On November 10, Tencent Holdings Limited (“Tencent” or “the company”, stock number of the stock exchange of Hong Kong: 00700), China’s leading Internet value-added service provider, announced today its unaudited comprehensive results for the third quarter ended September 30, 2012.
Summary of results for the third quarter of 2021
Total revenue: a year-on-year increase of 13%, profit attributable to non IFRS equity holders of the company: a year-on-year decrease of 2%
Total revenue was 142.4 billion yuan (US $22 billion), an increase of 13% over the third quarter of 2020 (“year-on-year”).
In accordance with non international financial reporting standards, excluding the impact of certain one-time and / or non cash items, to reflect the performance of core business:
-The operating profit was 40.8 billion yuan (US $6.3 billion), a year-on-year increase of 7%; The operating profit margin decreased to 29% from 30% in the same period last year.
-The profit during the period was RMB 32.5 billion (US $5 billion), a year-on-year decrease of 2%; The net profit margin decreased to 23% from 27% in the same period last year.
-During the period, the profit attributable to equity holders of the company was 31.8 billion yuan (US $4.9 billion), a year-on-year decrease of 2%.
-The basic earnings per share is RMB 3.329 and the diluted earnings per share is RMB 3.269.
In accordance with IFRS:
-The operating profit was 53.1 billion yuan (US $8.2 billion), a year-on-year increase of 21%; The operating profit margin increased to 37% from 35% in the same period last year.
-The profit during the period was RMB 40.1 billion (US $6.2 billion), a year-on-year increase of 3%; The net profit margin decreased to 28% from 31% in the same period last year.
-During the period, the profit attributable to equity holders of the company was 39.5 billion yuan (US $6.1 billion), a year-on-year increase of 3%.
-The basic earnings per share is RMB 4.143. Diluted earnings per share was RMB 4.074.
The total cash at the end of the period was RMB 289.5 billion (US $44.6 billion).
Ma Huateng, chairman and CEO of the board of directors, said: “In the third quarter, the Internet industry, including local games, and some advertisers’ industries adapted to the changes in regulatory and macroeconomic development. We actively embraced the new regulatory environment and believed that the new environment could help the industry move towards a more sustainable development track. In the local game market, we significantly reduced the number of games played by minors through industry-leading comprehensive compliance measures In addition, we actively invest in key strategic areas and cutting-edge technologies, and make new commitments to invest in common prosperity projects. Looking ahead, we are committed to providing users with excellent experience, helping enterprises realize digital operation and contributing to the whole society. ”
Financial analysis for the third quarter of 2021
Starting from the third quarter of 2021, we disclosed the revenue from games in the local market and games in the international market as a new sub segment under the value-added service business to reflect the continuous expansion of the scale of the game business in the international market.
In the third quarter of 2021, the revenue of value-added services increased by 8% year-on-year to RMB 75.2 billion. It was received by “glory of the king”, “call of duty Tour” and “Tianya Mingyue Tour” And other games, the game revenue in the local market increased by 5% year-on-year to RMB 33.6 billion. The game revenue in the international market increased by 20% year-on-year to RMB 11.3 billion, or 28% at a fixed exchange rate, due to valorant and tribal conflict Social network revenue increased by 7% year-on-year to RMB 30.3 billion, driven by the relatively rapid growth of video and music paid member services and the moderate growth of live broadcast and game props sales.
Internet advertising revenue grew 5% to RMB 22 billion 500 million in the third quarter of 2021, and despite the weak advertising demand in education, insurance and games industries, the demand for advertising from essential consumer goods and Internet services and the combined contribution of easy to make car revenue still contributed to the growth of advertising revenue. The official account of WeChat’s small program and WeChat public address Driven by the growth of advertising revenue, social and other advertising revenue increased by 7% year-on-year to RMB 19 billion. Media advertising revenue decreased by 4% year-on-year to RMB 3.5 billion, mainly due to the decrease of advertising revenue of Tencent News application.
The revenue of fintech and enterprise services business increased by 30% year-on-year to RMB 43.3 billion in the third quarter of 2001. The growth of fintech service revenue mainly reflects the increase in the amount of commercial payment transactions. The healthy growth of enterprise service revenue year-on-year is due to the increasing digitization of traditional industries and the video trend of the Internet industry, as well as the enterprise service revenue of merging and changing cars Input contribution.
Other major financial information for the third quarter of 2021
EBITDA was RMB 42.7 billion, a year-on-year decrease of 5%. Adjusted EBITDA was RMB 49.3 billion, a year-on-year increase of 3%.
Capital expenditure was RMB 7.1 billion, a year-on-year decrease of 19%.
Free cash flow was RMB 24.1 billion, a year-on-year decrease of 14%.
As at 30 September 2021, the company’s net liabilities amounted to rmb26.1 billion. The fair value of our equity in listed investment companies (excluding subsidiaries) was rmb1196.6 billion. In the third quarter, the Company repurchased about 5.6 million shares at a total consideration of about US $334 million on the stock exchange of Hong Kong.
