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Tencent Announces 2015 First Quarter Results

SHENZHEN, China, May 13, 2015 /PRNewswire/ -- Tencent Holdings Limited ("Tencent" or the "Company") (SEHK: 00700), a leading provider of Internet services in China, today announced the unaudited consolidated results for the first quarter of 2015 ended March 31, 2015 ("1Q2015").

Key Highlights:

  • Total revenues were RMB22,399 million (USD3,647 million1), an increase of 22% over the first quarter of 2014 ("YoY").
  • Operating profit was RMB9,372 million (USD1,526 million), an increase of 20% YoY. Operating margin was 42%, the same as the first quarter of 2014.
  • Profit for the period was RMB6,930 million (USD1,128 million), an increase of 8% YoY. Net margin decreased to 31% from 35% last year.
  • Profit attributable to equity holders of the Company for the period was RMB6,883 million (USD1,121 million), an increase of 7% YoY.
  • Basic earnings per share2 were RMB0.741. Diluted earnings per share2 were RMB0.733.
  • On a non-GAAP basis, excluding share-based compensation, deemed disposal gains, amortization of intangible assets and impairment provision:
    • Operating profit was RMB9,399 million (USD1,530 million), an increase of 45% YoY. Operating margin increased to 42% from 35% last year.
    • Profit for the period was RMB7,144 million (USD1,163 million), an increase of 37% YoY. Net margin increased to 32% from 28% last year.
    • Profit attributable to equity holders of the Company for the period was RMB7,053 million (USD1,148 million), an increase of 36% YoY.
    • Basic earnings per share were RMB0.759. Diluted earnings per share were RMB0.752.

Mr. Ma Huateng, Chairman and CEO of Tencent, said, "During the first quarter of 2015, we continued to expand our mobile user base and improve our engagement with users, while delivering solid financial results. Our key mobile properties extended their leadership in China and continued to broaden user activities from social and communications to gaming, entertainment, media content, payment, and beyond. Driven by mobile social and video advertisements, our total advertising revenue more than doubled year-on-year. Our Red Envelope gifting initiative spurred increased adoption of our payment solutions and boosted total payment volumes. Looking ahead, we aim to bring further technology benefits to users through our "Internet +" strategy of connecting users with services in various vertical industries through collaboration with a broad range of partners."

1 Figures stated in USD are based on USD1 to RMB6.1422.

2 Since the second quarter of 2014, EPS has been stated after taking into account the effect of the Share Subdivision. Comparative figures have been restated on the assumption that the Share Subdivision had been effective since the commencement of prior corresponding period.

3 Since the fourth quarter of 2014, we recognise revenues from smart phone games we publish on an exclusive basis on a gross basis, primarily to reflect changes in our co-operation models that qualify us the principal, rather than agent, for certain licensed titles. Correspondingly, we recorded revenue sharing with third-party developers and channel costs of these titles in costs of revenues, instead of treating them as contra-revenue items.

1Q2015 Financial Review

Value Added Services ("VAS")3.  Revenues from our VAS business increased by 29% YoY to RMB18,626 million. Online game revenues increased by 28% to RMB13,313 million. The increase was mainly driven by revenue growth from smart phone games, primarily reflecting our diversified game portfolio and, to a lesser extent, the impact of the adoption of gross revenue recognition. Revenues from PC client games also contributed to the increase, driven by growth in our key genres. Social networks revenues grew by 32% to RMB5,313 million. The increase primarily reflected revenue growth from in-game item sales within mobile platforms, and higher subscription revenues from our QQ Membership, Qzone and digital content subscription services. If gross revenue recognition for smart phone games was adopted for the first quarter of 2014, revenues from our VAS business, online games, and social networks would have increased by 26%, 24% and 29% respectively for the first quarter of 2015.

Online advertising.  Revenues from our online advertising business increased by 131% YoY to RMB2,724 million whereas brand display advertising revenues and performance-based advertising revenues increased by 90% and 199% YoY, respectively. The increase was mainly driven by revenue growth in video advertising due to more video views, and higher contributions from performance-based social advertising on mobile driven by Mobile Qzone and Weixin Official Accounts.

