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Tencent Announces 2017 First Quarter Results

2017-05-17 19:46
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SHENZHEN, China, May 17, 2017 /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 first quarter of 2017 ended March 31, 2017 ("1Q2017").

Key Highlights:

  • Total revenues were RMB49,552 million (USD7,182 million[1]), an increase of 55% over the first quarter of 2016 ("YoY").
  • Operating profit was RMB19,272 million (USD2,793 million), an increase of 44% YoY. Operating margin decreased to 39% from 42% last year.
  • Profit for the period was RMB14,548 million (USD2,109 million), an increase of 57% YoY. Net margin was 29%, the same as the first quarter of 2016.
  • Profit attributable to equity holders of the Company for the period was RMB14,476 million (USD2,098 million), an increase of 58% YoY.
  • Basic earnings per share were RMB1.540. Diluted earnings per share were RMB1.522.
  • On a non-GAAP basis, excluding share-based compensation, net (gains)/losses from investee companies, amortisation of intangible assets and impairment provision:
    • Operating profit was RMB18,520 million (USD2,684 million), an increase of 37% YoY. Operating margin decreased to 37% from 42% last year.
    • Profit for the period was RMB14,372 million (USD2,083 million), an increase of 42% YoY. Net margin decreased to 29% from 32% last year.
    • Profit attributable to equity holders of the Company for the period was RMB14,211 million (USD2,060 million), an increase of 42% YoY.
    • Basic earnings per share were RMB1.512. Diluted earnings per share were RMB1.494.

Mr. Ma Huateng, Chairman and CEO of Tencent, said, "We delivered a strong set of operating and financial results for the first quarter of 2017. Financially, our smart phone games, payment related services, digital content subscriptions, PC games and social advertising businesses all contributed to our broad-based revenue growth. Operationally, our entertainment services benefited from the Chinese New Year holiday, and several of our products achieved notable growth during the quarter. These include our video platform which featured popular original content, as well as newer products such as our karaoke app WeSing, our photo editing app Pitu, and our mobile games such as Honour of Kings. We will continue to invest in new technologies, quality content and innovative products to bring increasingly better experiences to our users."

1Q2017 Financial Review

Value Added Services ("VAS"). Revenues increased by 41% to RMB35,108 million for 1Q2017 on a YoY basis. Online games revenues grew by 34% YoY to RMB22,811 million. The increase mainly reflected higher revenues from both smart phone games (such as Honour of Kings and Dragon Nest Mobile) and PC client games (such as LoL and DnF). Social networks revenues grew by 56% YoY to RMB12,297 million. The increase primarily reflected revenue growth from digital content services, including digital music, video, and literature services, and from virtual item sales.

Online advertising. Revenues increased by 47% to RMB6,888 million for 1Q2017 on a YoY basis. In light of the increasingly blurred boundaries between performance-based advertising and brand display advertising, and advertisers increasingly purchasing performance ads on traditionally brand-oriented inventories, we have reclassified online advertising revenues by advertising properties, rather than advertising pricing models.

Media advertising revenues (mainly including those generated from our news, video and music properties) increased by 20% YoY to RMB2,509 million, primarily reflecting growth in revenues from our mobile media platforms, Tencent News and Tencent Video. Social and others advertising revenues(mainly including those generated from our social properties, app store, browser and ad networks) grew by 67% YoY to RMB4,379 million, mainly driven by higher advertising revenues derived from Weixin Moments, Weixin Official Accounts, our app store, and our mobile browser.

Others. Revenues increased by 224% to RMB7,556 million for 1Q2017 on a YoY basis. The increase was primarily driven by higher revenues from our payment related and cloud services.

Other Key Financial Information for 1Q2017

Share-based compensation was RMB1,339 million, up 89% YoY.
EBITDA was RMB19,995 million, up 40% YoY. Adjusted EBITDA was RMB21,300 million, up 42% YoY.

Capital expenditure was RMB2,108 million, down 49% YoY. 
Free cash flow was RMB24,229 million, up 74% YoY.

As at March 31, 2017, Net cash position totaled RMB27,572 million. Fair value of our stakes in listed investee companies (both associates and available-for-sale financial assets) totalled RMB112 billion as at March 31, 2017.

