Tencent Music Entertainment Group Announces Third Quarter 2024 Unaudited Financial Results
SHENZHEN, China, Nov. 12, 2024 /PRNewswire/ -- Tencent Music Entertainment Group ("TME," or the "Company") (NYSE: TME and HKEX: 1698), the leading online music and audio entertainment platform in China, today announced its unaudited financial results for the third quarter ended September 30, 2024.
Third Quarter 2024 Financial Highlights
-- Total revenues were RMB7.02 billion (US$1.0 billion), representing a
6.8% year-over-year increase, primarily due to strong year-over-year
growth in revenues from online music services, and partially offset by a
decline in revenues from social entertainment services and others.
-- Revenues from music subscriptions were RMB3.84 billion (US$547 million),
representing 20.3% year-over-year growth. The number of paying users
increased by 15.5% year-over-year to 119.0 million, up by 2.0 million
from the second quarter of 2024. ARPPU grew 4.9% year-over-year to
RMB10.8.
-- Net profit was RMB1.71 billion (US$244 million), representing 35.3%
year-over-year growth. Net profit attributable to equity holders of the
Company was RMB1.58 billion (US$226 million), representing 35.5%
year-over-year growth. Non-IFRS net profit([1]) was RMB1.94 billion
(US$276 million), representing 29.1% year-over-year growth. Non-IFRS net
profit attributable to equity holders of the Company([1] )was RMB1.81
billion (US$258 million), representing 28.8% year-over-year growth.
-- Diluted earnings per ADS was RMB1.01 (US$0.14), up from RMB0.74 in the
same period of 2023.
-- Total cash, cash equivalents, term deposits and short-term investments
as of September 30, 2024 were RMB36.04 billion (US$5.14 billion).
-- As of September 30, 2024, the Company had repurchased 42.1 million ADSs
in the open market with cash for a total consideration of US$335.5
million, of which approximately US$100 million were repurchased in the
third quarter.
Mr. Cussion Pang, Executive Chairman of TME, commented, "Our commitment to high-quality growth is reflected in another solid quarterly performance. The steady expansion of our music subscribers and diversified music services continue to drive overall growth and profitability. We are encouraged by the growing synergies between our platform and well-established content ecosystem, which have become a vital force in empowering us to seize new opportunities for long-term, sustainable growth."
Mr. Ross Liang, CEO of TME, continued, "This quarter's robust music subscription performance, with better-than-expected net subscriber additions and an expanding ARPPU, highlights the effectiveness of our balanced approach to achieve growth, which is important to drive paying user base expansion in the coming years. By offering enriched and differentiated user privileges, our value proposition for more premium memberships has been well accepted, cultivating greater loyalty on our platform."
Third Quarter 2024 Operational Highlights
-- Key Operating Metrics
3Q24 3Q23 YoY %
MAUs - online music (million) 576 594 (3.0 %)
Mobile MAUs - social entertainment (million) 90 129 (30.2 %)
Paying users - online music (million) 119.0 103.0 15.5 %
Paying users - social entertainment (million) 7.9 7.8 1.3 %
Monthly ARPPU - online music (RMB) 10.8 10.3 4.9 %
Monthly ARPPU - social entertainment (RMB) 64.8 86.2 (24.8 %)
Dynamic and robust content ecosystem enabled us to diversify our offerings and capitalize on emerging trends swiftly.
-- Expanded and deepened partnerships with leading record labels: 1)
Renewed contracts with YH Entertainment Group and Image Music Group to
include early access for new song releases. 2) Strategic alliance with
Galaxy Corporation further strengthened our advantage in K-pop content
offerings, including digital albums, merchandise, and multi-year hosting
rights for G-Dragon's concerts in Asia and other regions.
-- Elevated our industry impact through hosting influential and tailored
concert events: 1) Successfully staged TME's Zebra Music Festival in
September, a two-day live music event attracting nearly 65,000 music
fans, featuring performances from leading artists such as Chen Chusheng,
Joker Xue, and Zhang Yuan([2]), alongside Tencent musicians and other
popular artists Leon Liu, Zhao Lei, and Suede([2]). 2) Organized pop
singer and songwriter Yu Jiayun's live concert, marking his first-ever
ticketed show with over 10,000 attendees.
-- Produced and promoted chart-topping theme songs for popular Tencent
games such as League of Legends: Wild Rift and Peacekeeper Elite, and
elevated engagement by offering in-game benefits to listeners.
