Pdf to text with Tesseract and ImageMagick

15000691526464720.txt

Page 1
Tencent &t

For Immediate Release

TENCENT ANNOUNCES 2018 FIRST QUARTER RESULTS

Hong Kong, May 16, 2018 — Tencent Holdings Limited (“Tencent” or the “Company”, 00700.HK), a leading provider
of Internet value added services in China, today announced the unaudited consolidated results for the first quarter
of 2018 (“1Q2018”).

1Q2018 Key Highlights
Revenues: +48% YoY, non-GAAP Profit attributable to equity holders of the Company: +29% YoY

* Total revenues were RMB73,528 million (USD11,693 million'), an increase of 48% over the first quarter of 2017
(“YoY”).
= Operating profit was RMB30,692 million (USD4,881 million), an increase of 59% YoY. Operating margin
increased to 42% from 39% last year.
= Profit for the period was RMB23,973 million (USD3,812 million), an increase of 65% YoY. Net margin increased
to 33% from 29% last year.
= Profit attributable to equity holders of the Company for the quarter was RMB23,290 million (USD3,704 million),
an increase of 61% YoY.
= Basic earnings per share were RMB2.470. Diluted earnings per share were RMB2.435.
= Onanon-GAAP? basis, which excludes certain non-cash items and certain impact of M&A transactions:
- Operating profit was RMB25,272 million (USD4,019 million), an increase of 36% YoY. Operating margin
decreased to 34% from 37% last year.
- Profit for the period was RMB19,130 million (USD3,042 million), an increase of 33% YoY. Net margin
decreased to 26% from 29% last year.
- Profit attributable to equity holders of the Company for the quarter was RMB18,313 million (USD2,912
million), an increase of 29% YoY.
- Basic earnings per share were RMB1.942. Diluted earnings per share were RMB1.915.

Mr. Ma Huateng, Chairman and CEO of Tencent, said, “In the first quarter of 2018, we launched the popular tactical
tournament mobile games and enhanced the capabilities of widely-used services such as our Weixin Mini Programs,
deepening engagement across our social, games and media platforms. We drove adoption of our infrastructure
services, seeing notable progress in areas such as mobile payment, cloud services, online financial services, and
smart retail. We will continue to invest in improving our own products as well as enabling services for our partners,

in order to fulfill our mission of enhancing the quality of life through Internet services.”
1Q2018 Financial Review

Revenues from our VAS business increased by 34% to RMB46,877 million for the first quarter of 2018 on a year-
on-year basis. Online games revenues grew by 26% to RMB28,778 million. The increase was mainly driven by

 

! Figures stated in USD are based on USD1 to RMB6.2881

2 Non-GAAP adjustments excludes share-based compensation and M&A related impact such as net (gains)/losses from investee companies, amortisation of intangible assets and
impairment provision

Page 1 of 11
Page 2

Tencent &t

revenue growth from our smart phone games, including existing titles such as Honour of Kings, and newly launched
tittes such as MU Awakening and QQ Speed Mobile. Revenues from our PC client games were broadly stable.
Social networks revenues increased by 47% to RMB18,099 million. The increase primarily reflected growth in
revenues from digital content services such as live broadcast, video streaming subscriptions and our music service

namely WeSing, as well as from in-game virtual item sales.

Revenues from our online advertising business increased by 55% to RMB10,689 million for the first quarter of 2018
on a year-on-year basis. Social and others advertising revenues grew by 69% to RMB7,390 million, mainly
benefiting from an expanded advertiser base boosting advertising fill rates in Weixin Moments, and higher CPC for
our mobile advertising network. Media advertising revenues increased by 31% to RMB3,299 million, primarily driven
by revenue growth from Tencent Video due to an increase in video views, and new advertising formats within

original productions.

Revenues from our other businesses increased by 111% to RMB15,962 million for the first quarter of 2018 on a
year-on-year basis. The increase primarily reflected contributions from our payment related and cloud services as
a result of the expansion of our business scale.

Other Key Financial Information for 1Q2018

Share-based compensation was RMB1,632 million, up 22% YoY.

EBITDA was RMB29,247 million, up 46% YoY. Adjusted EBITDA was RMB30,856 million, up 45% YoY.
Capital expenditure was RMB6,318 million, up 200% YoY.

Free cash flow was RMB13,000 million, down 46% YoY.