Business Review and Outlook

Operating Information

  • Monthly active user accounts ("MAU") of QQ was 861 million, a decrease of 2% YoY.
  • Smart device MAU of QQ[2] was 678 million, the same as last year.
  • Peak concurrent user accounts ("PCU") of QQ (for the quarter) was 266 million, an increase of 3% YoY.
  • Combined MAU of Weixin and WeChat were 938 million, an increase of 23% YoY.
  • MAU of Qzone was 632 million, a decrease of 3% YoY.
  • Smart device MAU of Qzone[3] was 605 million, the same as last year.
  • Fee-based VAS registered subscriptions were 119 million, an increase of 10% YoY.

Social and Communication

  • QQ: Smart device MAU was broadly stable YoY, while PCU including PC and mobile increased by 3% to 266 million. As a new generation of users come online, we seek to address their needs by sharpening QQ's focus on young people. For example, we introduced Kandian, which recommends personalised content to young QQ users based on their interest graphs and big data analytics. We also enriched our QQ Smart Campus service, providing tools to support the administration of college student affairs, facilitate school-student communication, pay tuition fees and host job listings.
  • Qzone: Smart device MAU was flat YoY. We continued to increase user engagement through refining functionalities in live broadcasting and search.
  • Weixin and WeChat: MAU reached 938 million, representing YoY growth of 23%. We have been nurturing the adoption of Mini Programs by introducing more developer-friendly features such as DIY scannable code, embedded links in Weixin Official Accounts, and Mini Programs discoverable based on location. We launched the Weixin Index which enables users to analyse the popularity of keywords within Weixin Official Accounts.

Online Games

For PC client games, we achieved approximately RMB14.1 billion revenue and generated 24% YoY revenue growth, with increased contributions from key titles such as LoL, DnF, and FIFA Online 3, supported by seasonal expansion packs, promotional activities and eSports events. Paying users ratio increased on a YoY basis.

For smart phone games, we achieved approximately RMB12.9 billion revenue[4], representing 57% YoY growth, driven by existing and new games such as Honour of Kings, CF Mobile and Dragon Nest Mobile. 

Digital Content

Digital content revenue recorded rapid growth during the quarter, as users were increasingly willing to pay for content, and as the copyright environment continued to improve.

Our video subscriptions revenue more than tripled YoY, driven by in-house productions such as Candle in the Tomb, and licensed content such as Country Romance 9.

For the QQ Music streaming service, we upgraded the listening and sharing experience with enhanced features in user-generated playlists, search and our music video player. WeSing, our karaoke app, saw significant growth in active users and paying users, benefitting from upgraded features such as singing contests with friends and the addition of higher-grossing virtual gifting items.

For online literature, we maintained our position as the leading online content library and publishing platform, with healthy growth in the number of daily paying readers.

Online Advertising

During 1Q2017, our advertising business delivered robust expansion, with Tencent Video and Tencent News being the key contributors to YoY growth for our media advertising business; and Weixin properties for our social and others advertising business.

Our news services maintained industry leadership in terms of DAU, and our video business ranked first in China in terms of mobile video views.

We upgraded our neighbourhood LBS advertising in Weixin Moments, enabling advertisers to more precisely target customers within their vicinity, which is particularly attractive to advertisers such as wedding suppliers and home decoration vendors.

Others

We generated 224% YoY revenue growth, driven mainly by payment related services and cloud services.

For other detailed disclosure, please refer to our website 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 social products Weixin and QQ link our users to a rich digital content catalogue including games, video, music and books. Our proprietary targeting technology helps advertisers reach out to hundreds of millions of consumers in China.  Our infrastructure services including payment, security, cloud and artificial intelligence create differentiated offerings and support our partners' business growth.  Tencent invests heavily in people and innovation, enabling us to evolve with the Internet.   

Tencent was founded in Shenzhen, China, in 1998.  Shares of Tencent (00700.hk) are traded on the Main Board of the Stock Exchange of Hong Kong. 

