Core Viewpoint - Tencent Music Entertainment Group reported a solid growth in Q1 2025, with total revenue increasing by 8.7% year-on-year to 7.36 billion yuan and adjusted net profit rising by 22.8% to 2.23 billion yuan [2] Group 1: Financial Performance - Total revenue for Q1 2025 reached 7.36 billion yuan, reflecting an 8.7% year-on-year growth [2] - Adjusted net profit increased by 22.8% to 2.23 billion yuan [2] - Online music service revenue grew by 15.9% to 5.8 billion yuan, with subscription revenue up by 16.6% to 4.22 billion yuan [2] Group 2: User Growth and Engagement - The number of paid users for online music reached 122.9 million, with ARPPU increasing to 11.4 yuan [2] - The growth in paid users was driven by exclusive high-quality content and benefits, particularly in the super membership segment [2] - Long audio content has become a significant driver for the conversion and retention of super members [2][6] Group 3: Long Audio Content Strategy - Tencent Music's long audio strategy, initiated in 2020, has led to substantial progress, with a rich ecosystem of long audio content [4] - Collaborations with popular IPs and top voice actors have resulted in successful audio dramas, such as "The Grave Robbers' Chronicles," which quickly surpassed 10 million plays [4][6] - The company has introduced AI-assisted tools to enhance the production efficiency of long audio content, exemplified by the launch of the AI audio drama "A Mortal's Journey to Immortality" [6][8] Group 4: Technological Innovation - Tencent Music leverages AIGC and other technologies to provide differentiated platform features and services for long audio enthusiasts [8] - The integration of long audio content with core online music services has enhanced user engagement and expanded the super member base [8]

Financial Data and Key Metrics Changes - In Q1 2025, total revenues reached RMB 7.4 billion, representing a 9% year-over-year growth [19] - Online music revenues increased by 16% year-over-year to RMB 5.8 billion, driven by strong growth in music subscription and advertising revenues [20] - Music subscription revenues reached RMB 4.2 billion, a 70% increase year-over-year [20] - Gross margin improved to 44.1%, up 3.2 percentage points year-over-year [23] - Net profit was RMB 4.4 billion, with a net profit attributable to equity holders of RMB 4.3 billion [25] Business Line Data and Key Metrics Changes - The music subscription business remains the cornerstone, with significant growth in SVIP membership and reduced promotional activity contributing to revenue increases [20][27] - Advertising revenues showed strong year-over-year growth, supported by the ad-supported model and increased engagement [20][21] - Artist-related merchandise sales and offline performances also contributed to revenue growth, with successful concert hosting leading to increased revenues [21][22] Market Data and Key Metrics Changes - The company has strengthened partnerships with record labels, enhancing its music library and user engagement [5][6] - There is a growing popularity of Korean, English, and Japanese tracks among users, indicating a diversification in music consumption preferences [7] - The company has expanded its merchandise collaborations, which have shown strong sales performance [8][9] Company Strategy and Development Direction - The company aims to enhance user engagement through a diverse range of music services and content offerings, focusing on high-quality growth [4][12] - Continued investment in original content production and innovative technologies is planned to improve user experience and strengthen the ecosystem [27] - The company is committed to expanding its SVIP membership and advertising business while diversifying offerings across the music value chain [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the 2025 outlook, expecting year-over-year growth rates to accelerate and margins to expand [31] - The company is focused on encouraging more music consumption and enhancing user engagement through unique offerings [31][32] - Management highlighted the importance of long-form audio content and its complementary role in driving user engagement and subscription growth [38] Other Important Information - The company released its 2024 ESG report, detailing practices in intellectual property protection, user privacy, and fostering diverse music communities [11] - The effective tax rate for Q1 2025 was 9.2%, a decrease from 19.9% in the same period of 2024 [25] Q&A Session Summary Question: Outlook for top line profit growth for the next quarter and full year 2025 - Management expressed confidence in achieving strong results in Q1 and expects growth rates to accelerate in 2025, driven by rich service offerings and user engagement [31] Question: Growth opportunity of podcasts in China and long-form audio user metrics - Management noted that while podcast growth in China is limited, long-form audio content is expected to grow and complement the existing subscriber base [36][38] Question: SVIP progress and key KPIs - Management reported strong growth in SVIP membership and ARPPU, with plans to enhance the membership system and improve user satisfaction [40][43] Question: Contribution of Super VIP to ARPPU growth - Management indicated that the reduction in promotional activities has positively impacted ARPPU growth, with expectations for continued growth from the SVIP business [46][48] Question: Monetization strategy for nonpaying subscribers - Management emphasized converting nonpaying users into subscribers and leveraging advertising and merchandise sales to generate revenue from this segment [51][55] Question: Future drivers for gross margin improvement - Management highlighted subscriber growth and cost management as key drivers for future gross margin improvement, with expectations for continued growth [60][62] Question: International opportunities, especially in Southeast Asia - Management acknowledged the importance of international markets and plans to invest in content creation and platform development in Southeast Asia [68][71] Question: Outlook for advertising and offline events business - Management expressed a positive outlook for advertising revenue growth and plans to enhance the quality of offline performances [79][80]