TENCENT ANNOUNCES 2023 ANNUAL AND FOURTH QUARTER RESULTS

High Quality Revenue Streams Drove Gross Profit Growth of 23% in FY2023
Increasing Dividend by 42%; More Than Doubling Share Repurchase to Over HKD100 Billion in 2024

HONG KONG, March 20, 2024 /PRNewswire/ -- Tencent Holdings Limited (HKEX: 00700 (HKD Counter) and 80700 (RMB Counter), "Tencent" or the "Company"), a world-leading Internet and technology company in China, today announced the audited consolidated results for the year ended December 31, 2023 ("FY2023") and the unaudited consolidated results for the fourth quarter ("4Q2023").

Mr. Ma Huateng, Chairman and CEO of Tencent, said, "In 2023, we achieved breakthroughs in a number of products and services, as Video Accounts' total user time spent more than doubled, enhancements to our advertising AI model significantly improved our targeting performance, and international contribution to our games revenue reached a record 30%. These developments drove high-quality revenue streams which fuelled our gross profit growth of 23%, and supported our plan to step up capital returns to shareholders. Tencent Hunyuan developed into a top-tier foundation model with superior performance in numerical reasoning, logical inference, and multi-turn conversations. In addition, we actively sought to leverage our technology and platform to create value for society through initiatives such as our digital philanthropy platform, one of the largest of its kind in the world, whose 99 Giving Day event raised a record RMB3.8 billion in public donations."

FY2023 Financial Highlights

Revenues: +10% YoY, gross profit: +23% YoY, non-IFRS^[1] profit attributable to equity holders of the Company: +36% YoY

• Total revenues were RMB609.0 billion (USD86.0 billion^[2]), up 10% over 2022.
• Gross profit was RMB293.1 billion (USD41.4 billion), up 23% 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 RMB191.9 billion (USD27.1 billion), up 34% YoY. Operating margin* increased to 32% from 26% last year.
  • Profit for the year was RMB161.7 billion (USD22.8 billion), up 36% YoY. Net margin increased to 27% from 21% last year.
  • Profit attributable to equity holders of the Company for the year was RMB157.7 billion (USD22.3 billion), up 36% YoY.
  • Basic earnings per share were RMB16.678. Diluted earnings per share were RMB16.320.

• On an IFRS basis:
  • Operating profit* was RMB160.1 billion (USD22.6 billion), up 44% YoY. Operating margin* increased to 26% from 20% last year.
  • Profit for the year was RMB118.0 billion (USD16.7 billion), down 37% YoY. Net margin decreased to 19% from 34% last year.
  • Profit attributable to equity holders of the Company for the year was RMB115.2 billion (USD16.3 billion), down 39% YoY.
  • Basic earnings per share were RMB12.186. Diluted earnings per share were RMB11.887.

FY2023 Business Review and Outlook 

• Video Accounts' total user time spent more than doubled, driven by DAU and time spent per user, benefitting from enhanced recommendation algorithms. We provided more monetisation support for Video Accounts creators, such as facilitating merchandise sales through live streaming, and matching creators with brands for marketing campaigns.
• Mini Games' gross receipts increased over 50%, with Mini Games representing the leading casual game platform in China.
• QQ Channels enhanced interest-based user interactions across categories such as games, lifestyle, and knowledge-based content.
• Tencent Video and Tencent Music extended their leadership in the long-form video and music streaming industries, with 117 million^[3] video subscriptions and 107 million^[4] music subscriptions.
• The number of Tencent mobile and PC "major hit games" in China surpassing average quarterly DAU of 5 million for mobile or 2 million for PC, and generating over RMB4 billion annual gross receipts (thresholds which we view as indicative of a major and enduring hit), increased from 6 in 2022 to 8 in 2023.
• We upgraded our AI-powered advertising technology platform, which significantly enhanced our targeting accuracy and thus advertising revenue.
• We strengthened our payment compliance capabilities, enhanced Mini Program-based transaction tools and upgraded cross-border payment experience.
• WeCom and Tencent Meeting deployed generative AI-powered functionalities and increased their monetisation.
• We launched our proprietary foundation model, Tencent Hunyuan, and scaled it up to trillion parameter scale, utilising a Mixture of Experts architecture.

We returned substantial capital to shareholders in 2023 through payment of cash dividend, share repurchases, and settlement of distribution in specie. We have proposed to increase our annual dividend in respect of the year ended 31 December 2023 by 42%, to HKD3.40 per share^[5] (equivalent to approximately HKD32 billion), and we intend to at least double the size of our share repurchases, from approximately HKD49 billion in 2023 to over HKD100 billion in 2024.