As at March 31, 2018, net debt position totalled RMB14,533 million. Fair value of our stakes in listed investee
companies (excluding subsidiaries) totalled RMB212.6 billion as at 31 March 2018.

Business Review and Outlook
Operating Information

— Monthly active user accounts (“MAU”) of QQ was 805.5 million, a decrease of 6.4% YOoY.
— Smart device MAU of QQ was 694.1 million, an increase of 2.4% YoY.

— Combined MAU of Weixin and WeChat were 1,040.0 million, an increase of 10.9% YoY.
—  MAU of Qzone was 562.3 million, a decrease of 11.0% YOoY.

— Smart device MAU of Qzone was 550.0 million, a decrease of 9.0% YoY.

— Fee-based VAS registered subscriptions were 147.1 million, an increase of 23.6% YoY

Communications and Social

- QQ: Smart device MAU was up by 2.4% year-on-year to 694.1 million and smart device MAU for users aged
21 years or below also increased year-on-year as we enriched chat features and entertainment-driven content
appealing for young users. QQ KanDian, our news feed service within QQ, achieved over 80 million DAU. It

Page 2 of 11
Page 3

Tencent &t

enhanced recommendation for short videos, driving video views to increase by 300% year-on-year.

- Weixin and WeChat. Combined MAU was 1,040.0 million, representing year-on-year growth of 10.9%. The
launch of Mini Games has achieved significant success, benefiting the overall Mini Program ecosystem as a
whole. We opened up the platform to third-party game developers in late March and over 500 Mini Games are
now available. The increased popularity of Mini Programs has encouraged more retailers and other developers
to embrace Mini Programs. For merchants, we introduced a Scan-to-Buy solution, as one of our smart retail
initiatives. This solution integrates Mini Programs with Weixin Pay, allowing customers to skip the check-out
queue, boosting transaction efficiency during peak hours. Supermarkets are among the early adopters of this
innovative solution which enables them to achieve higher transactional efficiency.

Online Games

Together with our investee companies, we have established global leadership in the tactical tournament genre. We
developed 2 mobile titles leveraging the licensed IP of PUBG game of which the initial PC and Xbox version have
been launched by its licensor. The two games achieved breakout popularity in China but have yet to be monetized
and we have just started to monetize in overseas markets. Fortnite, a tactical tournament game developed by our
investee company Epic Games, is a global phenomenon with over 40 million MAU across PC and console. After
the launch of its mobile version on the iOS platform in March, it soon jumped to be the highest grossing game in
the iOS App Store in the U.S. In China, we have started the pre-registration of Fortnite’s local PC version. We are
cooperating with the PUBG'’s licensor in preparing to publish a localized PC version in China, which is currently
pending government approval.

Smart phone games achieved approximately RMB21.7 billion revenues (including smart phone games revenues
attributable to our social networks business), up 68% year-on-year, driven by in-house mobile titles such as Honour
of Kings and QQ Speed Mobile. Revenues increased 28% sequentially due to seasonal promotional activities and
new games. Honour of Kings remained as the highest grossing smart phone game in China’s iOS Top Grossing
Chart. Its metrics were healthy with double-digit growth in DAU and strong growth in revenues on year-on-year
basis. Our new title QQ Speed Mobile became the second-highest smart phone game in China’s iOS Top Grossing
Chart during the first quarter. QQ Speed Mobile appealed to the existing players of the PC version, and also pulled
in a substantial number of users new to the franchise, demonstrating our ability to extend successful game
franchises from PC to mobile, and to expand their user base in that process. In the most recent months, our platform
has been focused on growing the user bases for our non-monetized tactical tournament games. The delay in China

monetization and heavy marketing expenses is expected to impact our mobile games revenues in short term.

PC client games achieved approximately RMB14.1 billion revenues, flat compared with the prior year period. Active
users declined due to the continued time shift to mobile devices while core user engagement remained largely
stable. Revenues grew 10% sequentially, driven by seasonal content updates and marketing activities held during
the Chinese New Year. DnF, which will celebrate the 10th anniversary of its China launch in June, delivered record
quarterly revenues in the first quarter, demonstrating our capability to manage game franchises for the long term.

Page 3 of 11
Page 4

Tencent &t

We will seek to expand our PC game franchises through the launch of new titles including the China PC versions
tactical tournament games plus several sandbox games. We also have upgraded versions for soccer and basketball
games in our pipeline. To further enhance our user engagement, we are deepening game promotions with live
broadcast platforms, such as Douyu and Huya.

