TENCENT ANNOUNCES 2023 THIRD QUARTER RESULTS
HONG KONG, Nov. 15, 2023 /PRNewswire/ -- Tencent Holdings Limited ("Tencent" or the "Company", 00700.HK), a leading provider of Internet value-added services in China, today announced the unaudited consolidated results for the third quarter ("3Q2023") ended September 30, 2023.
*3Q2023 **Key Highlights *
*Revenues: +10% YoY, non-IFRS^*[1]* profit attributable to equity holders of the Company: +39% YoY*
· *Total r**evenues* were RMB154.6 billion (USD21.5 billion^[2]), an increase of 10% over the third quarter of 2022 ("YoY").
· *On a non-IFRS basis**, *which is intended to reflect core earnings by excluding certain one-time and/or non-cash items:
· *Operating profit* was RMB55.5 billion (USD7.7 billion), an increase of 36% YoY. Operating margin increased to 36% from 29% last year.
· *Profit for the period* was RMB45.8 billion (USD6.4 billion), an increase of 37% YoY. Net margin increased to 30% from 24% last year.
· *Profit attributable to equity holders of the Company* for the quarter was RMB44.9 billion (USD6.3 billion), an increase of 39% YoY.
· *Basic earnings per share* were RMB4.753. *Diluted earnings per share* were RMB4.657.
· *On an IFRS basis*:
· Operating profit was RMB48.5 billion (USD6.8 billion), a decrease of 6% YoY. Operating margin decreased to 31% from 37% last year.
· Profit for the period was RMB36.8 billion (USD5.1 billion), a decrease of 5% YoY. Net margin decreased to 24% from 28% last year.
· Profit attributable to equity holders of the Company for the quarter was RMB36.2 billion (USD5.0 billion), a decrease of 9% YoY.
· Basic earnings per share were RMB3.828. Diluted earnings per share were RMB3.752.
· *Total cash *were RMB387.4 billion (USD54.0 billion) at the end of the period.
Mr. Ma Huateng, Chairman and CEO of Tencent, said, "During the third quarter of 2023, we achieved solid and high quality revenue growth, notable margin expansion, and structural operating leverage. Relatively new services such as Video Accounts and Mini Games contributed high margin revenue streams while we re-focused away from less-scalable activities. We are increasing investment in our AI models, providing new features to our products and enhancing our targeting capabilities for both content and advertising. We aspire to position our leading AI capability not only as a growth multiplier for ourselves, but also as a value provider to our enterprise customers, and the society at large. "
[1] Non-IFRS adjustments excludes share-based compensation, M&A related impact such as net (gains)/losses from investee companies, amortisation of intangible assets and impairment provision/(reversals), SSV & CPP, income tax effects and others
[2] Figures stated in USD are based on USD1 to RMB7.1798
*3Q2023** Financial Review *
Revenues from VAS increased by 4% to RMB75.7 billion for the third quarter of 2023 on a year-on-year basis. International Games revenues increased by 14% to RMB13.3 billion, or up 7% excluding the impact of currency movements. By title, we saw a revenue recovery for PUBG Mobile, alongside healthy revenue contributions from Goddess of Victory: NIKKE, VALORANT, and Triple Match 3D, versus decreased revenue from Tower of Fantasy, attributable to a tough comparison against its launch quarter in the same period last year. Domestic Games revenues grew by 5% to RMB32.7 billion, driven by the recent launches of Lost Ark and VALORANT, as well as increased revenues from evergreen titles such as Honour of Kings and DnF. Social Networks revenues were broadly stable at RMB29.7 billion, supported by revenue growth from music subscriptions, Mini Games platform service fees, and app-based game virtual item sales, offset by revenue declines from music-related and games-related live streaming services.
Revenues from Online Advertising were RMB25.7 billion for the third quarter of 2023, up 20% year-on-year, propelled by robust advertising demand for Video Accounts, our mobile ad network, and Weixin Search, with notable growth in the local services and FMCG categories.
