Financial Data and Key Metrics Changes - In Q4 2023, total revenues were RMB6.9 billion, down by 7% year-over-year, primarily due to a decline in revenues from social entertainment services [22] - IFRS net profit and non-IFRS net profit were RMB5.2 billion and RMB6.2 billion respectively, up by 36% and 27% year-over-year [22] - Gross margin for Q4 stood at 38.3%, marking an increase of 5.3 percentage points year-over-year [25] - For the full year 2023, total revenues were RMB27.8 billion, down by 2% year-over-year, while revenues from online music services were RMB17.3 billion, up by 39% year-over-year [28][29] Business Line Data and Key Metrics Changes - Music subscription revenues reached RMB3.4 billion in Q4 2023, a 45% increase year-over-year [22] - The number of online music paying users expanded to 106.7 million, representing a 21% increase year-over-year [23] - Advertising revenue showed strong growth year-over-year and sequentially, supported by diversified product offerings [24] Market Data and Key Metrics Changes - The online music business has consistently delivered strong performance, with total monthly subscribers reaching 107 million [34] - The demographic profile of users is aligned with China's population structure, with a significant portion of active users aged between 18 to 30 years old [38] Company Strategy and Development Direction - The company aims to leverage its content and platform dual engines to drive growth and capture opportunities in 2024 and beyond [14] - Continued investment in high-quality content and original productions, as well as new technologies like AIGC, is a priority [32] - The strategy includes enhancing user experience through technology and expanding into new areas such as artist merchandise and live performances [35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of the music industry and the company's ability to maintain solid growth in subscription services [34] - The company is focused on improving monetization and operational efficiency while exploring new growth opportunities [32] - The long-form audio segment is expected to see significant growth and integration with existing music platforms [39] Other Important Information - The company has repurchased 25.3 million ADS for a total cash consideration of US$175 million as part of its share repurchase program [28] - The effective tax rate for Q4 2023 was 17.3%, an increase from 12.2% in the same period of 2022 [26] Q&A Session Summary Question: What are the revenue growth expectations for 2024, particularly in the music segment? - Management indicated strong performance in 2023 and expressed confidence in continued growth driven by subscription services and advertising opportunities [34] Question: Can management elaborate on the user profile of newly converted members? - The user base is reflective of China's demographic structure, with a focus on younger users in tier 1, 2, and 3 cities [38] Question: What are the key drivers for gross margin expansion in 2024? - Gross margin increased due to significant growth in music subscription revenues, higher ARPPU, and a ramp-up in self-produced content [43] Question: How does the company leverage AIGC in its business? - AIGC is used to enhance user experience, improve content creation efficiency, and boost promotional materials for better conversion rates [55][57]

[Executive Summary](index=1&type=section&id=Executive%20Summary) [Fourth Quarter 2023 Financial Highlights](index=1&type=section&id=Fourth%20Quarter%202023%20Financial%20Highlights) TME reported a 7.2% YoY decrease in total revenues for Q4 2023, primarily due to a decline in social entertainment services, while online music services showed strong growth, with music subscription revenues increasing by 45.3% and net profit growing by 16.9% | Metric | Q4 2023 (RMB) | YoY Change | US$ (million) | | :-------------------------------- | :------------ | :--------- | :------------ | | Total Revenues | 6.89 billion | -7.2% | 971 | | Music Subscriptions Revenue | 3.42 billion | +45.3% | 481 | | Net Profit | 1.41 billion | +16.9% | 198 | | Net Profit Attributable to Equity Holders | 1.31 billion | +13.5% | 184 | | Non-IFRS Net Profit | 1.68 billion | +12.5% | 236 | | Diluted Earnings per ADS | 0.83 | +15.3% | 0.12 | | Music Paying Users | 106.7 million | +20.6% | - | | Monthly ARPPU - Online Music | 10.7 | +20.2% | - | - Total cash, cash equivalents, and term deposits as of December 31, 2023, were **RMB32.22 billion (US$4.54 billion)**[4](index=4&type=chunk) [Full Year 2023 Financial Highlights](index=1&type=section&id=Full%20Year%202023%20Financial%20Highlights) For the full year 2023, TME's total revenues decreased by 2.1% YoY, despite which music subscription revenues saw significant growth of 39.1%, contributing to a substantial 36.0% increase in net profit | Metric | FY 2023 (RMB) | YoY Change | US$ Equivalent | | :-------------------------------- | :------------ | :--------- | :--------------- | | Total Revenues | 27.75 billion | -2.1% | 3.91 billion | | Music Subscriptions Revenue | 12.10 billion | +39.1% | 1.70 billion | | Net Profit | 5.22 billion | +36.0% | 735 million | | Net Profit Attributable to