Tencent Music Entertainment (TME) 13 Aug 242024 Q2 Earnings call transcript

Good evening, and good morning, and welcome to Tencent Music Entertainment Second Quarter 2024 Earnings Conference Call. I'm Millicent Tu, Head of IR. We announced our quarterly financial results earlier today before the U.S. market opened. The earnings release is now available on our IR website and via PRNewswire services.

will Mr. you call, today's hear from During Cussion Executive Chairman; and Mr. Pang, our Ross who strategies our CEO, Liang, and share updates. [ our of will ] an overview business company Ms. Then before will CFO, Hu, questions. Shirley open call for we our our the financial discuss results

and release refer participants be to pleased non-IFRS more call recorded. With that, time. Before applies a that call this turn with safe Executive under harbor release, advised call [ [ and to will I'm is Please measures note as are we'll After reconciled we'll to being Chairman the TME. of statement we session. [ you explained filings today's to pleased earnings comparable the the discuss our today, most on mute Cussion? in to which measures thoroughly over in continue, that IFRS very earnings statements. Q&A ] I there this I'm to which be the SEC. All management's make forward-looking Cussion, remarks, ] reported at ] our

Millicent. Hello, everyone, joining today. you, you thank call our for and Thank

are continuously ourselves better different optimistic external are committed achieve the to user and a development long-term and within changing healthy meantime, strong growth to net excited net of XX% a rise music goals. In at the in over XXXX, with to and about to year-over-year environment, ARPPU, music underpinned million of as coupled new pace and ability by our in consistently as with are stage bring to growth outstanding business a mindset in in We landscape. another brands online potential our China's the adjusting streaming solid to year-over-year again sustainable services our to balance. increase right growth subscribers music XX% profit. evolving We well report The adjusted quarter innovate a we industry's XX addition demonstrated adapt remain mid first half long-term once the

me content on highlights getting [ our ] share Let now is expansive which rewarding. ecosystem, some recent increasingly

to labels music and content partnerships bring continue of users. record the expand reinforce enrich artists our we our to and with First available all, library and best to to

to Our with [ but long-standing the early for access content-centric enable ] privileges not us and win-win latest including more hits. users, limited music secure labels partnerships to extensive to

This quarter, we All include Overall, [ licensing Sodagreen, with improved and start bands, and suda XX-day that a these highly band, as K-pop new such agreements extended see top the boy renewals songs. pre-phase lu ] to we are our a has CJ label, well-known some pleased collaborative Korean which contract engagement. head such ZEROBASEONE. represents of popular ENM, effectively their pre-phase conversion Chinese membership's

for we ways continue to enjoy to Second, engaging users explore music. more

digital a live top Shen, exceeded as calls, During album on album recent is platform. and sales a months we such fan-artist and proprietary increased in seller combined ] success. effectively Language] the and popular quarter, declarations sales. as Zhou It ] year-to-date copies interaction singer, video virtual souvenirs [ benefits, within the new Shenself, of of release, X digital in artists [ Chinese X features in-app [Foreign releases it million a the ranking the our

girl Lay digital Chinese solid Zhang artists, group, as album K-pop the results Zhang, from and such sales popular seen ], aespa. also have other singer, Xin We [

Music featuring the [ TMEA, to In continues time flagship demand services. value-added in and surge, A to festivals annual our our with Third, stepped concerts in XXXX [ horizons as we host Awards the performances Tencent host efforts we Macau. ] music for this event, up our ] offline We Entertainment live July, upgraded more elevated brought [indiscernible], international buzz, our of industry musicians household Shen, ] K-pop ], [ Yuan [ names, BABYMONSTER, including Yawei girl media rising singers as ], and group, domestic at billions well showcasing [ sparked this Notably, year XXXX ] Zhou event. TMEA Zhang XX and idols. social input. as listed over performed Liangying [

[ organize are bolstering noted ] We concerts top capabilities singers. for also our to large-scale

landmark of For helped tour ] all hosted her RAY's attending instance, and achieve XX,XXX a over concert [ TIA we fans. milestone

We happy a our year-over-year significant growth performances offline are in see in quarter. revenues the second to from

This merchandise ] our customize Mok, we quarter, [ as artist on Karen concerts have a event-themed platform. sales new the initiative, started for [indiscernible],

TV, popular promotion resources as and in subscribers [ content user continue member-only conversion. remarkable films our our success access leveraged our artists [ IPs benefit. Fourth, extensive to ] with a [ our and concerts win Chinese self-produced provide the of a as to ], advantage popularity ] also We strategically production, [indiscernible] premier to elevate content. online boost We of self-produced band, and