Other Key Financial Information for 1Q2015

Share-based compensation was RMB593 million, up 5% YoY.

EBITDA was RMB9,945 million, up 47% YoY. Adjusted EBITDA was RMB10,506 million, up 48% YoY.

Capital expenditure was RMB1,332 million, up 17% YoY. 

Free cashflow was RMB8,350 million, up 52% YoY.

Net cash position totaled RMB25,319 million, down 26% YoY, due to strategic investments, partly offset by an increase in free cash flows generated during the year. Fair value of our stakes in listed investee companies (both associates and available-for-sale financial assets) totalled RMB74 billion as at March 31, 2015.

Strategic Highlights

In the first quarter of 2015, we conducted several initiatives to enhance our mobile ecosystem and develop our digital content businesses, such as:

  1. Promoting our payment services through enriched payment scenarios, including our Chinese New Year Red Envelope gifting initiative, to attract more users to our payment platforms;
  2. Expanding our social advertising inventory on mobile, via selected advertisements inside Weixin Moments and via our third party advertising network; and
  3. Partnering with NBA to exclusively offer users in China online video streams of NBA games and related digital content.

In terms of balance sheet management, in April 2015 we upsized the limit on the aggregate principal amount of our Global Medium Term Note Programme by USD5 billion to USD10 billion. In addition, Moody's and Standard & Poor 's upgraded our long-term corporate credit ratings from A3 to A2 in March 2015 and from A- to A in April 2015, respectively.

Business Review and Outlook

Divisional and Product Highlights

Operating information

  • Monthly active user accounts ("MAU") of QQ was 832 million, a decrease of 2% YoY.
  • Smart device MAU of QQ was 603 million, an increase of 23% YoY.
  • Peak concurrent user accounts ("PCU") of QQ was 228 million, an increase of 14% YoY.
  • Combined MAU of Weixin and WeChat were 549 million, an increase of 39% YoY.
  • MAU of Qzone was 668 million, an increase of 4% YoY.
  • Smart device MAU of Qzone was 568 million, an increase of 22% YoY.
  • Fee-based VAS registered subscriptions were 82 million, a decrease of 7% YoY.

Key Platforms

In the first quarter of 2015, QQ and Qzone benefited from further growth in mobile user base and enhanced user engagement.

  • For QQ, smart device MAU increased by 23% YoY to 603 million at the end of the quarter, while overall PCU increased by 14% YoY to 228 million. Mobile QQ usage benefited from enhanced features in areas such as location-based groups, voice and video calls, short video sharing and document transmission.
  • For Qzone, smart device MAU increased by 22% YoY to 568 million at the end of the quarter. User metrics increase was partly due to favourable seasonal effect of Chinese New Year festival. Further, user activity and stickiness continued to improve, benefiting from enhanced features in areas such as short video posting and photo editing.

Combined MAU of Weixin and WeChat reached 549 million at the end of the quarter, representing YoY growth of 39%.

  • For Weixin, we deepened user engagement by providing users in major cities access to local public services such as transportation, utilities, healthcare and municipal services. We also extended the "shake" function to allow selected merchants to offer promotion coupons to users.
  • For WeChat, we continued to drive user engagement in selected overseas markets.

Weixin Payment and Mobile QQ Wallet gained popularity as we launched initiatives to build user awareness and habit, such as Red Envelope gifting during the Chinese New Year festival.

Our online media platforms extended their leadership in China. Tencent News leveraged enhanced content, improved user experience and plug-ins to Mobile QQ and Weixin to consolidate its positions as the leading mobile news platform in China. Tencent Video solidified its position as the broadest-reach mobile video platform in China, thanks to enriched content and enhanced user experience.

VAS

In the first quarter of 2015, our social networks business benefited from YoY growth from in-game item sales on our mobile platforms, and higher subscription revenues as we enhanced the mobile privileges and mobile user experience for QQ Membership, Qzone and digital content subscription services. We will continue to add premium content for our literature, music and video subscription services.