For investor and media enquiries, please contact:

Jane Yip

Tel: (86) 755 86013388 ext 68961/ (852) 3148 5100

Email: janeyip@tencent.com

Stella Lui 

Tel: (86) 755 86013388 ext 68870/ (852) 3148 5100

Email: stellalui@tencent.com

Kennis Lau

Tel: (86) 755 86013388 ext 68958/ (852) 3148 5100

Email: kennislau@tencent.com

Non-GAAP Financial Measures

To supplement the consolidated results of the Group prepared in accordance with IFRS, certain additional non-GAAP 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-GAAP 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-GAAP financial measures may be defined differently from similar terms used by other companies.

The Company's management believes that the non-GAAP 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 M&A transactions. In addition, non-GAAP adjustments include relevant non-GAAP adjustments for the Group's material associates based on available published financials of the relevant material 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, 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 future.  Underlying the forward-looking statements is a large number of risks and uncertainties.  Further information regarding these risks and uncertainties is included in our other public disclosure documents on our corporate website.

CONSOLIDATED INCOME STATEMENT

RMB in million, unless specified



Unaudited


Unaudited


1Q2017

1Q2016


1Q2017

4Q2016

Revenues

49,552

31,995


49,552

43,864

    VAS

35,108

24,964


35,108

29,191

  Online advertising

6,888

4,701


6,888

8,288

    Others

7,556

2,330


7,556

6,385

Cost of revenues

(24,109)

(13,406)


(24,109)

(20,238)

Gross profit

25,443

18,589


25,443

23,626

Gross margin

51%

58%


51%

54%

Interest income

808

703


808

653

Other gains, net

3,191

506


3,191

1,022

Selling and marketing expenses

(3,158)

(2,032)


(3,158)

(4,462)

General and administrative expenses

(7,012)

(4,368)


(7,012)

(6,909)

Operating profit

19,272

13,398


19,272

13,930

Operating margin

39%

42%


39%

32%

Finance costs, net

(691)

(491)


(691)

(483)

Share of losses of associates and joint ventures

(375)

(1,089)


(375)

(522)

Profit before income tax

18,206

11,818


18,206

12,925

Income tax expense

(3,658)

(2,550)


(3,658)

(2,402)

Profit for the period

14,548

9,268


14,548

10,523

Net margin

29%

29%


29%

24%

Attributable to:






    Equity holders of the Company

14,476

9,183


14,476

10,529

    Non-controlling interests

72

85


72

(6)







Non-GAAP profit attributable to equity holders
    of the Company

14,211

10,032


14,211

12,332







Earnings per share for profit attributable
    to equity holders of the Company
    
(in RMB per share)






- basic

1.540

0.981


1.540

1.121

- diluted

1.522

0.970


1.522

1.108

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

RMB in million, unless specified



Unaudited


1Q2017

1Q2016

Profit for the period

14,548

9,268

Other comprehensive income, net of tax:



Items that may be subsequently reclassified to profit or loss



Share of other comprehensive income of associates

111

8

Net gains/(losses) from changes in fair value of available-for-sale financial assets

7,226

(1,653)

Transfer to profit or loss upon disposal of available-for-sale financial assets

(1,832)

-

Currency translation differences

(985)

(214)

Other fair value gains/(losses)

59

(139)




Items that may not be subsequently reclassified to profit or loss



Other fair value losses

(343)

(262)

Total comprehensive income for the period

18,784

7,008

Attributable to:



    Equity holders of the Company

18,717

6,920

    Non-controlling interests

67

88

 

 

 

OTHER FINANCIAL INFORMATION

RMB in million, unless specified



Unaudited


1Q2017

4Q2016

1Q2016

EBITDA (a)

19,995

16,775

14,329

Adjusted EBITDA (a)

21,300

18,495

15,004

Adjusted EBITDA margin (b)

43%

42%

47%

Interest expense

667

611

477

Net cash (c)

27,572

18,140

27,429

Capital expenditures (d)

2,108

2,839

4,105


Note:

(a)      EBITDA consists of operating profit less interest income and other gains/losses, net, and plus depreciation of property, plant and equipment as well as investment properties, and amortisation of intangible assets. Adjusted EBITDA consists of EBITDA plus equity-settled share-based compensation expenses.

(b)      Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues.

(c)      Net cash represents period end balance and is calculated as cash and cash equivalents, 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, land use rights and intangible assets (excluding online game and other content licences).