Equity Holders | 4.92 billion | +33.8% | 693 million | | Non-IFRS Net Profit | 6.22 billion | +26.8% | 876 million | | Net Adds of Music Paying Users | 18.2 million | Up from 12.3M in 2022 | - | [Management Commentary](index=2&type=section&id=Management%20Commentary) [Executive Chairman's Comments](index=2&type=section&id=Executive%20Chairman's%20Comments) Mr. Cussion Pang highlighted 2023 as a pivotal transition year, noting accelerated growth in music subscription revenue and expanded net profits, driven by online music services mitigating social entertainment headwinds - 2023 marked a pivotal transition at TME, with **accelerated year-over-year growth in music subscription revenue** and **expanded quarterly net profits**[5](index=5&type=chunk) - Online music services' strong performance mitigated headwinds from social entertainment services[5](index=5&type=chunk) - TME is well-positioned for multi-faceted opportunities, underpinned by content and platform dual engines and the online music business's relatively counter-cyclical nature[5](index=5&type=chunk) [CEO's Comments](index=2&type=section&id=CEO's%20Comments) Mr. Ross Liang focused on efficiency and user experience, noting that deeper insights into users and content enhanced operational efficiency and personalization, and highlighted the positive impact of expanded user privileges and AI-empowered products on subscriber conversion and retention - Laser focus on execution resulted in a year of efficiency, with enhanced operational efficiency through deeper insights into users and content[5](index=5&type=chunk) - Expanded user privileges and AI-empowered products contributed positively to **subscriber conversion and retention**[5](index=5&type=chunk) - For 2024, TME remains dedicated to delivering a more compelling user experience and easier access to music across a broader range of use cases[5](index=5&type=chunk) [Operational Highlights](index=2&type=section&id=Operational%20Highlights) [Key Operating Metrics (Q4 2023)](index=2&type=section&id=Key%20Operating%20Metrics%20(Q4%202023)) In Q4 2023, online music paying users and ARPPU showed strong growth, while MAUs for both online music and social entertainment declined, and social entertainment ARPPU also saw a significant decrease | Metric | 4Q23 | 4Q22 | YoY % | | :-------------------------------- | :--- | :--- | :---- | | MAUs — online music (million) | 576 | 601 | (4.2%) | | Mobile MAUs — social entertainment (million) | 104 | 146 | (28.8%) | | Paying users — online music (million) | 106.7 | 88.5 | 20.6% | | Paying users — social entertainment (million) | 8.0 | 7.6 | 5.3% | | Monthly ARPPU — online music (RMB) | 10.7 | 8.9 | 20.2% | | Monthly ARPPU — social entertainment (RMB) | 78.0 | 169.6 | (54.0%) | [Strategic Initiatives](index=3&type=section&id=Strategic%20Initiatives) TME strengthened its content leadership through extensive partnerships and diverse offerings, enhanced platform value with improved user experiences and multi-device support, and leveraged AIGC for intelligent music discovery and artist creation - Strengthened content offerings with **over 200 million music and audio tracks** by the end of 2023, including renewed multi-year strategic cooperation with Universal Music Group[8](index=8&type=chunk)[10](index=10&type=chunk) - Enriched mid- to long-tail content with **over 3 million songs** published by **over 480,000 indie musicians** through Tencent Musician Platform[10](index=10&type=chunk) - Expanded user privileges and improved multi-device experience, including China's largest Dolby Atmos music library and upgraded in-car music experience[9](index=9&type=chunk)[10](index=10&type=chunk) - Integrated Large Language Models (LLMs) into music streaming for intelligent music discovery, upgrading features like the virtual DJ[10](index=10&type=chunk) - Introduced Venus' AI composition tool to support artists' music creation[10](index=10&type=chunk) [Fourth Quarter 2023 Financial Review](index=4&type=section&id=Fourth%20Quarter%202023%20Financial%20Review) [Total Revenues and Cost of Revenues (Q4 2023)](index=4&type=section&id=Total%20Revenues%20and%20Cost%20of%20Revenues%20(Q4%202023)) Total revenues for Q4 2023 decreased by 7.2% YoY, primarily due to a significant decline in social entertainment services, while cost of revenues also decreased, mainly driven by lower revenue sharing fees from social entertainment | Metric | Q4 2023 (RMB million) | Q4 2022 (RMB million) | YoY Change | | :-------------------- | :-------------------- | :-------------------- | :--------- | | Total Revenues | 6,893 | 7,425 | -7.2% | | Cost of Revenues | 4,252 | 4,978 | -14.6% | - The decrease in total revenues was mainly due to the decline in revenues from social entertainment services and others, partially mitigated by growth in online music services[4](index=4&type=chunk)[11](index=11&type=chunk) - Cost of revenues decreased mainly due to decreased revenues from social entertainment services leading to lower revenue sharing fees, partially offset by increased content costs of royalties and advertising agency fees[12](index=12&type=chunk) [Gross Margin and Operating Expenses (Q4 