In online games, we extended our leadership in China:

  • For PC client games, the quarter saw a healthy YoY revenue increase as we benefited from growth in key genres. For instance, League of Legends registered a robust performance with an enlarged user base, and FIFA Online 3 contributed to the revenue growth with more in-game micro-transactions, including sales of player cards.
  • For mobile games, we achieved strong YoY revenue growth with more paying users in the quarter. In the first quarter of 2015, total revenues from smart phone games (including those distributed via Mobile QQ and Weixin game centers, YingYongBao app store, and elsewhere) amounted to approximately RMB4.4 billion, increasing by 82% YoY and 8% quarter-on-quarter on a gross-to-gross basis, respectively4. Consolidating our position as China's leading publisher of mobile games, we diversified our portfolio for smart phone games via introducing new genres, such as shooting games and quiz show games, and via licensing of sequels to popular PC and mobile games, and licensing of non-game IPs, such as I am MT2, Infinity Blade Saga, Carrot Fantasy 3, Naruto, and the mobile version of DnF.

Looking ahead, we aim to enrich our PC and mobile game portfolios in different genres and solidify our market leadership.

4 In the first quarter of 2015, total revenues from smart phone games distributed via Mobile QQ and/ or Weixin game centers amounted to approximately RMB4.0 billion, increasing by 80% year-on-year and 5% quarter-on-quarter on a gross-to-gross basis, respectively.

Online Advertising

Our online advertising business achieved rapid YoY revenue growth in the first quarter of 2015, mainly reflecting revenue growth in video advertising supported by higher viewer traffic, and increased revenues from performance-based social advertising driven by Mobile Qzone and Weixin Official Accounts. Approximately 40% of our brand display advertising revenues and 75% of our performance-based advertising revenues were generated on mobile platforms in the first quarter of 2015. Looking forward, we will continue to invest aggressively in key content to further build our traffic, and we will expand our mobile advertising inventory and enhance our performance-based advertising service capabilities.

For other detailed disclosure, please refer to our website www.tencent.com/ir.

About Tencent

Tencent uses technology to enrich the lives of Internet users. Every day, hundreds of millions of people communicate, share experiences, consume information and seek entertainment through our integrated platforms. Tencent's diversified services include QQ, Weixin/ WeChat for communications; Qzone for social networking; QQ Game Platform for online games; QQ.com and Tencent News for information and Tencent Video for video content.

Tencent was founded in Shenzhen in 1998 and went public on the Main Board of the Hong Kong Stock Exchange in 2004. The Company is one of the constituent stocks of the Hang Seng Index. Tencent seeks to evolve with the Internet by investing in innovation, providing a hospitable environment for partners, and staying close to users.

For enquiries, please contact:

Investor:
Catherine Chan
Tel: (86) 755 86013388 ext 88369/ (852) 3148 5100
Email: [email protected]

Angie Chang
Tel: (86) 755 86013388 ext 73951/ (852) 3148 5100
Email: [email protected]

Media:
Canny Lo
Tel: (86) 755 86013388 ext 66630/ (852) 3148 5100
Email: [email protected]

Limin Chen
Tel: (86) 755 86013388 ext 56011
Email: [email protected]

Non-GAAP Financial Measures

To supplement the consolidated results of the Company prepared in accordance with IFRS, certain non-GAAP financial measures, including non-GAAP operating profit, non-GAAP operating margin, non-GAAP profit for the period, non-GAAP net margin and non-GAAP profit attributable to equity holders of the Company, have been presented in this press release.  These unaudited non-GAAP financial measures should be considered in addition to, not as a substitute for, measures of the Company's financial performance prepared in accordance with IFRS.  In addition, these non-GAAP financial measures may be defined differently from similar terms used by other companies. 

The Company's management believes that the non-GAAP financial measures provide investors with useful supplementary information to assess the performance of the Company's core operations by excluding certain non-cash items and certain impact of acquisitions.

Forward-Looking Statements

This press release contains forward-looking statements relating to the business outlook, forecast business plans and growth strategies of the Company.  These forward-looking statements are based on information currently available to the Company and are stated herein on the basis of the outlook at the time of this press release.  They are based on certain expectations, assumptions and premises, some of which are subjective or beyond our control.  These forward-looking statements may prove to be incorrect and may not be realized in future.  Underlying the forward-looking statements is a large number of risks and uncertainties.  Further information regarding these risks and uncertainties is included in our other public disclosure documents on our corporate website.