Revenues from FinTech and Business Services increased by 16% year-on-year to RMB52 billion for the third quarter of 2023. FinTech Services maintained double-digit year-on-year growth, driven by increased commercial payment activities and higher revenues from wealth management services. Business Services achieved a faster year-on-year growth rate compared to the second quarter of 2023, benefitting from our cloud services restructuring undertaken in prior periods, as well as higher eCommerce technology service fees within Video Accounts.
*Other Key Financial Information for **3Q2023 *
EBITDA was RMB55.8 billion, up 29% YoY. Adjusted EBITDA was RMB61.3 billion, up 26% YoY.
Capital expenditures were RMB8.0 billion, up 237% YoY.
Free cash flow was RMB51.1 billion, up 85% YoY.
As at September 30, 2023, net cash position totalled RMB36.4 billion. Fair value of our shareholdings^[3] in listed investee companies (excluding subsidiaries) totalled RMB464.4 billion (USD64.7 billion) and the carrying book value of our unlisted investments was RMB347.2 billion (USD48.4 billion). During the third quarter, the Company repurchased approximately 47.5 million shares on the Hong Kong Stock Exchange for an aggregate consideration of approximately RMB14.0 billion.
*Operating Metrics * *As at *
*30 September*
* 2023*
As at
30 September
2022
Year-
on-year
change
As at
30 June
2023
Quarter-on-
quarter
change (in millions, unless specified)
Combined MAU of Weixin and
WeChat
*1,336*
1,309
2 %
1,327
0.7 %
Mobile device MAU of QQ
*558*
574
-3 %
571
-2 %
Fee-based VAS registered
subscriptions
*245*
229
7 %
241
2 %
[3] Including those held via special purpose vehicles, on an attributable basis
*B**u**siness Review and Selected Product Highlights *
· At Weixin, Video Accounts' total video views climbed over 50% year-on-year, supported by a thriving creator community and growing user mindshare. Original content video views increased rapidly and now contribute the large majority of Video Accounts' total video views.
· At QQ, we are adding capabilities to QQ Channels, which enable users with shared hobbies, activities or memberships to operate interest-based communities, utilising software tools such as voice chat and event management.
· Video subscriptions declined 3% year-on-year, but grew 1% quarter-on-quarter, to 117 million.
· Music subscriptions rose 21% year-on-year to 103 million, while ARPU increased 17% year-on-year.
· The 19th Asian Games included esports as a medal event for the first time, and we are the publisher for four out of the seven selected game titles.
· Recent domestic game launches included PC tactical first person game VALORANT, mobile hero first person game Hyper Legends, and mobile MMORPG MapleStory: The Legends of Maple. Recent international game launches included mobile extraction shooter Arena Breakout.
· Weixin's closed-loop advertising revenue (derived from advertisements linking to the landing pages of Weixin Mini Programs, Video Accounts, Official Accounts and WeCom) increased over 30% year-on-year and contributed over half of Weixin advertising revenue.
· Video Accounts advertising revenue grew notably quarter-on-quarter, driven by increases in video views and user time spent, while ad load percentage remained stable.
· We expanded our advertising AI models with more parameters to increase targeting and attribution accuracy. We also started to provide generative AI tools to advertiser partners, enabling them to dynamically generate advertising visuals based on text prompts, and to optimise advertisement sizes for different inventories.
· We are upgrading our proprietary foundation model, Tencent Hunyuan, and deploying it for in-house products, as well as making it available to enterprise customers.
For other detailed disclosure, please refer to our website https://www.tencent.com/en-us/investors.htmlhttp://www.tencent.com/ir, or follow us via Weixin Official Account (Weixin ID: Tencent_IR):
*About Tencent*
Tencent uses technology to enrich the lives of Internet users.
Our communication and social services, Weixin and QQ, connect users with each other and with digital content and services, both online and offline, making their lives more convenient. Our targeted advertising service helps advertisers reach out to hundreds of millions of consumers in China. Our FinTech and business services support our partners' business growth and assist their digital upgrade.
Tencent invests heavily in talent and technological innovation, actively promoting the development of the Internet industry. Tencent was founded in Shenzhen, China, in 1998. Shares of Tencent (00700.HK) are listed on the Main Board of the Stock Exchange of Hong Kong.