2023)](index=4&type=section&id=Gross%20Margin%20and%20Operating%20Expenses%20(Q4%202023)) Gross margin improved significantly by 5.3 percentage points to 38.3% in Q4 2023, driven by strong growth in music subscriptions and advertising, and the ramp-up of own content, while total operating expenses decreased by 7.0% YoY, mainly due to reduced employee-related and promotional expenses | Metric | Q4 2023 | Q4 2022 | Change | | :-------------------------------- | :------ | :------ | :----- | | Gross Margin | 38.3% | 33.0% | +5.3 ppts | | Total Operating Expenses (RMB million) | 1,266 | 1,361 | -7.0% | | Selling and Marketing Expenses (RMB million) | 255 | 266 | -4.1% | | General and Administrative Expenses (RMB million) | 1,011 | 1,095 | -7.7% | - Gross margin increase was primarily due to **strong growth of revenues from music subscriptions and advertising services**, and the ramp-up of TME's own content[13](index=13&type=chunk) - Selling and marketing expenses decreased mainly due to reduced promotional expenses for social entertainment services, partially offset by increased spending on content promotion[15](index=15&type=chunk) - General and administrative expenses decreased primarily due to reduced employee-related expenses[15](index=15&type=chunk) [Revenue Breakdown by Service (Q4 2023)](index=4&type=section&id=Revenue%20Breakdown%20by%20Service%20(Q4%202023)) Online music services revenue surged by 41.1% YoY, driven by strong music subscription growth (45.3%) and increased advertising, while social entertainment services revenue plummeted by 51.6% due to adjustments in live-streaming functions and stricter compliance | Service | Q4 2023 (RMB million) | Q4 2022 (RMB million) | YoY Change | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Online Music Services | 5,022 | 3,559 | +41.1% | | Music Subscriptions | 3,420 | 2,350 | +45.3% | | Social Entertainment Services and Others | 1,871 | 3,866 | -51.6% | - Online music paying users increased by **20.6% to 106.7 million**, and monthly ARPPU expanded to **RMB10.7**, marking its seventh consecutive quarter of growth[14](index=14&type=chunk) - The decrease in social entertainment revenues was mainly caused by adjustments to certain live-streaming interactive functions and more stringent compliance procedures[14](index=14&type=chunk) [Operating Profit, Net Profit, and EPS (Q4 2023)](index=5&type=section&id=Operating%20Profit%2C%20Net%20Profit%2C%20and%20EPS%20(Q4%202023)) Operating profit grew by 23.5% YoY, reflecting improved operating efficiency, with net profit and non-IFRS net profit also seeing double-digit growth, and diluted EPS increasing to RMB0.83 | Metric | Q4 2023 (RMB million) | Q4 2022 (RMB million) | YoY Change | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Operating Profit | 1,714 | 1,388 | +23.5% | | Net Profit | 1,409 | 1,205 | +16.9% | | Net Profit Attributable to Equity Holders | 1,306 | 1,151 | +13.5% | | Non-IFRS Net Profit | 1,678 | 1,492 | +12.5% | | Diluted EPS (RMB) | 0.83 | 0.72 | +15.3% | | Non-IFRS Diluted EPS (RMB) | 1.00 | 0.91 | +9.9% | - Effective tax rate for Q4 2023 was **17.3%**, up from 12.2% in Q4 2022, mainly due to the accrual of withholding income tax[16](index=16&type=chunk) [Cash and Term Deposits (Q4 2023)](index=5&type=section&id=Cash%20and%20Term%20Deposits%20(Q4%202023)) As of December 31, 2023, TME's combined balance of cash, cash equivalents, and term deposits increased to RMB32.22 billion (US$4.54 billion) from RMB30.96 billion at the end of Q3 2023 | Metric | As of Dec 31, 2023 (RMB billion) | As of Sep 30, 2023 (RMB billion) | Change | | :-------------------------------- | :------------------------------- | :------------------------------- | :----- | | Cash, Cash Equivalents and Term Deposits | 32.22 | 30.96 | +1.26 | [Full Year 2023 Financial Review](index=5&type=section&id=Full%20Year%202023%20Financial%20Review) [Total Revenues and Service Breakdown (FY 2023)](index=5&type=section&id=Total%20Revenues%20and%20Service%20Breakdown%20(FY%202023)) Total revenues for FY 2023 decreased by 2.1% YoY, while online music services revenue grew strongly by 38.8%, driven by music subscriptions (up 39.1%) and advertising, but social entertainment services revenue declined significantly by 34.2% due to operational adjustments | Service | FY 2023 (RMB million) | FY 2022 (RMB million) | YoY Change | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Total Revenues | 27,752 | 28,339 | -2.1% | | Online Music Services | 17,325 | 12,483 | +38.8% | | Music Subscriptions | 12,100 | 8,700 | +39.1% | | Social Entertainment Services and Others | 10,427 | 15,856 | -34.2% | - Online music paying users increased by **19.8% to 100.9 million**, and monthly ARPPU expanded to **RMB10.0**[20](index=20&type=chunk) - The decrease in social entertainment revenues was mainly caused by adjustments to certain live-streaming interactive functions and more stringent compliance procedures[21](index=21&type=chunk) [Cost of Revenues, Gross Margin, and Operating Expenses (FY 2023)](index=6&type=section&id=Cost%20of%20Revenues%2C%20Gross%20Margin%2C%20and%20Operating%20Expenses%20(FY%202023)) Cost of revenues decreased by 8.2% YoY, primarily due to lower revenue sharing fees