Digital Content

Total fee-based VAS subscriptions grew by 24% year-on-year to 147 million, primarily driven by video and music
streaming services. Tencent Video reinforced its industry leadership in China by mobile DAU and subscriptions.
We strengthened user engagement of our video platform, where the number of DAU and per user time spent on
mobile grew rapidly year-on-year. Mobile daily video views increased by over 60% year-on-year, driven by the
premium quality content from our self-commissioned and licensed productions. Total video revenues were up 75%
year-on-year. Our investment in self-commissioned content successfully enhanced Tencent Video's user
engagement, contributing to increased conversion to subscription rates and subscriber retention rates. We grew
our video subscription revenues by 85% year-on-year.

We offered a mini video sharing app, WeiShi, to serve our users’ short-session entertainment needs. WeiShi offers
users a wide range of high quality PUGC (professional user generated content) from the market as well as our
licensed digital content libraries covering music, games, sports and variety shows. It also distributes the content
across our feed verticals, such as QQ KanDian and Mobile QQ Browser.

Online Advertising

Our online advertising business achieved 55% year-on-year growth in revenues. For media advertising, revenues
grew by 31% year-on-year. Within which, video ad revenues increased 64% year-on-year due to more pre-roll ads
benefiting from the growth in video views, and our enhanced capability to develop creative ad formats within original
productions. Video and news revenues decreased quarter-to-quarter due to the low seasonality for advertising
activity in the first quarter.

For social and others advertising, the 69% year-on-year increase in revenues was driven by an expanded advertiser
base boosting ad fill rates in Weixin Moments, and higher CPC for our Mobile Ad Network. The sequential decrease
in revenues was mainly due to the low seasonality in the first quarter. Amid the low seasonality, QQ KanDian
revenues increased due to fast growth in traffic. To cater to the strong demand for social advertising on our platforms,
Weixin Moments increased its maximum ad load to two advertisements per user day in late March. Given our ad
loads for social and feeds products are only small fractions of those of industry peers, we believe there is a long
runway for continued growth of our social and others advertising.

Others

Our other businesses grew revenues by 111% year-on-year, driven by our payment solution business and related

financial services, as well as our cloud services business. The growth in our payment solution business was mainly

Page 4 of 11
Page 5

Tencent &t

contributed by the rapidly increasing offline commercial transaction volumes and consumer cash withdrawal fees.

Our cloud services revenues more than doubled on a year-on-year basis, which was driven by the growth in games
video, eCommerce and O20 industries. We rolled out new customized cloud products targeting financial, municipal
and retail clients. Utilizing our advanced data analytics and Al technologies, we offered customized cloud solutions
to large financial institutions, supermarkets, chain stores and leading fashion retailers, enabling them to achieve
rapid sales growth and enhanced security. We will strengthen our core competencies in game and video cloud
services, and our presence in categories such as financial, municipal and retail services. We will expand our global
cloud infrastructure to support the overseas expansion of our external clients and internal businesses such as

games.

For other detailed disclosure, please refer to our website www.tencent.convir, or follow us via Weixin Official
Account (Weixin ID: Tencent_IR):

 

Page 5 of 11
Page 6

Tencent &t

About Tencent

Tencent uses technology to enrich the lives of Internet users. Our social products Weixin and QQ link our users to
a rich digital content catalogue including games, video, music and books. Our proprietary targeting technology
helps advertisers reach out to hundreds of millions of consumers in China. Our infrastructure services including
payment, security, cloud and artificial intelligence create differentiated offerings and support our partners’ business
growth. Tencent invests heavily in people and innovation, enabling us to evolve with the Internet.

Tencent was founded in Shenzhen, China, in 1998. Shares of Tencent (00700.HK) are traded on the Main Board
of the Stock Exchange of Hong Kong.