*Investor contact: IR@tencent.com*
*Media contact: GC@tencent.com *
*Non-IFRS Financial Measures*
To supplement the consolidated results of the Group prepared in accordance with IFRS, certain additional non-IFRS financial measures (in terms of operating profit, operating margin, profit for the period, net margin, profit attributable to equity holders of the Company, basic EPS and diluted EPS), have been presented in this press release. These unaudited non-IFRS financial measures should be considered in addition to, not as a substitute for, measures of the Group's financial performance prepared in accordance with IFRS. In addition, these non-IFRS financial measures may be defined differently from similar terms used by other companies.
The Company's management believes that the non-IFRS financial measures provide investors with useful supplementary information to assess the performance of the Group's core operations by excluding certain non-cash items and certain impact of investment-related transactions. In addition, non-IFRS adjustments include relevant non-IFRS adjustments for the Group's major associates based on available published financials of the relevant major associates, or estimates made by the Company's management based on available information, certain expectations, assumptions and premises.
*Forward-Looking Statements*
This press release contains forward-looking statements relating to the business outlook, estimates of financial performance, forecast business plans and growth strategies of the Company. These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release. They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control. These forward-looking statements may prove to be incorrect and may not be realised in the future. Underlying these forward-looking statements are a lot of risks and uncertainties. In light of the risks and uncertainties, the inclusion of forward-looking statements in this press release should not be regarded as representations by the Board or the Company that the plans and objectives will be achieved, and investors should not place undue reliance on such statements.
*CONSOLIDATED INCOME STATEMENT *
RMB in millions, unless specified
*Unaudited*
*Unaudited* *3Q2023*
3Q2022
*3Q2023*
2Q2023
*Revenues*
*154,625*
140,093
*154,625*
149,208
VAS
*75,748*
72,727
*75,748*
74,211
Online Advertising
*25,721*
21,443
*25,721*
25,003
FinTech and Business Services
*52,048*
44,844
*52,048*
48,635
Others
*1,108*
1,079
*1,108*
1,359
*Cost of revenues*
*(78,102)*
(78,110)
*(78,102)*
(78,368)
*Gross profit*
*76,523*
61,983
*76,523*
70,840
*Gross margin*
*49 %*
44 %
*49 %*
47 %
Interest income
*3,509*
2,328
*3,509*
3,419
Other gains/(losses), net
*2,644*
20,886
*2,644*
(230)
Selling and marketing expenses
*(7,912)*
(7,124)
*(7,912)*
(8,310)
General and administrative expenses
*(26,289)*
(26,480)
*(26,289)*
(25,419)
*Operating profit*
*48,475*
51,593
*48,475*
40,300
*Operating margin*
*31 %*
37 %
*31 %*
27 %
Finance costs
*(2,784)*
(1,950)
*(2,784)*
(3,291)
Share of profit/(loss) of associates and
joint ventures, net
*2,098*
(3,697)
*2,098*
1,159
*Profit before income tax*
*47,789*
45,946
*47,789*
38,168
Income tax expense
*(11,008)*
(7,104)
*(11,008)*
(11,145)
*Profit for the period*
*36,781*
38,842
*36,781*
27,023
*Net margin*
*24 %*
28 %
*24 %*
18 %
*Attributable to:*
Equity holders of the Company
*36,182*
39,943
*36,182*
26,171
Non-controlling interests
*599*
(1,101)
*599*
852
Non-IFRS profit attributable to equity holders of the Company
*44,921*
32,254
*44,921*
37,548
*Earnings per share for profit attributable to equity holders of the Company *
*(in RMB per share)*
- basic
*3.828*
4.187
*3.828*
2.761
- diluted
*3.752*
4.104
*3.752*
2.695
*CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME*