from social entertainment, leading to a gross margin improvement of 4.3 percentage points to 35.3%, while total operating expenses decreased by 9.7% YoY with reductions in both selling & marketing and G&A expenses | Metric | FY 2023 (RMB million) | FY 2022 (RMB million) | YoY Change | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Cost of Revenues | 17,957 | 19,566 | -8.2% | | Gross Margin | 35.3% | 31.0% | +4.3 ppts | | Total Operating Expenses | 5,018 | 5,557 | -9.7% | | Selling and Marketing Expenses | 897 | 1,144 | -21.6% | | General and Administrative Expenses | 4,121 | 4,413 | -6.6% | - Gross margin increase was primarily due to **strong growth of revenues from music subscriptions and advertising services**, and the ramp-up of TME's own content[22](index=22&type=chunk) - Selling and marketing expenses decreased mainly due to reduced promotional expenses for social entertainment services[26](index=26&type=chunk) - General and administrative expenses decreased primarily due to reduced employee-related expenses and expenses related to the Hong Kong secondary listing incurred in 2022[26](index=26&type=chunk) [Operating Profit, Net Profit, and EPS (FY 2023)](index=6&type=section&id=Operating%20Profit%2C%20Net%20Profit%2C%20and%20EPS%20(FY%202023)) Operating profit for FY 2023 increased significantly by 36.4% YoY, driven by improved operating efficiency and cost controls, with net profit and non-IFRS net profit also showing strong double-digit growth, and diluted EPS reaching RMB3.11 | Metric | FY 2023 (RMB million) | FY 2022 (RMB million) | YoY Change | | :-------------------------------- | :-------------------- | :-------------------- | :--------- | | Operating Profit | 6,059 | 4,443 | +36.4% | | Net Profit | 5,220 | 3,839 | +36.0% | | Net Profit Attributable to Equity Holders | 4,920 | 3,677 | +33.8% | | Non-IFRS Net Profit | 6,223 | 4,907 | +26.8% | | Diluted EPS (RMB) | 3.11 | 2.27 | +37.0% | | Non-IFRS Diluted EPS (RMB) | 3.74 | 2.93 | +27.6% | [Other Corporate Information](index=7&type=section&id=Other%20Corporate%20Information) [Share Repurchase Program](index=7&type=section&id=Share%20Repurchase%20Program) As of December 31, 2023, TME had repurchased 25.3 million ADSs for a total consideration of US$174.5 million under its US$500 million Share Repurchase Program announced in March 2023 - Repurchased **25.3 million ADSs** for **US$174.5 million** under the **US$500 million Share Repurchase Program**[27](index=27&type=chunk) [Social Responsibilities](index=7&type=section&id=Social%20Responsibilities) TME collaborated with local governments and Tencent Charity in Q4 2023 to organize music events, such as the Shenzhen-Linzhi Music Festival, to promote cultural and economic development in ethnic minority regions and boost rural tourism - Collaborated with local governments and Tencent Charity to organize music events, like the 2023 Shenzhen-Linzhi Music Festival, to promote cultural and economic development in ethnic minority regions[28](index=28&type=chunk) [Exchange Rate Information](index=7&type=section&id=Exchange%20Rate%20Information) All RMB to USD translations in the announcement were made at a rate of RMB7.0999 to US$1.00, based on the noon buying rate on December 29, 2023, as per the Federal Reserve Board's H.10 statistical release - All translations from RMB to USD were made at the rate of **RMB7.0999 to US$1.00**, the noon buying rate in effect on December 29, 2023[29](index=29&type=chunk) [Non-IFRS Financial Measure Explanation](index=7&type=section&id=Non-IFRS%20Financial%20Measure%20Explanation) TME uses non-IFRS net profit to evaluate operating results and for financial decision-making, believing it helps identify underlying business trends by excluding certain expenses like amortization of intangible assets, share-based compensation, and net losses/gains from investments - Non-IFRS net profit helps identify underlying trends by excluding amortization of intangible assets, share-based compensation expenses, net losses/gains from investments, and related income tax effects[30](index=30&type=chunk)[33](index=33&type=chunk) - Non-IFRS net profit should not be considered in isolation or as an alternative to IFRS measures, and may not be comparable to similarly titled measures presented by other companies[31](index=31&type=chunk) [About Tencent Music Entertainment](index=8&type=section&id=About%20Tencent%20Music%20Entertainment) Tencent Music Entertainment Group is China's leading online music and audio entertainment platform, operating popular apps like QQ Music, Kugou Music, Kuwo Music, and WeSing, with a mission to create endless possibilities with music and technology - TME is the leading online music and audio entertainment platform in China, operating QQ Music, Kugou Music, Kuwo Music, and WeSing[34](index=34&type=chunk) - TME's mission is to create endless possibilities with music and technology, enabling users to discover, listen, sing, watch, perform, and socialize around music[34](index=34&type=chunk) [Safe Harbor Statement](index=8&type=section&id=Safe%20Harbor%20Statement) The press release contains forward-looking statements made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995, which