-- Collaborated with artists and labels to offer Super VIP ("SVIP") members
additional privileges, enhancing conversion and loyalty. This includes:
1) Complimentary access to an extensive digital album collection. 2)
Proprietary concerts and fan engagement activities, such as pre-sales
for ticket concerts by G.E.M., Mariah Carey, and TIA RAY([2] )during the
quarter.
Effective operations and expansive privileges led to subscriber base expansion and SVIP adoption, paving a strong foundation for sustained future growth.
-- Enhanced recommendation algorithms increased overall subscriber
conversion, with recommendation-driven streams reaching a record high.
-- Introduced more personalized product features including dynamic player
skins, audio players, and ringtones; collaborated with popular IPs such
as Black Myth: Wu Kong, Crayon Shin-chan, and Disney to drive
engagement.
-- Leveraged expanding LLM capabilities to improve contents production and
discovery effectiveness.
-- Over 10 million SVIP subscribers as of the end of September 2024, with
blended ARPPU and user engagement higher than non-SVIP subscribers.
-- For SVIP adoption, premium audio quality and enriched long-form audio
offerings were some of the key growth drivers. Features such as QQ
Music's Premium Sound, DTS sound quality, and Kugou Music's Viper Ultra
Sound helped enhance SVIP member experiences. We also expanded the Viper
series privileges to in-vehicle use through strengthened partnerships
with Xiaomi, Li Auto, and NIO.
Third Quarter 2024 Financial Review
Total revenues increased by 446 million, or 6.8%, to RMB7.02 billion (US$1.0 billion) from RMB6.57 billion in the same period of 2023.
-- Revenues from online music services delivered a strong year-over-year
increase of 20.4% to RMB5.48 billion (US$781 million) from RMB4.55
billion in the same period of 2023. The increase was driven by solid
growth in music subscription revenues, supplemented by growth in
revenues from advertising services. Revenues from music subscriptions
were RMB3.84 billion (US$547 million), representing 20.3% year-over-year
growth compared with RMB3.19 billion in the same period of 2023. This
rapid growth was driven by continuous expansion in the online music
paying user base and improved ARPPU. The number of online music paying
users increased by 15.5% year-over-year to 119.0 million, with a monthly
ARPPU of RMB10.8 in the third quarter of 2024. The increase in the
number of paying users and monthly ARPPU was primarily due to high
quality contents, attractive membership privileges, optimized user
operations and effective promotions, as well as the expansion of SVIP
membership program. The year-over-year increase in revenues from
advertising was primarily due to our more diversified product portfolio
and innovative ad formats, such as ad-supported mode. Additionally,
increased revenues from offline performances also contributed to the
growth in revenues from online music services.
-- Revenues from social entertainment services and others decreased by
23.9% to RMB1.54 billion (US$219 million) from RMB2.02 billion in the
same period of 2023. The continued decrease was mainly the result of
adjustments to certain live-streaming interactive functions and more
stringent compliance procedures implemented. Meanwhile, we continue to
focus on the healthy growth in advertising and VIP memberships within
social entertainment.
Cost of revenues decreased by 4.8% year-over-year to RMB4.02 billion (US$573 million), mainly due to decreased revenues from social entertainment services that led to less revenue sharing fees, partially offset by increased costs related to offline concerts and music festivals, content costs of royalties and payment channel fees.
Gross margin increased to 42.6% from 35.7% in the same period of 2023, primarily due to strong revenue growth from music subscriptions and advertising services, and the ramp-up of our own content.
Total operating expenses decreased by 3.9% year-over-year to RMB1.22 billion (US$174 million). Operating expenses as a percentage of total revenues decreased to 17.4% from 19.3% in the same period of 2023.
-- Selling and marketing expenses were RMB220 million (US$31 million),
which were relatively stable compared with same period of last year. We
continue to maintain ROI focused approach for promotion expenses.
-- General and administrative expenses were RMB1.00 billion (US$142
million), representing a 4.9% year-over-year decrease. This decrease was
primarily due to reduced employee-related expenses.
Total operating profit was RMB2.14 billion (US$306 million) in the third quarter of 2024, representing an increase of 50.5% year-over-year.