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
RMB in million, unless specified



Unaudited


Audited


31 March 2017


31 December 2016

ASSETS




Non-current assets




Property, plant and equipment

14,708


13,900

Construction in progress

4,819


4,674

Investment properties

847


854

Land use rights

5,147


5,174

Intangible assets

36,338


36,467

Investments in associates

69,983


70,042

Investments in redeemable instruments of associates

14,161


9,627

Investments in joint ventures

696


630

Available-for-sale financial assets

97,527


83,806

Prepayments, deposits and other assets

7,499


7,363

Other financial assets

1,813


1,760

Deferred income tax assets

7,536


7,033

Term deposits

5,414


5,415






266,488


246,745

Current assets




Inventories

263


263

Accounts receivable

12,900


10,152

Prepayments, deposits and other assets

17,579


14,118

Other financial assets

2,253


1,649

Term deposits

66,631


50,320

Restricted cash

763


750

Cash and cash equivalents

68,861


71,902






169,250


149,154





Total assets

435,738


395,899






 

 

 


CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

RMB in million, unless specified



Unaudited


Audited


31 March 2017


31 December 2016

EQUITY




Equity attributable to equity holders of the Company equity holders




Share capital

-


-

Share premium

18,524


17,324

Shares held for share award schemes

(3,332)


(3,136)

Other reserves

27,892


23,693

Retained earnings

151,219


136,743






194,303


174,624





Non-controlling interests

11,384


11,623





Total equity

205,687


186,247





LIABILITIES




Non-current liabilities




Borrowings

62,935


57,549

Notes payable

31,879


36,204

Long-term payables

4,422


4,935

Other financial liabilities

2,560


2,576

Deferred income tax liabilities

5,515


5,153

Deferred revenue

1,650


2,038






108,961


108,455





Current liabilities




Accounts payable

32,804


27,413

Other payables and accruals

17,998


20,873

Borrowings

11,889


12,278

Notes payable

7,581


3,466

Current income tax liabilities

6,551


5,219

Other tax liabilities

1,754


745

Deferred revenue

42,513


31,203






121,090


101,197





Total liabilities

230,051


209,652





Total equity and liabilities

435,738


395,899









 

 

 

RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS




Adjustments


RMB in million,
unless specified

As

reported


Share-based

compensation (a)

Net (gains)/losses from investee companies (b)

Amortisation of
intangible assets (c)

Impairment

provision (d)

Non-GAAP


                                            Unaudited three months ended 31 March 2017

Operating profit

19,272


1,339

(2,747)

153

503

18,520

Profit for the period

14,548


1,530

(2,717)

500

511

14,372

Profit attributable to equity holders

14,476


1,483

(2,717)

458

511

14,211

Operating margin

39%






37%

Net margin

29%






29%


                                           Unaudited three months ended 31 December 2016

Operating profit

13,930


1,754

(1,502)

162

602

14,946

Profit for the period

10,523


1,980

(1,440)

541

828

12,432

Profit attributable to equity holders

10,529


1,940

(1,440)

493

810

12,332

Operating margin

32%






34%

Net margin

24%






28%


                                           Unaudited three months ended 31 March 2016

Operating profit

13,398


707

(728)

47

60

13,484

Profit for the period

9,268


898

(786)

356

398

10,134

Profit attributable to equity holders

9,183


889

(786)

348

398

10,032

Operating margin

42%






42%

Net margin

29%






32%


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 and businesses, and fair value changes on options and other financial instruments arising from investments in investee companies

(c)   Amortisation of intangible assets resulting from acquisitions, net of related deferred tax

(d)   Impairment provision for associates, available-for-sale financial assets, and intangible assets arising from acquisitions

 

 

 

Figures stated in USD are based on USD1 to RMB6.8993.

2  

We have adjusted historical smart device MAU figure for QQ so as to include users who only participate in certain activities inside the QQ application, such as Interest Tribe or, more recently, listening to online music and reading online literature. These changes had a relatively immaterial impact on the MAU count and growth rates, but we feel that they better reflect the broadening range of user activities within QQ.

3  

We have adjusted historical smart device MAU figure for Qzone so as to better reflect user behaviour on Qzone via smart devices.

4

Including smart phone games revenue attributable to our social networks business.

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/tencent-announces-2017-first-quarter-results-300459182.html

Source: Tencent Holdings Limited

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