CONSOLIDATED INCOME STATEMENT

RMB in millions, unless specified


Unaudited


Unaudited


1Q2015

1Q2014


1Q2015

4Q2014

Revenues

22,399

18,400


22,399

20,978

    VAS

18,626

14,413


18,626

17,137

   Online advertising

2,724

1,177


2,724

2,627

    Others [1]

1,049

2,810


1,049

1,214

Cost of revenues

(8,965)

(7,800)


(8,965)

(8,332)

Gross profit

13,434

10,600


13,434

12,646

Gross margin

60%

58%


60%

60%

Interest income

521

375


521

443

Other gains, net

411

1,607


411

343

Selling and marketing expenses

(1,326)

(1,855)


(1,326)

(2,063)

General and administrative expenses

(3,668)

(2,937)


(3,668)

(3,975)

Operating profit

9,372

7,790


9,372

7,394

Operating margin

42%

42%


42%

35%

Finance costs, net

(433)

(238)


(433)

(273)

Share of (losses)/profits of associates and

joint ventures

(310)

44


(310)

(275)

Profit before income tax

8,629

7,596


8,629

6,846

Income tax expense

(1,699)

(1,164)


(1,699)

(892)

Profit for the period

6,930

6,432


6,930

5,954

Net margin

31%

35%


31%

28%

Attributable to:






    Equity holders of the Company

6,883

6,457


6,883

5,860

    Non-controlling interests

47

(25)


47

94







Non-GAAP profit attributable to equity

    holders of the Company

7,053

5,194


7,053

6,723







Earnings per share for profit attributable

     to equity holders of the Company

(in RMB per share)


Restated [2]




- basic

0.741

0.700


0.741

0.632

- diluted

0.733

0.690


0.733

0.625

[1] In light of the reduction in size of our eCommerce transactions business, we include the eCommerce transactions in the "Others" business segment in our financial statements from the first quarter of 2015 onwards. Comparative figures have been reclassified to conform to the new presentation.  

[2] Comparative figures have been restated on the assumption that the Share Subdivision had been effective since the commencement of prior corresponding period.  

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

RMB in millions, unless specified

 


Unaudited


Unaudited


1Q2015

1Q2014


1Q2015

4Q2014

Profit for the period

6,930

6,432


6,930

5,954

Other comprehensive income, net of tax:






     Items that may be subsequently

       reclassified to profit or loss






     Share of other comprehensive income

        of associates

70

8


70

38

     Net gains/(losses) from changes in fair

       value of available-for-sale financial

       assets

1,764

(37)


1,764

(1,439)

Currency translation differences

187

17


187

(280)

Total comprehensive income for the

period

8,951

6,420


8,951

4,273

Attributable to:






    Equity holders of the Company

8,898

6,441


8,898

4,183

    Non-controlling interests

53

(21)


53

90

 

OTHER FINANCIAL INFORMATION

RMB in millions, unless specified


Unaudited


1Q2015

1Q2014

4Q2014

EBITDA (a)

9,945

6,787

7,929

Adjusted EBITDA (a)

10,506

7,121

8,424

Adjusted EBITDA margin (b)

47%

39%

40%

Interest expense

329

112

264

Net cash (c)

25,319

34,245

22,758

Capital expenditures (d)

1,332

1,138

1,603

 


Note:

(a)   EBITDA consists of operating profit less interest income and other (gains)/losses, net, and plus depreciation of fixed assets and investment properties and amortisation of intangible assets. Adjusted EBITDA consists of EBITDA plus equity-settled share-based compensation expenses.

(b)   Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues.

(c)    Net cash represents period end balance and is calculated as cash and cash equivalents, term deposits, minus borrowings and notes payable.

(d)   Capital expenditures consist of additions (excluding business combinations) to fixed assets, construction in progress, land use rights and intangible assets (excluding game and other content licenses).