FY2023 Environmental, Social and Governance ("ESG") Initiatives

Harnessing our technology and platform, we continue to create social value for our users, partners and the society at large.

• Our digital philanthropy platform helped raise a record RMB3.8 billion in public donations during the 99 Giving Day campaign, up 15% year-on-year.
• Our New Cornerstone Investigator Program has supported 104 scientists, contributing to the development of basic science research.
• We made progress in our decarbonisation journey by applying our fourth-generation data centre technology to reduce emissions and increasing the adoption of renewable energy.
• In August 2023, we joined the United Nations Global Compact ("UNGC"), demonstrating our commitment to integrating UNGC's principles into our strategy, culture and day-to-day operations, and supporting UNGC's Sustainable Development Goals.

4Q2023 Financial Highlights

Revenues: +7% YoY, gross profit: +25% YoY, non-IFRS profit attributable to equity holders of the Company: +44% YoY

• Total revenues were RMB155.2 billion (USD21.9 billion), up 7% over the fourth quarter of 2022 ("YoY").
• Gross profit was RMB77.6 billion (USD11.0 billion), up 25% 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 RMB49.1 billion (USD6.9 billion), up 35% YoY. Operating margin* increased to 32% from 25% last year.
  • Profit for the period was RMB43.8 billion (USD6.2 billion), up 43% YoY. Net margin increased to 28% from 21% last year.
  • Profit attributable to equity holders of the Company for the quarter was RMB42.7 billion (USD6.0 billion), up 44% YoY.
  • Basic earnings per share were RMB4.537. Diluted earnings per share were RMB4.443.
    
    
• On an IFRS basis:
  • Operating profit* was RMB41.4 billion (USD5.8 billion), up 42% YoY. Operating margin* increased to 27% from 20% last year.
  • Profit for the period was RMB27.8 billion (USD3.9 billion), down 74% YoY. Net margin decreased to 18% from 74% last year.
  • Profit attributable to equity holders of the Company for the quarter was RMB27.0 billion (USD3.8 billion), down 75% YoY.
  • Basic earnings per share were RMB2.873. Diluted earnings per share were RMB2.807.
• Total cash were RMB403.3 billion (USD56.9 billion) and free cash flow was RMB34.2 billion (USD 4.8 billion), up 48% YoY. Net cash position totalled RMB54.7 billion (USD 7.7 billion).
• Fair value of our shareholdings[6] in listed investee companies (excluding subsidiaries) totalled RMB550.7 billion (USD77.8 billion) and the carrying book value of our unlisted investee companies was RMB337.3 billion (USD47.6 billion).
• During the fourth quarter, the Company repurchased approximately 56.3 million shares on the Hong Kong Stock Exchange for a consideration of approximately RMB15.7 billion.

Operating Metrics 

4Q2023 Business Review

Revenues from VAS decreased by 2% YoY to RMB69.1 billion for the fourth quarter of 2023. International Games revenues increased by 1% YoY to RMB13.9 billion, or declined by 1% YoY when excluding currency fluctuations, reflecting Supercell repositioning some of its games. PUBG Mobile saw a strong upturn in revenue, while VALORANT maintained robust growth. Domestic Games revenues declined by 3% YoY to RMB27.0 billion due to decreased contributions from Honour of Kings and Peacekeeper Elite, partially offset by contributions from our recently launched games, such as VALORANT and Lost Ark. Social Networks revenues decreased by 2% YoY to RMB28.2 billion, due to lower revenues from music-related and games-related live streaming services, partially mitigated by revenue growth from music subscriptions and Mini Games platform service fees.

Revenues from Online Advertising were RMB29.8 billion for the fourth quarter of 2023, up 21% YoY, propelled by advertising demand for Video Accounts, as well as the ongoing upgrade of our advertising platform. All categories except for automotive saw a year-on-year increase in advertising spending with us, with particularly notable growth in Internet services, healthcare and consumer goods categories.

Revenues from FinTech and Business Services increased by 15% YoY to RMB54.4 billion for the fourth quarter of 2023. FinTech Services sustained double-digit year-on-year growth due to the growth in commercial payment activities, as well as the expansion of wealth management services and consumer loan services. Business Services achieved YoY growth of around 20%, mainly driven by increased eCommerce technology service fees within Video Accounts, alongside moderate revenue growth in cloud services.

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. Tencent has been listed on the Main Board of the Stock Exchange of Hong Kong since 2004. 

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.