For investor and media enquiries, please contact:

Catherine Chan Tel: (86) 755 86013388 ext. 88369/ (852) 3148 5100 Email: cchan#tencent.com

(852)
Jane Yip Tel: (86) 755 86013388 ext. 68961/ (852) 3148 5100 Email: janeyip#tencent.com
Stella Lui Tel: (86) 755 86013388 ext. 68870/ (852) 3148 5100 Email: stellalui#tencent.com
PH Cheung Tel: (86) 755 86013388 ext. 68919/ (852) 3148 5100 Email: phcheung#tencent.com

Non-GAAP Financial Measures

To supplement the consolidated results of the Group prepared in accordance with IFRS, certain additional non-
GAARP financial measures (in terms of, operating profit, operating margin, profit for the period, net margin, profit
attributable to equity holders of the Company, basic EPS and diluted EPS), 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 Group’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 Group’s core operations by excluding certain non-
cash items and certain impacts of M&A transactions. In addition, non-GAAP adjustments include relevant non-
GAAP adjustments for the Group’s material associates based on available published financials of the relevant
material associates, or estimates made by the Company’s management based on available information, certain
expectations, assumptions and premises.

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 realised 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.

Page 6 of 11
Page 7

Tencent &t

CONSOLIDATED INCOME STATEMENT
RMB in million, unless specified

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Unaudited
1Q2018 1Q2017 1Q2018 4Q2017
Revenues 73,528 49,552 73,528 66,392
VAS 46,877 35,108 46,877 39,947
Online advertising 10,689 6,888 10,689 12,361
Others 15,962 7,556 15,962 14,084
Cost of revenues (36,486) (24,109) (36,486) (34,897)
Gross profit 37,042 25,443 37,042 31,495
Gross margin 50% 51% 50% 47%
Interest income 1,065 808 1,065 1,156
Other gains, net 7,585 3,191 7,585 7,906
Selling and marketing expenses (5,570) (3,158) (5,570) (6,022)
General and administrative expenses (9,430) (7,012) (9,430) (8,811)
Operating profit 30,692 19,272 30,692 25,724
Operating margin 42% 39% 42% 39%
Finance costs, net (654) (691) (654) (859)
Share of profit/(loss) of associates and joint ventures (319) (375) (319) (120)
Profit before income tax 29,719 18,206 29,719 24,745
Income tax expense (5,746) (3,658) (5,746) (3,123)
Profit for the period 23,973 14,548 23,973 21,622
Net margin 33% 29% 33% 33%
Attributable to:
Equity holders of the Company 23,290 14,476 23,290 20,797
Non-controlling interests 683 72 683 825
Non-GAAP profit attributable to equity holders of the
Company 18,313 14,211 18,313 17,454
Earnings per share for profit attributable to
equity holders of the Company
(in RMB per share)
- basic 2.470 1.540 2.470 2.206
- diluted 2.435 1.522 2.435 2177

 

 

 

 

 

 

Page 7 of 11

 
Page 8

Tencent &t

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

RMB in million, unless specified

Profit for the period 23,973 14,548

Other comprehensive income, net of tax:

L 1,070 -
comprehensive income

Other fair value losses (41) (343)
(3,394) 4,236
Total comprehensive income for the period 20,579 18,784

Attributable to:
Equity holders of the Company 20,144 18,717
Non-controlling interests 435 67

Items that may be subsequently reclassified to profit or loss

Items that may not be subsequently reclassified to profit or loss

 

Unaudited
1Q2018 1Q2017

 

 

 

Share of other comprehensive income of associates and joint ventures 95 111
Net gains from changes in fair value of available-for-sale financial assets - 7,226
Transfer to profit or loss upon disposal of available-for-sale financial assets - (1,832)
Currency translation differences (5,379) (985)
Other fair value gains 861 59

Net gains from changes in fair value of financial assets at fair value through

 

 

 

 

 

 

 

OTHER FINANCIAL INFORMATION
RMB in million, unless specified

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

1Q2018 4Q2017 1Q2017
EBITDA (a) 29,247 23,278 19,995
Adjusted EBITDA (a) 30,856 25,127 21,300
Adjusted EBITDA margin (b) 42% 38% 43%
Interest expense 1,067 839 667
Net (debt)/ cash (c) (14,533) 16,332 27,572
Capital expenditures (d) 6,318 4,975 2,108
Note:
(a) EBITDA consists of operating profit less interest income and other gains/losses, net, and plus depreciation of property, plant and equipment as well as

investment properties, and amortisation of intangible assets. Adjusted EBITDA consists of EBITDA plus equity-settled share-based compensation expenses.
Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues.

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

Capital expenditures consist of additions (excluding business combinations) to property, plant and equipment, construction in progress, investment

properties, land use rights and intangible assets (excluding media contents, game licenses and other contents).

