TENCENT ANNOUNCES 2023 THIRD QUARTER RESULTS

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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 revenues 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

Business 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)

 

OTHER 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

 

 

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