The effective tax rate for the third quarter of 2024 was 17.7% compared with 12.2% in the same period of 2023. The increase in the effective tax rate was mainly driven by the accrual of withholding income tax of RMB113 million (US$16 million) in the third quarter of 2024.
For the third quarter of 2024, net profit was RMB1.71 billion (US$244 million) and net profit attributable to equity holders of the Company was RMB1.58 billion (US$226 million). Non-IFRS net profit was RMB1.94 billion (US$276 million) and non-IFRS net profit attributable to equity holders of the Company was RMB1.81 billion (US$258 million). Please refer to the section in this press release titled "Non-IFRS Financial Measure" for details.
Basic and diluted earnings per American Depositary Shares ("ADS") for the third quarter of 2024 were RMB1.02 (US$0.15) and RMB1.01 (US$0.14), respectively; non-IFRS basic and diluted earnings per ADS were RMB1.17 (US$0.17) and RMB1.16 (US$0.16), respectively. The Company had weighted averages of 1.55 billion basic and 1.57 billion diluted ADSs outstanding, respectively. Each ADS represents two of the Company's Class A ordinary shares.
As of September 30, 2024, the combined balance of the Company's cash, cash equivalents, term deposits and short-term investments amounted to RMB36.04 billion (US$5.14 billion), compared with RMB35.03 billion as of June 30, 2024.
Share Repurchase Program
Under the US$500 million Share Repurchase Program announced on March 21, 2023, as of September 30, 2024, we had repurchased 42.1 million ADSs in the open market with cash for a total consideration of US$335.5 million.
Environmental, Social, and Governance ("ESG")
In the third quarter, we published our inaugural ESG report, detailing our practices and achievements across environmental, social, and governance areas. This report underscores our unwavering commitment to sustainable development and corporate social responsibility.
Additionally, the Tencent Musician Platform was recognized as one of China's first model cases for its national copyright powerhouse strategy recently, honoring our contributions to music copyright protection and the advancement of the music industry.
Exchange Rate
This announcement contains translations of certain RMB amounts into U.S. dollars ("USD") at specified rates solely for the convenience of the reader. Unless otherwise stated, all translations from RMB to USD were made at the rate of RMB7.0176 to US$1.00, the noon buying rate in effect on September 30, 2024, in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or USD amounts referred could be converted into USD or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release.
Non-IFRS Financial Measure
The Company uses non-IFRS net profit for the period, which is a non-IFRS financial measure, in evaluating its operating results and for financial and operational decision-making purposes. TME believes that non-IFRS net profit helps identify underlying trends in the Company's business that could otherwise be distorted by the effect of certain expenses that the Company includes in its profit for the period. TME believes that non-IFRS net profit for the period provides useful information about its results of operations, enhances the overall understanding of its past performance and future prospects and allows for greater visibility with respect to key metrics used by its management in its financial and operational decision-making.
Non-IFRS net profit for the period should not be considered in isolation or construed as an alternative to operating profit, net profit for the period or any other measure of performance or as an indicator of its operating performance. Investors are encouraged to review non-IFRS net profit for the period and the reconciliation to its most directly comparable IFRS measure. Non-IFRS net profit for the period presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to the Company's data. TME encourages investors and others to review its financial information in its entirety and not rely on a single financial measure.
Non-IFRS net profit for the period represents profit for the period excluding amortization of intangible and other assets arising from business acquisitions or combinations, share-based compensation expenses, net losses/gains from investments and related income tax effects.
Please see the "Unaudited Non-IFRS Financial Measure" included in this press release for a full reconciliation of non-IFRS net profit for the period to its net profit for the period.
[1] Non-IFRS net profit and non-IFRS net profit attributable to equity holders of the Company were arrived at after excluding the combined effect of amortization of intangible assets and other assets arising from business acquisitions or combinations, share-based compensation expenses, net losses/gains from investments, and related income tax effects.
[2] Names of artists and bands contained in this press release are sorted according to the following rules: (i) grouped by artists and bands: and (ii)in alphabetical order by full names.
About Tencent Music Entertainment
Tencent Music Entertainment Group (NYSE: TME and HKEX: 1698) is the leading online music and audio entertainment platform in China, operating the country's highly popular and innovative music apps: QQ Music, Kugou Music, Kuwo Music and WeSing. TME's mission is to create endless possibilities with music and technology. TME's platform comprises online music, online audio, online karaoke, music-centric live streaming and online concert services, enabling music fans to discover, listen, sing, watch, perform and socialize around music. For more information, please visit ir.tencentmusic.com.