involve inherent risks and uncertainties that could cause actual results to differ materially from expectations - The press release contains forward-looking statements made under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[35](index=35&type=chunk) - Forward-looking statements involve inherent risks and uncertainties, and actual results could differ materially from those contained in any forward-looking statement[35](index=35&type=chunk) [Investor Relations Contact](index=8&type=section&id=Investor%20Relations%20Contact) Contact information for Tencent Music Entertainment Group's Investor Relations is provided for inquiries - Investor Relations Contact: ir@tencentmusic.com, **+86 (755) 8601-3388 ext. 818415**[36](index=36&type=chunk) [Financial Statements](index=9&type=section&id=Financial%20Statements) [Consolidated Income Statement](index=9&type=section&id=Consolidated%20Income%20Statement) The consolidated income statement provides a detailed breakdown of revenues, costs, expenses, and profits for both the fourth quarter and full year ended December 31, 2023, compared to the prior year | Metric | Q4 2023 (RMB million) | Q4 2022 (RMB million) | FY 2023 (RMB million) | FY 2022 (RMB million) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Online music services revenue | 5,022 | 3,559 | 17,325 | 12,483 | | Social entertainment services and others revenue | 1,871 | 3,866 | 10,427 | 15,856 | | Total revenues | 6,893 | 7,425 | 27,752 | 28,339 | | Cost of revenues | (4,252) | (4,978) | (17,957) | (19,566) | | Gross profit | 2,641 | 2,447 | 9,795 | 8,773 | | Total operating expenses | (1,266) | (1,361) | (5,018) | (5,557) | | Operating profit | 1,714 | 1,388 | 6,059 | 4,443 | | Profit for the period/year | 1,409 | 1,205 | 5,220 | 3,839 | | Profit attributable to equity holders | 1,306 | 1,151 | 4,920 | 3,677 | | Diluted Earnings per ADS (RMB) | 0.83 | 0.72 | 3.11 | 2.27 | [Unaudited Non-IFRS Financial Measure Reconciliation](index=11&type=section&id=Unaudited%20Non-IFRS%20Financial%20Measure%20Reconciliation) This section reconciles IFRS net profit to non-IFRS net profit for both the fourth quarter and full year 2023, detailing adjustments for amortization, share-based compensation, investment gains/losses, and related tax effects | Metric | Q4 2023 (RMB million) | Q4 2022 (RMB million) | FY 2023 (RMB million) | FY 2022 (RMB million) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Profit for the period/year (IFRS) | 1,409 | 1,205 | 5,220 | 3,839 | | Amortization of intangible and other assets | 111 | 126 | 445 | 498 | | Share-based compensation | 183 | 178 | 736 | 834 | | Losses/(gains) from investments | 23 | — | (7) | (141) | | Income tax effects | (48) | (17) | (171) | (123) | | Non-IFRS Net Profit | 1,678 | 1,492 | 6,223 | 4,907 | | Non-IFRS Net Profit Attributable to Equity Holders | 1,575 | 1,438 | 5,923 | 4,745 | | Non-IFRS Diluted EPS (RMB) | 1.00 | 0.91 | 3.74 | 2.93 | [Consolidated Balance Sheet](index=13&type=section&id=Consolidated%20Balance%20Sheet) The consolidated balance sheet presents TME's financial position as of December 31, 2023, and December 31, 2022, detailing assets, equity, and liabilities | Metric | As of Dec 31, 2023 (RMB million) | As of Dec 31, 2022 (RMB million) | | :-------------------------------- | :------------------------------- | :------------------------------- | | Total assets | 75,536 | 67,009 | | Total equity | 57,202 | 49,127 | | Total liabilities | 18,334 | 17,882 | | Cash and cash equivalents | 13,567 | 9,555 | | Term deposits (Non-current) | 8,719 | 6,530 | | Term deposits (Current) | 9,937 | 11,291 | | Financial assets at fair value through other comprehensive income | 6,540 | 3,168 | [Condensed Consolidated Statements of Cash Flows](index=15&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) The condensed consolidated statements of cash flows provide an overview of cash generated from operating, investing, and financing activities for both the fourth quarter and full year ended December 31, 2023 | Metric | Q4 2023 (RMB million) | Q4 2022 (RMB million) | FY 2023 (RMB million) | FY 2022 (RMB million) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net cash provided by operating activities | 1,977 | 2,494 | 7,337 | 7,481 | | Net cash used in investing activities | (193) | (1,108) | (1,863) | (1,446) | | Net cash used in financing activities | (576) | (383) | (1,538) | (3,419) | | Net increase in cash and cash equivalents | 1,208 | 1,003 | 3,936 | 2,616 | | Cash and cash equivalents at end of period/year | 13,567 | 9,555 | 13,567 | 9,555 |