RMB in millions, unless specified
*Unaudited* *3Q2023*
3Q2022
*Profit for the period*
*36,781*
38,842
*Other comprehensive income, net of tax:*
Items that may be subsequently reclassified to profit or loss
Share of other comprehensive income of associates and joint ventures
*278*
948
Transfer of share of other comprehensive income to profit or loss upon disposal and deemed disposal of associates and joint ventures
*-*
42
Transfer to profit or loss upon disposal of financial assets at fair value through other comprehensive income
*1*
-
Net losses from changes in fair value of financial assets at fair value through
*(3)*
(8)
Currency translation differences
*(7,303)*
5,809
Other fair value (losses)/gains, net
*(897)*
1,830
Items that will not be subsequently reclassified to profit or loss
Share of other comprehensive income of associates and joint ventures
*564*
503
Net losses from changes in fair value of financial assets at fair value through other comprehensive income
*(25,417)*
(26,433)
Currency translation differences
*(720)*
2,245 *(33,497)*
(15,064)
*Total comprehensive income for the **period*
*3,284*
23,778
*Attributable to:*
Equity holders of the Company
*3,526*
24,826
Non-controlling interests
*(242)*
(1,048)
*O**THER FINANCIAL INFORMATION*
RMB in millions, unless specified
*Unaudited* *3Q2023*
2Q2023
3Q2022
EBITDA (a)
*55,824*
51,918
43,124
Adjusted EBITDA (a)
*61,301*
56,848
48,610
Adjusted EBITDA margin (b)
*40 %*
38 %
35 %
Interest and related expenses
*3,061*
3,009
2,729
Net cash/(debt) (c)
*36,431*
17,717
(27,271)
Capital expenditures (d)
*8,005*
3,953
2,377
Note:
(a) EBITDA is calculated as operating profit minus interest income and other gains/(losses), net, and adding back depreciation of property, plant and equipment, investment properties as well as right-of-use assets, and amortisation of intangible assets and land use rights. Adjusted EBITDA is calculated as EBITDA plus equity-settled share-based compensation expenses.
(b) Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues.
(c) Net cash/(debt) represents period end balance and is calculated as cash and cash equivalents, plus term deposits and others, minus borrowings and notes payable.
(d) Capital expenditures consist of additions (excluding business combinations) to property, plant and equipment, construction in progress, investment properties, land use rights and intangible assets (excluding long-form video and music content, game licences and other content).
*CONSOLIDATED STATEMENT OF FINANCIAL POSITION*
RMB in millions, unless specified
*Unaudited*
Audited *As at *
*September 30, 2023*
As at
December 31, 2022
*ASSETS*
*Non-current assets *
Property, plant and equipment
*51,173*
53,978
Land use rights
*17,504*
18,046
Right-of-use assets
*19,174*
22,524
Construction in progress
*13,486*
9,229
Investment properties
*563*
559
Intangible assets
*175,919*
161,802
Investments in associates
*252,715*
246,043
Investments in joint ventures
*8,092*
6,672
Financial assets at fair value through profit or loss
*217,559*
206,085
Financial assets at fair value through other
comprehensive income
*187,163*
185,247
Prepayments, deposits and other assets
*28,489*
36,752
Other financial assets
*3,107*
6,987
Deferred income tax assets
*29,848*
29,882
Term deposits
*30,440*
28,336
*1,035,232*
1,012,142
*Current assets*
Inventories
*1,676*
2,333
Accounts receivable
*47,327*
45,467
Prepayments, deposits and other assets
*91,298*
76,685
Other financial assets
*6,145*
1,278
Financial assets at fair value through profit or loss
*24,331*
27,963
Term deposits
*185,543*
104,776
Restricted cash
*3,205*
2,783
Cash and cash equivalents
*146,476*
156,739
Assets held for distribution
*-*
147,965
*506,001*
565,989
*Total assets*
*1,541,233*
1,578,131