Safe Harbor Statement
This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to" or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the SEC and the HKEX. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law.
Investor Relations Contact
Tencent Music Entertainment Group
ir@tencentmusic.com
+86 (755) 8601-3388 ext. 818415
TENCENT MUSIC ENTERTAINMENT GROUP
CONSOLIDATED INCOME STATEMENTS
Three Months Ended September 30 Nine Months Ended September 30
2023 2024 2023 2024
RMB RMB US$ RMB RMB US$
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
(in millions, except per share data) (in millions, except per share data)
Revenues
Online music services 4,553 5,480 781 12,303 15,911 2,267
Social entertainment services and
others 2,016 1,535 219 8,556 5,032 717
6,569 7,015 1,000 20,859 20,943 2,984
Cost of revenues (4,227) (4,024) (573) (13,705) (12,171) (1,734)
Gross profit 2,342 2,991 426 7,154 8,772 1,250
Selling and marketing expenses (219) (220) (31) (642) (617) (88)
General and administrative expenses (1,049) (998) (142) (3,110) (2,885) (411)
Total operating expenses (1,268) (1,218) (174) (3,752) (3,502) (499)
Interest income 273 299 43 775 881 126
Other gains, net 78 72 10 168 150 21
Operating profit 1,425 2,144 306 4,345 6,301 898
Share of net profit of investments
accounted 49 29 4 107 65 9
for using equity method
Finance cost (35) (97) (14) (111) (153) (22)
Profit before income tax 1,439 2,076 296 4,341 6,213 885
Income tax expense (176) (367) (52) (530) (1,180) (168)
Profit for the period 1,263 1,709 244 3,811 5,033 717
Attributable to:
Equity holders of the Company 1,168 1,583 226 3,614 4,687 668
Non-controlling interests 95 126 18 197 346 49
Earnings per share for Class A and
Class B
ordinary shares
Basic 0.37 0.51 0.07 1.16 1.52 0.22
Diluted 0.37 0.50 0.07 1.14 1.50 0.21
Earnings per ADS (2 Class A shares
equal to 1 ADS)
Basic 0.75 1.02 0.15 2.31 3.04 0.43
Diluted 0.74 1.01 0.14 2.28 2.99 0.43
Shares used in earnings per Class A
and Class B
ordinary share computation:
Basic 3,134,975,498 3,092,300,590 3,092,300,590 3,127,809,736 3,087,337,746 3,087,337,746
Diluted 3,173,371,472 3,134,713,201 3,134,713,201 3,172,090,075 3,132,654,290 3,132,654,290
ADS used in earnings per ADS
computation
Basic 1,567,487,749 1,546,150,295 1,546,150,295 1,563,904,868 1,543,668,873 1,543,668,873
Diluted 1,586,685,736 1,567,356,601 1,567,356,601 1,586,045,038 1,566,327,145 1,566,327,145
TENCENT MUSIC ENTERTAINMENT GROUP
UNAUDITED NON-IFRS FINANCIAL MEASURE
Three Months Ended September 30 Nine Months Ended September 30
2023 2024 2023 2024
RMB RMB US$ RMB RMB US$
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
(in millions, except per share data) (in millions, except per share data)
Profit for the period 1,263 1,709 244 3,811 5,033 717
Adjustments:
Amortization of intangible and other assets
arising from 101 109 16 334 330 47
business acquisitions or combinations*
Share-based compensation 185 168 24 553 525 75
(Gains)/losses from investments** (3) (30) 16 2
Income tax effects*** (43) (46) (7) (123) (167) (24)
Non-IFRS Net Profit 1,503 1,940 276 4,545 5,737 818
Attributable to:
Equity holders of the Company 1,408 1,814 258 4,348 5,391 768
Non-controlling interests 95 126 18 197 346 49
Earnings per share for Class A and Class B
ordinary shares
Basic 0.45 0.59 0.08 1.39 1.75 0.25
Diluted 0.44 0.58 0.08 1.37 1.72 0.25
Earnings per ADS (2 Class A shares equal to
1 ADS)
Basic 0.90 1.17 0.17 2.78 3.49 0.50
Diluted 0.89 1.16 0.16 2.74 3.44 0.49
Shares used in earnings per Class A and
Class B
ordinary share computation:
Basic 3,134,975,498 3,092,300,590 3,092,300,590 3,127,809,736 3,087,337,746 3,087,337,746
Diluted 3,173,371,472 3,134,713,201 3,134,713,201 3,172,090,075 3,132,654,290 3,132,654,290
ADS used in earnings per ADS computation
Basic 1,567,487,749 1,546,150,295 1,546,150,295 1,563,904,868 1,543,668,873 1,543,668,873
Diluted 1,586,685,736 1,567,356,601 1,567,356,601 1,586,045,038 1,566,327,145 1,566,327,145
* Represents the amortization of identifiable assets, including intangible assets such as domain name, trademark, copyrights, supplier resources,
corporate customer relationships and non-compete
agreement etc., and fair value adjustment on music content (i.e., signed contracts obtained for the rights to access to the music contents for
which the amount was amortized over the contract period),
resulting from business acquisitions or combination.