Financial Performance - In Q4 2023, Tencent Music Entertainment Group reported total revenue of RMB 6.89 billion (USD 971 million), a year-over-year decrease of 7.2%[2] - Net profit for Q4 2023 was RMB 1.41 billion (USD 198 million), a year-over-year increase of 16.9%[2] - The total revenue for the full year 2023 was RMB 27.75 billion (USD 3.91 billion), a year-over-year decrease of 2.1%[3] - Operating profit for Q4 2023 increased to RMB 1.71 billion (USD 241 million), a year-over-year growth of 23.5%[8] - Net profit for the full year 2023 was RMB 5.22 billion (USD 735 million), with profit attributable to equity holders of the company at RMB 4.92 billion (USD 693 million)[10] User Metrics - The number of online music paying users increased by 20.6% year-over-year to 106.7 million, with a net increase of 3.7 million users quarter-over-quarter[2] - The number of monthly active users for online music services was 576 million in Q4 2023, down 4.2% from 601 million in Q4 2022[4] - The number of online music paid users for the full year increased by 19.8% to 10.09 million, with average monthly revenue per paid user reaching RMB 10.0[9] Revenue Breakdown - Online music subscription revenue reached RMB 3.42 billion (USD 481 million) in Q4 2023, representing a year-over-year growth of 45.3%[2] - Online music service revenue grew significantly by 41.1% year-over-year to RMB 5.02 billion (USD 707 million), driven by accelerated growth in subscription revenue and advertising services[6] - Full year online music service revenue grew by 38.8% to RMB 17.33 billion (USD 2.44 billion), with subscription revenue increasing by 39.1% to RMB 12.10 billion (USD 1.70 billion)[9] - Social entertainment services and other services revenue decreased by 34.2% year-on-year to RMB 10.43 billion (USD 1.47 billion) from RMB 15.86 billion in 2022, primarily due to adjustments in live interaction features and stricter compliance procedures[10] Cost and Expenses - Operating costs decreased by 8.2% year-on-year to RMB 17.96 billion (USD 2.53 billion), mainly due to a decline in revenue-sharing costs corresponding to the drop in social entertainment services revenue[10] - Operating expenses decreased by 9.7% year-on-year to RMB 5.02 billion (USD 707 million), with operating expenses as a percentage of total revenue declining from 19.6% in 2022 to 18.1%[10] - Sales and marketing expenses were RMB 0.897 billion (USD 126 million), a decrease of 21.6% year-on-year, primarily due to reduced promotional expenses for social entertainment services[10] - General and administrative expenses were RMB 4.12 billion (USD 580 million), down 6.6% year-on-year, mainly due to reduced personnel expenses and one-time costs related to the secondary listing in Hong Kong in 2022[10] Profitability Metrics - Gross margin improved to 38.3%, up 5.3 percentage points from 33.0% in Q4 2022, primarily due to strong growth in music subscription and advertising service revenues[6] - Gross margin improved by 4.3 percentage points to 35.3% from 31.0% in 2022, driven by strong growth in music subscription and advertising service revenues[10] - The basic and diluted earnings per American Depositary Share (ADS) for the full year 2023 were RMB 3.15 (USD 0.44) and RMB 3.11 (USD 0.44), respectively[10] Cash and Assets - The total cash, cash equivalents, and short-term deposits amounted to RMB 32.22 billion (USD 4.54 billion) as of December 31, 2023[2] - The company maintained a cash and cash equivalents balance of RMB 32.22 billion (USD 4.54 billion) as of December 31, 2023, up from RMB 30.96 billion at the end of Q3 2023[8] - As of December 31, 2023, total assets increased to RMB 75,536 million from RMB 67,009 million as of December 31, 2022, representing an increase of approximately 12.5%[22] - Cash and cash equivalents increased significantly to RMB 13,567 million in 2023 from RMB 9,555 million in 2022, a growth of approximately 42.5%[24] Strategic Focus - Tencent Music's CEO emphasized the focus on enhancing user experience and increasing AI usage to improve member conversion and retention in 2024[3] - The company aims to leverage its content and platform strategy to capture diverse growth opportunities in the coming years[3] Share Repurchase - As of December 31, 2023, the company repurchased approximately 25.3 million ADS for about USD 174.5 million under a USD 500 million share repurchase plan announced on March 21, 2023[11]

Tencent Music Entertainment Group (NYSE:TME) Q3 2023 Earnings Conference Call November 14, 2023 6:00 AM ET Company Participants Millicent Tu - Investor Relations Kar Shun Pang - Executive Chairman Ross Liang - Chief Executive Officer Shirley Hu - Chief Financial Officer Conference Call Participants Alicia Yap - Citigroup Alex Poon - Morgan Stanley Zhang Lei - Bank of America Merrill Lynch Lincoln Kong - Goldman Sachs Thomas Chong - Jefferies Alex Yao - JPMorgan Xueqing Zhang - CICC Wei Xiong - UBS Millicent ...

Company Information - Tencent Music Entertainment Group filed its report for April 2024 under Form 20-F[1] - The company is headquartered in Shenzhen, China, with a principal office address at Unit 3, Building D, Kexing Science Park[2] Report Details - The report was signed by Min Hu, Chief Financial Officer, on April 18, 2024[5]

Good evening, good morning. Welcome to Tencent Music Entertainment Group's third quarter 2023 earnings webinar. I'm Millicent Tu, Head of IR at the company. CME announced its quarterly financial results today before the US market opened. Earnings release is now available on our IR website and via Newswire services. Today, you'll hear from Mr. Kashin Pan, our Executive Chairman, who will start the call with an overview of our company's strategies and business updates. Next, Mr. Ross Leung, our CEO, will shar ...