XXX platform [ For our example, for popular total X today. songs the months in [ charts of top X] form invited artists, and ] TV [ OST release to [ ], we The original [indiscernible] on million of video within soundtracks streams over Joy on Tencent till series, ], Life of []. self-produced Rose, This master ranking X blockbuster X Tale

variety our Language], Season [Foreign [Foreign and The ] [streams had Language], of Treasured on Am after on viral pop self-produced show, significantly X, Who Heard addition, went platform. which I, our featured short soon video they boosted songs, In You, Voice Language], the national on platform [Foreign music

local the music with bolstering to our strive combined time to online volunteer We share amplified rural offline ] is fulfills We the half we on of strong to of areas Accounts music. tastes premium society performances. inspire our Flower content operationally financially. value first jointly by will and long-term a social artists through progress our we dynamic music influence content view, Red second teachers vibrant [ record support privileges a quarter, launched Charity, the [ healthy In to have our online [ ecosystem. We unique entertainment increasingly development in effect, note, Guided reach Video fan-artist its a and leading ] promote partnering future Little growth. ] by stream an original diverse this to a always with through and love industry. solid finishing sustainable collaborating Concert interactions platform, of and of with goal to children Weixin for the with members' year live performance, and power strong, win-win a quarter [ another ] the lay education and content expanding believe for foundation both snowball deeply Tencent second the summary, the concerts. In a the and and high-quality solid needs, and Our

ahead. Ross, the for Ross call Now, you. to I details overall please on Thank turn go like more our over would platform to development.

everyone. Thank Cussion. Hello, you,

especially on music This focus during high-value and efforts has reflected the increased Our products innovation the enhanced user-centric effectively our ongoing plan, focus subscription retention Super the and membership. services, our subscribers advance on VIP this the to quarter.

the of Our at share. the quarterly few streaming forefront approach to ] us keeps industry. A highlights continuously ] [ [ delight users to

we sound [ offerings. First, premium effects of the enhanced quality further part and ] as our

[Foreign example, its audio Viper and Language], Music launched X.X, XD For quality. Music ultra-clear the the Language] upgraded Ultra QQ sound Kugou self-developed [Foreign all featuring Sound,

audio the music only ] consumption. with [ headphones including and quality to with [ [ user quality. not led We best-in-class This end for [ also high enjoy ways sound ] new ] improvements have ] to also higher increased certain playlists presented adoption, users music, but

the meet personalized users' we Second, needs.

ringtones based features customized retention. including well-known artists. and with proved a of launched [ ] benefits, effective the series for ] players have on and users' conversion IPs self-expression resonate in and user We desire [ and [ These ]

with and a is quality. premium multiple superior albums more such SVIP and live membership priority the holistic comprehensive audio online music employing the long-form karaoke Third, gaining seamless integrates online with to including TMEA. digital traction, various music hearts sound services, members and It active devices SVIP and our ticket of experience booking wins across offline access listening events, always scenarios. our and privileges, as our for

progress with SVIP down pleased membership adoption to forward are We and are looking sharing news exciting of early road. more the the

discovery our discover to [indiscernible] our We Next, [indiscernible] users songs experiences. key testing. to few apps, middleware enabling to listening and A personalized music their our music better across spotlight. optimized upgraded recommendation more

During discovery and distribution were essential continue models, recommendations. the audio of new XX% more ]. we long-tail quarter, streams [ content the music import from evolving generated large With and of our nearly to

We with applications. AIGC experience overall our also platform's elevated

AI-enhanced For [Foreign introduced Lite saving, Language]. a example, data Mode, SQ we

We XD Music are QQ a users preserving avatar superior [ and features sound Kugou [ Music quality virtual DJ ] ] of companionship. offer and sense

refined the our and we UI On more side, visual [ a offer ] to effortless inviting streaming experience. design

benefits, as playback To music further growing first stickiness multi-device the increased reflected consumption different in year-over-year platform, engagement. such per sum include ] and enjoy up, on ] among by artist rewards when QQ matching music high ] as devices content merchandise. our not to more program a and has quarter. Its and half-screen users increases the we efforts spent Music user both [ can least, now [ player. in above boosted a popularity our example, across all second user time but [ searching Users quarter-over-quarter expanded streaming seamless compact, feature music applications. Last contributed industry to effectively and launched For

to a services of dive we would CFO, align and to offering with deep increasing user Moving our expand over I diverse [ competing committed ] better financials. user more call ultimately like turn lovers, that paying ] our loyalty. With needs forward, are our for that, music to base into [ the Shirley,

greetings everyone. I will results. and our turn to financial Ross, now you, Thank to

year-over-year effective of net to quarter by by strong net profit XX% in and [ Our online continued the ] monetization profit the to management drive non-IFRS financial RMB X of and billion. X.X XXXX. IFRS operational results music efficiency billion, second increased RMB to services rose XX%

