. Let me give you some key examples. First, we empowered users to curate and accumulate personal music assets. which help enhancing their sense of belonging and stickiness. By optimizing algorithms and improving the user interface, we made the music discovery more fun and efficient. This led to the steady growth of recommendation-driven streams year-over-year and quarter-over-quarter, alongside a 10% year-over-year increase in user song collections. The latest revives to QQ music and Kugoo music also provide private users a more intuitive and personalized way for navigation. Second, we further elevated the sound quality with our AI pod audio effects and voice extraction technology, which are resonating very well with users. These features have become an important draw for our SYP membership program. Our sound effect LIM analyzes the audio to match its song with the most suitable audio setting. Ensure optimal audio streaming performance. Our AI voice extraction features allows users to separate original vocals and the instrumental tracks with a single click. Users can either sing alongside their favorite artists or enjoy instrumental-only mode for karaoke sessions. Third, we continue to expand music consumption scenarios, allowing users to enjoy music wherever they are, however they listen, and whatever moment they are in. During the fourth quarter, We broaden the partnership with mapping service, AMAP and Baidu Maps to roll out a music navigation feature, providing users with a smooth and uninterrupted music streaming experience on their road. Through our in-depth collaborations with electric automakers, such as Biadi and Xiaopeng, we enrich the user's in-car entertainment experience by introducing AI voice attraction and the Meknes karaoke features. We are pleased to see that our IoT user base recorded steady growth with year-over-year and quarter-over-quarter increases in the first quarter. To better serve users on multiple terminals on TME, we also refined the PC streaming user interface and introduced an innovative Lyricus display function in the Windows task text bar, all of which helped enhance users' music companionship. Moving on to some novel features and the fresh experiences we brought to users through constant innovations. First, we integrated the advanced capability of DeepSeq RM to enjoy a more tailored and inclusive music creation experience. For instance, leveraging DeepSeq's lyrical generation capabilities along our AI song writing feature, users can quickly create songs tailored to specific context or modes. We also integrated DeepSeq into our AI assistance, comment sections, recommendation page, and other user touch points. This allow users to easily access interesting music information, receive song comments in diverse styles, and enjoy a more personalized music experience. Second, We launch a virtual fan community that imposes users to express their feelings for artists and music. This immersive platform, co-created by fans and artists, enables users to personalize profiles, design communities, and engage in multi-user synchronized screen sharing and voice chat. It has cemented the bond between artists and their followers, while driving user engagement and ecosystem vitality. Notable example in the fourth quarter include the virtual communities of GCT and the teams in Times with their fan base growing significantly since lunch. Sir. Our interactive and incentivized advertising has been effective in enabling advertisers to reach a broad music audience, increasing adoption strengths over users and the brand's connections. It in turn contributed strongly to our advertising revenue growth in the first quarter. Altogether, We have progressively redefined the music experience for our users and grew our ecosystem into a striving hub for music creation, promotion, and consumption. As we look ahead to 2025, we will continue to embrace AI technologies to empower innovation. Always the goal of creating the most beloved music platform for our users and the creators. With that, I would like to turn the call over to Shirley, our CFO for a deep dive into our financials.