Business Review and Prospect
Communication and social networking
In terms of WeChat, we enrich the content of video numbers and enhance the recommended technology by using resources in official account, sports and game content, and the number of video viewing has increased healthfully. The number of active small programs has increased by over 40% over the same period last year, which is due to our strengthening of business and deepening penetration in restaurants, retail and transportation industries. By opening up WeChat, With the communication function and wechat applet, retailers can allow their salespeople to interact with customers online in a private domain environment.
In terms of QQ, we have upgraded interactive technology to provide a richer video experience. We provide augmented reality (AR) creation tools customized for festivals and landmarks to promote users to create and share video content, and provide cross screen interactive ar effect to create a more entertaining video call experience.
The number of paid members of our paid value-added services increased by 10% year-on-year to 235 million. The number of paid video members increased by 8% year-on-year to 129 million, which mainly benefited from the promotion of high-quality content, including “anti Mafia storm” and “you are my glory”, which are the first and second popular dramas on China’s online platforms in the third quarter. The number of music paying members increased by 38% year-on-year to 71 million, because Tencent music entertainment group enhanced the music streaming media experience and attracted more paying users.
Local market games
Since September 1, 2021, we have taken new measures to fully implement the latest regulations on the prevention of minors’ game addiction in China. In September 2021, the proportion of minors in the length of game time in our local market was 0.7%, which was significantly lower than 6.4% in September 2020. In September 2021, the proportion of minors in our local market was 1.1%, which was also significantly lower than 4.8% in September 2020. We continue to take industry-leading measures to combat minors’ fraudulent use of adult accounts, such as upgrading the cruise system to identify fraudulent accounts.
We have produced a series of popular Chinese skin for the glory of the king to carry forward Chinese local art and traditional culture. Hero League mobile game extends the pure experience of end game to mobile game, activating and expanding the user base of hero League. In October, 2021, hero League mobile game ranked second in the number of daily active accounts in China. We added the “player vs. environment” (PVE) and “co OP” modes to the “golden shovel war” to revitalize the self-propelled chess products. This game is the second most active game in China since the beginning of the year, second only to the “hero League mobile game”.
International market games
We are increasing investment in global game development, including expanding our game studios in China and mature international studios with a variety of popular games, and providing professional knowledge, technical and financial support for the international studios that are ahead of their specialized categories to cultivate their development. We strengthen our global IP portfolio by developing our own IP and cooperating with companies with well-known IP. In addition, we are building localized distribution and operation capabilities in the international market to support business development in different regions.
We allow enterprises to embed the sales staff dialogue function of enterprise wechat in advertisements, so that they can directly contact users, which is particularly effective for advertisers aiming to obtain sales leads, such as car dealers. More and more transaction driven advertisers (such as grocers and e-commerce merchants) use applets as advertising landing pages to improve sales conversion. Our top TV dramas, variety shows and the content of the 2020 Tokyo Olympic Games have attracted brand advertisers to put more sponsorship advertisements on Tencent video applications.
Despite the above measures, the growth of advertising revenue slowed down during the period. Due to the challenges of the macro environment and the regulatory impact on some key advertiser industries, we expect the advertising prices of the whole industry to remain weak in the coming quarters. We believe that after readjusting the base in 2002, the advertising industry will resume growth driven by long-term drivers.
In terms of payment business, our number of daily active users and payment frequency maintained a healthy growth. However, due to the implementation of epidemic control measures due to a new round of epidemic in some regions, the growth rate of offline commercial payment transactions slowed down year-on-year. We deepened our cooperation with UnionPay and expanded new interconnection scenarios at the two levels of payment and service through cloud flash payment application.
Cloud and other enterprise services
Our CRM SaaS solution, Tencent enterprise point, has served more than 1 million enterprises and is increasingly adopted by large and medium-sized enterprises. Tencent enterprise points provide customers with all-weather and multi-channel artificial intelligence customer service to help enterprise customers significantly reduce customer service costs. Our database PAAS solution – Tencent cloud enterprise distributed database (tdsql) has served more than 3000 customers, spanning multiple vertical fields such as finance, public services and telecommunications; In the vertical field of the financial industry, tdsql serves six of China’s top ten banks, and more and more financial institutions adopt tdsql in their core systems, reflecting their trust in our data security, reliability and consistency.
Tencent enriches the lives of Internet users with technology.
Through communication and social services, wechat and QQ, promote users to connect with each other and help them connect digital content, online and offline services. Through targeted advertising services, help advertisers reach hundreds of millions of Chinese consumers. Through financial technology and enterprise services, promote partner business growth and help realize digital upgrading.
Tencent has invested heavily in the talent team, promoted scientific and technological innovation, and actively participated in the coordinated development of the Internet industry. Tencent was established in Shenzhen, China in 1998. Tencent’s shares (00700. HK) are listed on the main board of the stock exchange of Hong Kong.