** Including the net gains/losses on deemed disposals/disposals of investments, fair value changes arising from investments, impairment provision
of investments and other expenses in relation to
equity transactions of investments.
*** Represents the income tax effects of Non-IFRS adjustments.
TENCENT MUSIC ENTERTAINMENT GROUP
CONSOLIDATED BALANCE SHEETS
As at December 31, As at September 30,
2023 2024
RMB RMB US$
Audited Unaudited Unaudited
(in millions)
ASSETS
Non-current assets
Property, plant and equipment 490 704 100
Land use rights 2,437 2,382 339
Right-of-use assets 367 312 44
Intangible assets 2,032 1,996 284
Goodwill 19,542 19,647 2,800
Investments accounted for using equity method 4,274 4,571 651
Financial assets at fair value through other comprehensive income 6,540 11,777 1,678
Other investments 307 327 47
Prepayments, deposits and other assets 540 454 65
Deferred tax assets 352 388 55
Term deposits 8,719 7,529 1,073
45,600 50,087 7,137
Current assets
Inventories 8 18 3
Accounts receivable 2,918 2,935 418
Prepayments, deposits and other assets 3,438 3,000 427
Other investments 37 48 7
Term deposits 9,937 18,306 2,609
Restricted Cash 31 10 1
Cash and cash equivalents 13,567 10,209 1,455
29,936 34,526 4,920
Total assets 75,536 84,613 12,057
EQUITY
Equity attributable to equity holders of the Company
Share capital 2 2 0
Additional paid-in capital 36,576 36,702 5,230
Shares held for share award schemes (302) (514) (73)
Treasury shares (6,996) (7,538) (1,074)
Other reserves 9,658 16,727 2,384
Retained earnings 16,969 18,106 2,580
55,907 63,485 9,047
Non-controlling interests 1,295 1,744 249
Total equity 57,202 65,229 9,295
LIABILITIES
Non-current liabilities
Notes payables 5,636 3,481 496
Deferred tax liabilities 239 234 33
Lease liabilities 297 235 33
Deferred revenue 148 163 23
6,320 4,113 586
Current liabilities
Accounts payable 5,006 6,523 930
Other payables and other liabilities 3,472 2,786 397
Notes payables 2,099 299
Current tax liabilities 567 823 117
Lease liabilities 115 109 16
Deferred revenue 2,854 2,931 418
12,014 15,271 2,176
Total liabilities 18,334 19,384 2,762
Total equity and liabilities 75,536 84,613 12,057
TENCENT MUSIC ENTERTAINMENT GROUP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 30 Nine Months Ended September 30
2023 2024 2023 2024
RMB RMB US$ RMB RMB US$
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
(in millions) (in millions)
Net cash provided by operating activities 1,441 2,165 309 5,360 7,795 1,111
Net cash used in investing activities (1,142) (3,337) (476) (1,670) (8,142) (1,160)
Net cash used in financing activities (849) (882) (126) (962) (3,015) (430)
Net (decrease)/increase in cash and cash equivalents (550) (2,054) (293) 2,728 (3,362) (479)
Cash and cash equivalents at beginning of the period 12,950 12,251 1,746 9,555 13,567 1,933
Exchange differences on cash and cash equivalents (19) 12 2 98 4 1
Cash and cash equivalents at end of the period 12,381 10,209 1,455 12,381 10,209 1,455
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SOURCE Tencent Music Entertainment Group