XX% quarterly RMB rise growth with year. users. both XX.X, last and net focus and balance X.X to an our XX% ] with same monthly music year-over-year. The of marking manage in million, the music social Monthly to revenues ARPPU billion, were the offsetting from increased Our down by advertising year-over-year increase second other our growth, XXXX, X.X online XXXX subscription the on RMB total online RMB music service is by supplemented X.X period sequentially. number achieve revenues strong million music were services. In subscription subscribers, expansion billion, quarter X% the online and XX% in paying revenues the by year-over-year of X.X year-over-year to offline RMB and second a a the large scale music a [ With Revenues our from subscription [ increase XXX reached quarter pace a in in had billion growth users largely of music decline X.X strong in was well of revenues X% of ARPPU. basis. growth entrainment adds by from in revenues from of right revenues representing paying up revenue subscribers increase growth as ] RMB driven performances. Music as was This revenues

content primarily offerings interactive ARPPU And reach advertising. ] for our run. Advertising growth advertising. attractive enriched the users. lead focus such our rewards ] and member Our provided privileges, growth, attractive for have advertising also ad-supported increased opened XXX shopping ] improved to user more year-over-year introducing stickiness. rolling in our Kugou the improving will to avenues users, new revenues. Moreover, the to also QQ which Audio our long features our to Viper Music commercialization contributed X.X Ultra out advertising improvement ad-supported [indiscernible][ our We for and strategic operationally due and as [ strong made our interactive had and Promotions enhanced is in helped in [ revenues to program Music program mid-year festival more membership for [indiscernible] SVIP Sound a products

and Additionally, deepening brand for integration sponsorships advertising with to continued ] the performances. diversify our we our and of offline offerings [ product innovate while mass,

were X.X revenues year-over-year. XX% by down Social other entertainment RMB services billion, and

environment We social product competitive monitor landscape, for entertainment conditions, the services. will continually market features regulatory and our

factors. Our increase to marking points of reached for percentage due gross following QX year-over-year XX%, margin X.X an the

favorable First, in as ARPPU margin. user improved for paying base online on and advertising well revenues monthly the had as increased impact music expansion a gross our

costs. ROCE key our to as we a metric been Second, manage focused have on

ramping improve own content the our ] to Third, help our gross of continued margin. up [

and membership have factors which ] collectively healthy our recent All [ above within margin. positively move to social a of entertainment, us gross margin. monetization to advertising enhanced have we enabled Lastly, impact

to RMB amounted period total on Moving period representing and remained last the year. XXXX, stable X.X of and compared XX% expenses, year. our operating with of same in were XX.X% second billion, expenses million last the marketing same in Selling they to the comparing XXX relatively quarter of revenues with of RMB

were in We for RMB primarily administrative employee-related [ XXX will online content continue perspective expenses and ] in expenses. areas and XX% expenses with promotions. General to a by well by to as promotion continue maintain ROI-focused as year-over-year, such invest million, long-term approach growth music lower driven as down

increase XX.X% of earnings compared QX related PRC entities. attributable XXX Our XXXX. RMB rate period accrual in offshore to to tax our the of same million by primarily for be tax the of subsidiaries This to to XX.X% withholding remitted effective was the to was

entities Additionally, changes risk for in also tax tax [ impact rate. our certain preferential ] effective

our RMB net RMB non-IFRS XXXX, were profit Non-IFRS to X.X attributable net of were equity company the X and the net QX of For attributable holders and billion profit company holders billion profit equity RMB respectively. net X.X respectively. to profit billion, and and X.X billion, RMB

[ of ] earnings impact share record These earnings this diluted increased XX% efficiency underscore per ADS robust year-over-year. Non-IFRS our high operating the RMB RMB quarter year-over-year. program. results diluted ADS performance, X.XX, a per repurchase beneficial up up reached and Our our X.XX, enhanced to financial at XX%

earnings we USD new May made a XXXX declared a have fiscal QX dividend year XXXX. during million in in cash payment of discussed call, XXXX the and As June for XXX