Page 8 of 11
Page 9

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

RMB in million, unless specified

ASSETS

Non-current assets

Property, plant and equipment

Construction in progress

Investment properties

Land use rights

Intangible assets

Investments in associates

Investments in redeemable instruments of associates
Investments in joint ventures

Financial assets at fair value through profit or loss
Financial assets at fair value through other comprehensive
income

Available-for-sale financial assets

Prepayments, deposits and other assets

Other financial assets

Deferred income tax assets

Term deposits

Current assets

Inventories

Accounts receivable

Prepayments, deposits and other assets

Other financial assets

Financial assets at fair value through profit or loss
Term deposits

Restricted cash

Cash and cash equivalents

Total assets

 

 

 

 

 

 

Unaudited Audited

31-Mar-18 31-Dec-17
25,884 23,597
3,325 3,163
771 800
6,883 5,111
41,239 40,266
135,118 113,779
- 22,976
5,598 7,826
111,471 -
70,622 -
- 127,218
12,977 11,173
2,118 5,159
10,369 9,793
5 5,365
426,380 376,226
285 295
20,627 16,549
22,349 17,110
466 465
5,022 -
20,287 36,724
1,694 1,606
117,072 105,697
187,802 178,446
614,182 554,672

 

Tencent &t

Page 9 of 11
Page 10

Tencent &t

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)

RMB in million, unless specified

 

 

 

 

 

 

 

 

 

 

Unaudited Audited
31-Mar-18 31-Dec-17
EQUITY
Equity attributable to equity holders of the Company
Share capital - -
Share premium 23,551 22,204
Shares held for share award schemes (4,095) (3,970)
Other reserves 15,937 35,158
Retained earnings 242,150 202,682
277,543 256,074
Non-controlling interests 23,512 21,019
Total equity 301,055 277,093
LIABILITIES
Non-current liabilities
Borrowings 78,695 82,094
Notes payable 59,528 29,363
Long-term payables 4,939 3,862
Other financial liabilities 1,898 2,154
Deferred income tax liabilities 8,808 5,975
Deferred revenue 3,592 2,391
157,460 125,839
Current liabilities
Accounts payable 53,890 50,085
Other payables and accruals 27,433 29,433
Borrowings 18,037 15,696
Notes payable 799 4,752
Current income tax liabilities 8,748 8,708
Other tax liabilities 1,552 934
Deferred revenue 45,208 42,132
155,667 151,740
Total liabilities 313,127 277,579
Total equity and liabilities 614,182 554,672

 

Page 10 of 11
Page 11

 

Tencent il

RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS

 

 

 

 

 

 

 

 

 

Adjustments
RMB in mi/”?fi, repoftid Share-based Net (gains)/losses from Amortisation of Impa.lir.ment Non-GAAP
unless specified compensation (a) investee companies (b) intangible assets (c) provision (d)
Unaudited three months ended March 31, 2018
Operating profit 30,692 1,632 (7,788) 100 636 25,272
Profit for the period 23,973 1,682 (7,765) 531 709 19,130
Profit attributable to equity holders 23,290 1,585 (7,766) 495 709 18,313
Operating margin 42% 34%
Net margin 33% 26%
Unaudited three months ended December 31, 2017
Operating profit 25,724 1,874 (6,281) 112 424 21,853
Profit for the period 21,622 2,146 (6,229) 474 358 18,371
Profit attributable to equity holders 20,797 2,084 (6,189) 442 320 17,454
Operating margin 39% 33%
Net margin 33% 28%
Unaudited three months ended March 31, 2017
Operating profit 19,272 1,339 (2,747) 153 503 18,520
Profit for the period 14,548 1,530 (2,717) 500 511 14,372
Profit attributable to equity holders 14,476 1,483 (2,717) 458 511 14,211
Operating margin 39% 37%
Net margin 29% 29%
Note:

(a) Including put options granted to employees of investee 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) Including net (gains)/losses on deemed disposals, disposals of investee companies and businesses, and fair value changes arising from investments
(c) Amortisation of intangible assets resulting from acquisitions, net of related deferred tax

(d) Impairment provision for associates, joint ventures, AFS and intangible assets arising from acquisitions

11

pdf_to_text [Tesseract] Terminal based

# test.pdf being the specified pdf from https://www.tencent.com/en-us/articles/15000691526464720.pdf
# file.tiff being the image created from the pdf
# http://kiirani.com/2013/03/22/tesseract-pdf.html

# In terminal
convert -density 300 test.pdf -depth 8 file.tiff
tesseract test.pdf stdout -l eng