TENCENT(TCEHY)2024-08-14 16:35Financial Data and Key Metrics Changes - Total revenue for Q2 2024 was RMB161 billion, up 8% year-on-year and 1% quarter-on-quarter [6][23] - Gross profit was RMB86 billion, up 21% year-on-year and 2% quarter-on-quarter [6][23] - Non-IFRS operating profit was RMB58 billion, up 27% year-on-year and flat quarter-on-quarter [7][24] - Net profit attributable to equity holders was RMB57.3 billion, up 53% year-on-year [24] - Diluted EPS was RMB6.014, up 55% year-on-year [25] Business Line Data and Key Metrics Changes - Value-added services (VAS) represented 49% of total revenue, with domestic games at 21% and international games at 9% [8] - Online advertising accounted for 19% of total revenue, while FinTech and business services made up 31% [8] - Domestic games revenue grew by 9% year-on-year to RMB35 billion, driven by titles like Valorant and DnF Mobile [11] - International games revenue also increased by 9% year-on-year to RMB14 billion, benefiting from PUBG Mobile and Supercell games [11] Market Data and Key Metrics Changes - The combined MAU of Weixin and WeChat reached 1.37 billion [7] - Video accounts ad revenue increased over 80% year-on-year, driven by rising short video engagement [19] - The number of transactions in the payment business continued to grow at a healthy rate, but average transaction value declined due to slow consumer spending [20][68] Company Strategy and Development Direction - The company continues to invest in platforms and technologies, including AI, to create new business value [6] - A focus on enhancing the e-commerce ecosystem within Weixin, integrating various functionalities to drive user engagement and merchant value [39] - Long-term investments in content, particularly in gaming and drama series, are expected to yield benefits as the industry recovers [33] Management's Comments on Operating Environment and Future Outlook - Management noted that the advertising market is expected to improve as consumer spending picks up [18][20] - The company anticipates continued growth in higher-margin revenue streams, although the multiplier effect on gross profit growth may decelerate [44] - The current consumption environment is seen as cyclical, with expectations for recovery driven by government policies [70] Other Important Information - Operating CapEx increased by 144% year-on-year, driven by investments in GPU and CPU servers [27] - The company had a net cash position of RMB71.8 billion, down 22% quarter-on-quarter due to share repurchases and dividend payments [28] Q&A Session Summary Question: Can management elaborate on the recent upgrade of the advertising technology platform? - Management confirmed that the upgrade allows for a more comprehensive user interest graph, improving click-through rates and attracting higher ad spend [30][32] Question: Will supportive comments from the state council on digital content change R&D resource deployment? - Management stated that long-term investments in content have already been made, and they will continue to focus on strategic investments rather than short-term reactions [33] Question: What is the e-commerce strategy for video accounts? - Management indicated that growth in live-streaming e-commerce remains solid, and they are building a comprehensive Weixin e-commerce ecosystem [37][39] Question: How should G&A expenses and tax rates be modeled going forward? - Management explained that G&A expenses are expected to increase by single digits, and the effective tax rate for 2024 is projected to be between 18% to 20% [40][41] Question: What are the drivers behind the increase in share of profit from associates? - Management noted that the increase is due to contributions from associates like PDD, and they expect year-on-year growth to moderate in the second half of the year [46]