XX, XX, combined This equivalents, June balance of changes of base RMB billion compared the cash, also exchange rate was of of with XXXX, cash March [ USD balance as combined [ XXXX. RMB ] XX.X term in our ]. balance as at and by affected [indiscernible] different XX investment RMB As were to billion short-term deposits

on will [ we as as to continue ] high-quality focus business, efficiency improvement. well as in our forward, music expanding Looking membership SVIP growth such operating

enhance as user production continue prepared further innovative concludes content, invest user experience. This and remarks. will as high-quality improve our to engagement original We to technologies in well content

are ready questions. take We to your now

one, the you, ] Shirley. limit of re-enter the queue. please all additional benefit Thank please question. today's call, to one Instructions]. [ participants then And For [Operator you on yourself if have

of If Chinese, first you the please, question line ask in Citigroup, from ask can the comes Alicia. in you we repeat English. And questions to

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first that net XXXX, over has very music a confident expansion. up of adds the foundation we of both adds the ARPPU for net the online laid which RMB and year, subscriber mentioned, also the good we as For also businesses, growth last us, the and will online music be XX.X, reached have by X.X and our XX from million the in to half ARPPU continue in fueled RMB same are quarter solid,

also accelerated in few quarters, primarily So net content much paid over marketing adds past the expected better comes and to the due the our than the of increase strategies. effective

normal focusing a a expected will ARPPU, net the than adds. net pace, to be will return a more we and So on the [ [ which we growing pace have of ] level ] growth in to the steadier as the asset, faster grow

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plan on SVIP which future. very growth confidence and ARPPU in gives our us So the the momentum has good

I XXXX in case net XXXX, our term, half, to near margin to will will as result, a further the into which adds a think ARPPU first noticeable moving as help compared second but the the more as half the So expand well. the of in that smaller the be improve

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by from the from will largely to to the growth music the and offset business. total side, we challenges with macro expect smaller, other be entertainment this becomes For contribution impact solid factors. social have But competition, revenue our continuous online much

of expected strategy better the now to are effective terms our effective, proven profit high-quality the profitability, slightly be is we a -- previous focus the in year growth net forecasted. in full to and than and So providing on

And the comes Goldman Lincoln Kong from from question next Sachs.

I a up I Congrats the want will meaningful In follow just increase into adds. on currently we in the ARPPU, think the more solid you half. second mentioned terms to net quarter. of have the

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And comes from the Chong last question from Jefferies. Thomas

headwinds. macro about is question My

seeing think competitive business about seeing advertising have And the about we in competition. actually we my how Language] to macro segments, Are any impact entertainment? we days, question should our different changes landscape? Given is that been these the second uncertainties [Foreign subscription, and social

online Thanks macroenvironment. aspects the -- speaking, of value regarding frankly really affordable I the really which music will think the is money, the the business downturn speaking, definitely TME's But different speaking -- bring is question a macroenvironment first frankly challenges in is the to is business. users. -- so take I'll very to all for that for some the is cost low entertainment that relatively

see music So subscription of can impact us, do the online -- business very by have for that the the not much macroenvironment. you what

seeing that Even is also in that of of terms and in concerts a some sponsorships. our may have quarters. job, job we in related we also for offline the to spending related great still tourists impact are example, but In the of though sectors on dollars, good X ] are their event advertising, advertising especially the some to, doing we the advertisers a [ are doing some some of

besides new formats momentum. So business I the we're good doing advertising sponsorships, grow of further us think help to the so as advertising the our that of well, a which also very can some advertising in

the TME. So big impact do have the business. healthy still, at to a goal I our we have that very such long-term And for macroenvironment overall think not confidence of

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the second the landscape. competition your [Interpreted] Respond question especially music, to online regarding

players, think or usually We I the has this ] [ still will ] market. [ clear. those everyone stay in been have players

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see can anniversary eighth Well, you business. year, our starting this it that the competition, [Interpreted] regarding for the marks of

the -- is to So do business do to focus our right our right. still business

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keep as this still competition same content we improve user our improve capacity, our where the [Interpreted] the continue position going to time and we at and to as long optimize So to we're our in experience, market. refine further believe, firmly

please today's IR would today. and to the Okay. much have thank to you no questions, you, to us I feel in you, the And to and concludes goodbye. queue, any further very reach free team. wrap this quarter. speaking next our call. you like Thank you call. everyone, And are joining for if And questions up look Thank again, forward further there Since

Goodbye. you. Thank

Thank you.