Financial Performance - Total revenue for Q3 2023 was RMB 6.57 billion (USD 900 million), a year-over-year decrease of 10.8% primarily due to declines in social entertainment services and other services revenue[3]. - Net profit for Q3 2023 was RMB 1.26 billion (USD 173 million), a year-over-year increase of 15.6%, while net profit attributable to equity holders was RMB 1.17 billion (USD 160 million), up 10.1% year-over-year[3]. - Operating profit for Q3 2023 rose to RMB 1.43 billion (USD 195 million), a year-over-year increase of 13.0%[9]. - Non-IFRS net profit for the three months ended September 30, 2023, was RMB 1,263 million, an increase of 15.5% compared to RMB 1,093 million in the same period of 2022[16]. - Tencent Music Entertainment Group reported a net profit of RMB 1,263 million for the three months ended September 30, 2023, representing a 15.5% increase from RMB 1,093 million in the same period of 2022[19]. Revenue Breakdown - Online music subscription revenue grew by 42.0% year-over-year to RMB 3.19 billion (USD 438 million), with paid user count increasing by 20.8% to 103 million, a net increase of 3.6 million quarter-over-quarter[3]. - Online music service revenue grew by 32.7% year-over-year to RMB 4.55 billion (USD 624 million), driven by a 42.0% increase in online music subscription revenue to RMB 3.19 billion (USD 438 million)[8]. - Social entertainment service revenue decreased by 48.8% year-over-year to RMB 2.02 billion (USD 276 million) due to adjustments in live interaction features[8]. User Engagement - Monthly active users for online music services decreased by 4.2% year-over-year to 594 million, while mobile monthly active users for social entertainment services fell by 16.8% to 129 million[5]. - The number of paid users for online music services increased by 20.8% year-over-year to 10.3 million, with average revenue per paid user rising by 5.4% to RMB 86.2[5]. - The number of online music paying users increased by 20.8% year-over-year to 103 million, with average revenue per paying user reaching RMB 10.3, marking six consecutive quarters of growth[8]. - The number of monthly active users for the online music services reached 600 million, reflecting a growth of 10% year-over-year[14]. Cash and Liquidity - As of September 30, 2023, the total balance of cash, cash equivalents, and time deposits was RMB 30.96 billion (USD 4.24 billion)[3]. - Cash and cash equivalents totaled RMB 30.96 billion (USD 4.24 billion) as of September 30, 2023, up from RMB 30.50 billion as of June 30, 2023[9]. - The ending cash and cash equivalents as of September 30, 2023, were RMB 12,381 million, up from RMB 8,582 million at the end of September 2022[23]. - The total cash and cash equivalents at the end of the nine months ended September 30, 2023, were RMB 12,381 million, reflecting a strong liquidity position[23]. Strategic Initiatives - The company continues to strengthen its content ecosystem through strategic partnerships, including a collaboration with CUBE Entertainment to enrich its music content library[5]. - The company is enhancing user engagement by launching interactive music experiences, such as a series of activities for the 10th anniversary single of TFBOYS[6]. - The CEO highlighted the ongoing improvement in platform operational efficiency and the core role of online music business in driving profitability[4]. - The company aims to innovate through technology and product development to create a more enjoyable music experience for users[4]. - Tencent Music Entertainment Group aims to leverage technology to create innovative music experiences and expand its user engagement strategies[14]. Cost Management - Operating expenses decreased by 11.8% year-over-year to RMB 1.27 billion (USD 174 million), with sales and marketing expenses down by 10.6%[9]. - Operating expenses for the three months ended September 30, 2023, were RMB 1,049 million, a decrease from RMB 1,192 million in the same period of 2022[16]. - The company reported a significant reduction in financing activities cash outflow, indicating improved financial management strategies[23]. Shareholder Returns - The company repurchased approximately 15.8 million American Depositary Shares for about USD 1.03 million under a USD 500 million share repurchase plan[10]. Asset and Equity Growth - Total assets increased from RMB 67,009 million as of December 31, 2022, to RMB 72,956 million as of September 30, 2023, marking an increase of 8.7%[21]. - The company’s total equity increased from RMB 49,127 million at the end of 2022 to RMB 55,168 million as of September 30, 2023, representing a growth of 12.5%[22].

Financial Data and Key Metrics Changes - Total revenues for Q2 2023 reached RMB7.3 billion, up 6% year-over-year, with adjusted net profit increasing by 48% year-over-year [4][31] - Online music services contributed 58% of total revenues, surpassing social entertainment services for the first time in history [31] - Monthly ARPPU reached an all-time high of RMB9.7, up 14% year-over-year and 5% sequentially [31][32] Business Line Data and Key Metrics Changes - Music subscription revenues grew to RMB2.9 billion, up 37% year-over-year, with paying users reaching 99.4 million, a 20% increase year-over-year [31][32] - Revenues from social entertainment services were RMB3.0 billion, down 25% year-over-year due to service enhancements and risk control measures [33][26] - Advertising revenues showed strong growth, driven by demand during the annual 618 e-commerce sales event [32] Market Data and Key Metrics Changes - The online music paying ratio reached an all-time high of 16.7% [5] - The number of paying users for online music services increased by 5 million sequentially [31] - The company reported a gross margin of 34.3%, up 4.4 percentage points year-over-year [34] Company Strategy and Development Direction - The company is focused on enhancing user experience and optimizing its music services, including in-car music offerings and AIGC features [18][19] - Strategic partnerships with top-tier labels and artists are being strengthened to expand content offerings [6][8] - The company aims to maintain a stable business scale in social entertainment while exploring diverse opportunities in the music arena [43][44] Management Comments on Operating Environment and Future Outlook - Management expects total revenues to decline by low- to mid-single digits year-over-year for 2023, primarily due to pressures in social entertainment services [26][42] - Confidence remains in delivering year-over-year bottom-line growth for 2023, driven by strong performance in online music services [27] - The company is committed to long-term sustainable growth despite short-term revenue pressures [33][34] Other Important Information - The company hosted the Tencent Music Entertainment Awards 2023, showcasing its industry influence and organizational capabilities [7][8] - Continued investment in research and development is planned to enhance music-related content creation and improve sound quality [35][62] - The company is actively involved in social welfare activities, including charity concerts for children [28] Q&A Session Summary Question: Revenue outlook for music and social entertainment segments - Management indicated that online music services are expected to maintain robust growth, while social entertainment services will face revenue pressure due to adjustments [40][42] Question: Rationale behind adjustments in social entertainment - Adjustments aim to create a more music-centric live streaming atmosphere and control potential risks, despite short-term revenue impacts [46][47] Question: Future targets for subscription business - Management expressed confidence in continued growth in subscription revenue driven by increased willingness to pay and enhanced user privileges [50][51] Question: AIGC developments and applications - The company is focusing on AIGC tools to assist musicians and enhance user interaction, including AI-enabled features for music discovery [55][56] Question: Gross margin expectations - Management expects gross margin to improve sequentially, driven by strong growth in subscription and advertising revenues [58][59]

[1 -> 3] Good evening and good morning. [3 -> 9] Welcome to Tencent Music Entertainment Group's second quarter 2023 earnings webinar. [9 -> 15] T&B announced its quarterly financial results today before the U.S. market opens. [15 -> 21] And earnings release is now available on our IR website at ir.tencentmusic.com, [21 -> 23] as well as via newswire services. [23 -> 28] Today, you'll hear from Mr. Kashan Pang, our executive chairman, [28 -> 31] who will start the call with an overview of our recent updates. ...