 

 


CONSOLIDATED STATEMENT OF FINANCIAL POSITION

In RMB millions (unless otherwise stated)






Unaudited      

Audited



31 March 2015


31 December 2014

ASSETS




Non-current assets




Fixed assets 

7,774


7,918

Construction in progress

4,402


3,830

Investment properties

266


268

Land use rights

748


751

Intangible assets

 

10,441


9,304

Investments in associates

53,161


51,131

Investments in redeemable preference shares of associates

4,276


2,941

Investment in joint ventures

563


63

Deferred income tax assets

432


322

Available-for-sale financial assets

17,171


13,277

Prepayments, deposits and other assets

996


1,209

Term deposits

4,121


4,831






104,351


95,845

Current assets




Inventories

279


244

Accounts receivable

5,195


4,588

Prepayments, deposits and other assets

9,153


7,804

Term deposits

14,147


10,798

Restricted cash

13,832


9,174

Cash and cash equivalents

55,583


42,713






98,189


75,321





Total assets

202,540


171,166







 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

In RMB millions (unless otherwise stated)






Unaudited

Audited


31 March 2015


31 December 2014


EQUITY





Equity attributable to the Company's equity holders





Share capital

-


-


Share premium

5,599


5,131


Shares held for share award schemes

 

(1,363)


(1,309)


Other reserves

3,070


2,129


Retained earnings

80,940


74,062








88,246


80,013







Non-controlling interests

2,424


2,111







Total equity

90,670


82,124







LIABILITIES





Non-current liabilities





Borrowings

5,835


5,507


Notes payable

37,322


25,028


Long-term payables

2,644


2,052


Deferred income tax liabilities

 

2,739


2,942


Deferred revenue

3,256


3,478








51,796


39,007







Current liabilities





Accounts payable

10,061


8,683


Other payables and accruals

23,125


19,123


Borrowings

3,534


3,215


Notes payable

1,841


1,834


Current income tax liabilities

1,546


461


Other tax liabilities

785


566


Deferred revenue

19,182


16,153








60,074


50,035







Total liabilities

111,870


89,042







Total equity and liabilities

202,540


171,166







Net current assets

38,115


25,286







Total assets less current liabilities

142,466


121,131


 

 

RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS



Adjustments


RMB in millions,

unless specified

As

Equity-settled

Cash-settled

(Gains)/Losses

Amortisation of

Impairment
provision (d)

Non-GAAP

reported

share-based
compensation

share-based
compensation(a)

on deemed
disposal (b)

intangible
assets (c)


Unaudited three months ended 31 March 2015

Operating profit

9,372

561

32

(839)

50

223

9,399

Profit for the period 

6,930

561

32

(829)

227

223

7,144

Profit attributable

  to equity holders 

6,883

541

31

(829)

220

207

7,053

Operating margin 

42%






42%

Net margin

31%






32%

Unaudited three months ended 31 December 2014

Operating profit

7,394

495

149

(1,153)

13

1,170

8,068

Profit for the period 

5,954

495

149

(1,155)

228

1,170

6,841

Profit attributable

  to equity holders 

5,860

488

136

(1,158)

227

1,170

6,723

Operating margin 

35%






38%

Net margin

28%






33%

Unaudited three months ended 31 March 2014

Operating profit

7,790

334

234

(2,717)

16

820

6,477

Profit for the period

6,432

334

234

(2,669)

55

820

5,206

Profit attributable

  to equity holders

6,457

328

219

(2,682)

52

820

5,194

Operating margin

42%






35%

Net margin

35%






28%

Note:

(a) Including put options granted to employees of investees companies on their shares and shares to be issued under investee companies' share-based incentive plans which can be acquired by the Group, and other incentives

(b)  (Gains)/ Losses, net on deemed disposal of investee companies and disposals of investee companies and businesses

(c)  Amortisation of intangible assets resulting from acquisitions, net of related deferred tax

(d) Impairment provision for associates, available-for-sale financial assets and intangible assets arising from acquisitions

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/tencent-announces-2015-first-quarter-results-300083239.html

SOURCE Tencent Holdings Limited

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