*CONSOLIDATED STATEMENT OF FINANCIAL POSITION **(continued)*
RMB in millions, unless specified
*Unaudited*
Audited
*As at *
*September 30, 2023*
As at
December 31, 2022
*EQUITY*
*Equity attributable to equity holders of the Company*
Share capital
*-*
-
Share premium
*46,557*
62,418
Treasury shares
*(2,235)*
(1,868)
Shares held for share award schemes
*(5,351)*
(4,226)
Other reserves
*(57,925)*
(40,914)
Retained earnings
*787,468*
705,981
*768,514*
721,391
*Non-controlling interests*
*62,431*
61,469
*Total equity*
*830,945*
782,860
*LIABILITIES*
*Non-current liabilities*
Borrowings
*151,544*
163,668
Notes payable
*138,965*
148,669
Long-term payables
*12,457*
9,067
Other financial liabilities
*8,896*
5,574
Deferred income tax liabilities
*16,524*
12,162
Lease liabilities
*16,198*
18,424
Deferred revenue
*3,360*
3,503
*347,944*
361,067
*Current liabilities*
Accounts payable
*111,921*
92,381
Other payables and accruals
*68,120*
61,139
Borrowings
*46,158*
11,580
Notes payable
*14,353*
10,446
Current income tax liabilities
*16,901*
13,488
Other tax liabilities
*5,543*
4,698
Other financial liabilities
*4,823*
3,937
Lease liabilities
*5,711*
6,354
Deferred revenue
*88,814*
82,216
Dividends payable for distribution in specie
*-*
147,965
*362,344*
434,204
*Total liabilities*
*710,288*
795,271
*Total equity and liabilities*
*1,541,233*
1,578,131
*RECONCILIATIONS OF IFRS TO NON-IFRS RESULTS*
*As*
*reported*
*Adjustments*
*Non-IFRS*
RMB in millions,
unless specified
*Share-based*
*compensation **(a)*
*Net (gains)/losses
from investee
companies (b)*
*Amortisation of*
*intangible assets
(c)*
*Impairment*
*provisions/
(reversals) (d)*
*SSV &
CPP (e)*
*Others (f)*
*Income*
*tax effects (g)*
*Unaudited three months ended September 30, 2023*
*Operating profit*
*48,475*
*5,655*
*(703)*
*1,434*
*321*
*301*
*–*
*–*
*55,483*
*Profit for the period*
*36,781*
*6,948*
*(565)*
*2,666*
*346*
*301*
*–*
*(640)*
*45,837*
*Profit attributable to*
* equity holders*
*36,182*
*6,833*
*(583)*
*2,458*
*309*
*301*
*–*
*(579)*
*44,921*
*Operating margin*
*31 %*
*36 %*
*Net margin*
*24 %*
*30 %*
*Unaudited three months ended June 30, 2023*
Operating profit
40,300
5,551
(206)
1,023
82
369
3,003
-
50,122
Profit for the period
27,023
6,859
(287)
2,372
210
369
3,002
(929)
38,619
Profit attributable to
equity holders
26,171
6,661
(162)
2,187
193
369
3,002
(873)
37,548
Operating margin
27 %
34 %
Net margin
18 %
26 %
*Unaudited three months ended September 30, 2022*
Operating profit
51,593
5,925
(32,341)
1,313
12,962
1,445
10
-
40,907
Profit for the period
38,842
8,020
(32,106)
3,065
13,283
1,445
1,738
(933)
33,354
Profit attributable to
equity holders
39,943
7,818
(32,402)
2,836
11,617
1,445
1,738
(741)
32,254
Operating margin
37 %
29 %
Net margin
28 %
24 %
Note:
(a) Including put options granted to employees of investee companies on their shares and shares to be issued under investee companies' share-based incentive plans which can be acquired by the Group, and other incentives
(b) Including net (gains)/losses on deemed disposals/disposals of investee companies, fair value changes arising from investee companies, and other expenses in relation to equity transactions of investee companies
(c) Amortisation of intangible assets resulting from acquisitions
(d) Mainly including impairment provisions/(reversals) for associates, joint ventures, goodwill and other intangible assets arising from acquisitions
(e) Mainly including donations and expenses incurred for the Group's Sustainable Social Value and Common Prosperity Programme ("SSV & CPP") initiatives
(f) Primarily non-recurring compliance-related costs and expenses incurred for certain litigation settlements of the Group and/or arising from investee companies
(g) Income tax effects of non-IFRS adjustments