Financial Performance - Total revenue for Q2 2023 was RMB 7.29 billion (USD 1.01 billion), representing a year-over-year increase of 5.5%[3] - Net profit attributable to equity holders was RMB 1.30 billion (USD 179 million), up 51.6% year-over-year[3] - Operating profit for Q2 2023 rose to RMB 1.54 billion, reflecting a year-on-year increase of 47.3%[7] - Tencent Music Entertainment Group reported non-IFRS net profit of RMB 1,348 million for the three months ended June 30, 2023, representing a 50.5% increase from RMB 892 million in the same period of 2022[19] - Basic earnings per share for the three months ended June 30, 2023, was RMB 0.42, compared to RMB 0.27 in the same period of 2022, reflecting a 55.6% increase[20] - Tencent Music Entertainment Group reported a net profit of RMB 1,348 million for the three months ended June 30, 2023, representing a 51% increase from RMB 892 million in the same period of 2022[21] - The adjusted net profit for the six months ended June 30, 2023, was RMB 2,548 million, up 25% from RMB 2,004 million in the prior year[21] Revenue Breakdown - Online music service revenue grew by 47.6% year-over-year to RMB 4.25 billion (USD 586 million), accounting for 58.3% of total revenue[3] - Online music subscription revenue increased by 37.2% to RMB 2.89 billion (USD 399 million), with paid user count reaching 99.4 million, a year-over-year growth of 20.2%[3] - Total revenue from online music services contributed 58.3% to the company's overall revenue, surpassing social entertainment services for the first time[9] - Social entertainment services and other revenue decreased to RMB 3,037 million for the three months ended June 30, 2023, down 24.6% from RMB 4,027 million in the same period of 2022[19] User Engagement and Growth - The company achieved a milestone of over 100 million paid online music users in June 2023, reflecting strong user recognition of its content and services[4] - The number of paying users reached a historical high of 99.4 million, representing a year-on-year growth of 20.2%[6] - Monthly average revenue per paying user for online music services increased to RMB 9.7, marking a 14.1% year-on-year growth[8] - The number of monthly active users for online music services was 594 million, down 4.7% year-on-year[8] Cost Management and Profitability - Total operating expenses decreased by 11.4% to RMB 1.26 billion, with operating expenses as a percentage of total revenue dropping from 20.5% to 17.2%[6] - Gross margin improved by 4.4 percentage points to 34.3%, driven by strong growth in music subscription and advertising service revenues[6] - Advertising revenue saw significant growth due to increased user adoption of incentive advertising models, with a low comparison base from the previous year[6] Cash Flow and Assets - Cash, cash equivalents, and time deposits totaled RMB 30.50 billion (USD 4.21 billion) as of June 30, 2023[3] - Cash and cash equivalents increased significantly from RMB 9,555 million to RMB 12,950 million, a growth of 36%[23] - For the three months ended June 30, 2023, net cash inflow from operating activities was RMB 2,067 million, compared to RMB 1,241 million for the same period in 2022, representing a 66.7% increase[25] - The total cash and cash equivalents at the end of June 30, 2023, were RMB 12,950 million, compared to RMB 10,044 million at the end of June 30, 2022, marking a 29.5% increase[25] Strategic Initiatives - The company is enhancing user experience through service improvements and risk management measures, despite potential revenue pressure in the second half of the year[4] - The company is expanding music services to various IoT devices, aiming to provide a more immersive listening experience[4] - Strategic partnerships with well-known record companies and artists are being deepened to enhance industry influence and content appeal[4] - The company aims to explore more opportunities in the online music sector while promoting the development of licensed music[4] - The company launched a couple membership package in June 2023, enhancing user engagement and subscription offerings[9] - The company launched new interactive features in live streaming services, such as AIGC-enabled virtual gifts, to enhance user engagement and competitiveness[10] - The company upgraded its high-quality audio experience across platforms, including QQ Music and Kugou Music, to improve user engagement and retention[12] - The company continues to support emerging musicians through comprehensive resources and opportunities, enhancing the overall music ecosystem[12] - The company collaborated with Tencent Charity to host two charity concerts for children, demonstrating its commitment to social responsibility[14] Market Outlook - Social entertainment services performance in Q2 2023 was weaker than expected, with projected total revenue decline of mid-teens percentage year-over-year for Q3 2023 and low single-digit percentage decline for the full year[10] - Tencent Music Entertainment Group aims to leverage technology to create innovative music products and expand its market presence in China[17] Miscellaneous - The exchange rate used for converting RMB to USD is 7.2513, as of June 30, 2023, for financial reporting purposes[15]