Tencent Announces 2012 Third Quarter Results PR Newswire HONG KONG, Nov 14, 2012 HONG KONG, Nov 14, 2012 /PRNewswire/ -- Tencent Holdings Limited ("Tencent" or the "Company", SEHK 00700), a leading provider of comprehensive Internet services in China, today announced the unaudited consolidated results for the third quarter of 2012 ended September 30, 2012. Highlights of the Third Quarter of 2012: oTotal revenues were RMB11,565.6 million (USD1,823.9 million), an increase of 9.9% over the second quarter of 2012 ("QoQ") or an increase of 54.3% over the third quarter of 2011 ("YoY"). oRevenues from Internet value-added services ("IVAS") were RMB8,371.0 million (USD1,320.1 million), an increase of 7.5% QoQ or an increase of 39.4% YoY. oRevenues from mobile & telecommunications value-added services ("MVAS") were RMB946.2 million (USD149.2 million), an increase of 1.9% QoQ or an increase of 12.0% YoY. oRevenues from online advertising were RMB1,015.3 million (USD160.1 million), an increase of 15.4% QoQ or an increase of 69.0% YoY. oRevenues from e-Commerce transactions were RMB1,133.9 million (USD178.8 million), an increase of 32.2% QoQ. oGross profit was RMB6,778.5 million (USD1,069.0 million), an increase of 9.1% QoQ or an increase of 40.2% YoY. Gross margin decreased to 58.6% from 59.0% last quarter. oOperating profit was RMB4,124.4 million (USD650.4 million), an increase of 4.7% QoQ or an increase of 37.9% YoY. Operating margin decreased to 35.7% from 37.4% last quarter. Non-GAAP operating profit was RMB4,442.8 million (USD700.6 million), an increase of 5.2% QoQ or an increase of 31.5% YoY. Non-GAAP operating margin decreased to 38.4% from 40.1% last quarter. oProfit for the quarter was RMB3,241.1 million (USD511.1 million), an increase of 4.2% QoQ or an increase of 32.5% YoY. Net margin decreased to 28.0% from 29.5% last quarter. Non-GAAP profit for the quarter2 was RMB3,587.1 million (USD565.7 million), an increase of 5.2% QoQ or an increase of 29.0% YoY. Non-GAAP net margin decreased to 31.0% from 32.4% last quarter. oProfit attributable to equity holders of the Company for the quarter was RMB3,218.7 million (USD507.6 million), an increase of 3.8% QoQ or an increase of 31.6% YoY. Non-GAAP profit attributable to equity holders of the Company for the quarter2 was RMB3,551.3 million (USD560.1 million), an increase of 4.9% QoQ or an increase of 28.2% YoY. oBasic earnings per share were RMB1.759. Diluted earnings per share were RMB1.727. oKey platform statistics: oMonthly active Instant Messaging ("IM") user accounts were 783.9 million, flat QoQ or an increase of 10.1% YoY. oPeak simultaneous online IM user accounts were 167.3 million, an increase of 0.4% QoQ or an increase of 15.1% YoY. oMonthly active Qzone user accounts were 592.8 million, a decrease of 0.8% QoQ or an increase of 8.2% YoY; monthly active Pengyou user accounts were 258.9 million, an increase of 4.5% QoQ or an increase of 26.8% YoY. oPeak simultaneous online QQ Game Platform user accounts were 9.4 million, an increase of 6.8% QoQ or an increase of 17.5% YoY. oFee-based IVAS registered subscriptions were 73.8 million, a decrease of 1.2% QoQ or a decrease of 4.8% YoY. oFee-based MVAS registered subscriptions were 33.7 million, a decrease of 2.6% QoQ or an increase of 8.0% YoY. Mr. Ma Huateng, Chairman and CEO of Tencent, said, "Our platform strength enabled us to achieve solid year-on-year growth in operating and financial metrics during the third quarter 2012. Several of our investment initiatives, such as open platform, Weixin and online video, made progress in driving user engagement or monetisation. Looking forward, we will extend our open platform from desktop to mobile Internet, and we will enrich the platform by encouraging a greater diversity of applications. Our focus remains on building our user base and enhancing our user experience, particularly during this period of rapid mobile Internet growth." Financial Review for the Third Quarter of 2012 Revenues from our IVAS business increased 7.5% QoQ to RMB8,371.0 million and represented 72.4% of our total revenues for the third quarter of 2012. Online game revenues increased 7.3% QoQ to RMB5,972.9 million. This primarily reflected growth in games revenues from China which benefited from the positive impact of summer holidays on titles such as Cross Fire, QQ Dancer and QQ Speed, as well as contributions from new titles, such as Legend of Yulong. We also experienced growth in game revenues from international markets such as the US, Europe, and Korea. Revenues from our community and open platforms increased 7.9% QoQ to RMB2,398.1 million, mainly driven by growth in item-based sales within applications on our open platforms. Revenues from our MVAS business increased 1.9% QoQ to RMB946.2 million and represented 8.2% of our total revenues for the third quarter of 2012. This primarily reflected an increase in revenues from our mobile games and mobile books. Revenues from our online advertising business increased 15.4% QoQ to RMB1,015.3 million and represented 8.8% of our total revenues for the third quarter of 2012. Brand display advertising revenues increased, reflecting the positive impact of the London Olympic Games, and performance display advertising grew, as advertisers spent more on our social networks' inventory. Revenues from our e-Commerce transactions business increased 32.2% QoQ to RMB1,133.9 million and represented 9.8% of our total revenues for the third quarter of 2012. This was mainly driven by increased volume of e-Commerce transactions in which we act as principal. Fees generated from transactions on our marketplace also contributed to the growth rate. Other Key Financial Information for the Third Quarter of 2012 Share-based compensation was RMB217.3 million for the third quarter of 2012 as compared with RMB255.7 million for the previous quarter. Capital expenditure was RMB1,132.3 million for the third quarter of 2012 as compared with RMB915.2 million for the previous quarter. The Company didn't repurchase any shares on the Stock Exchange during the third quarter of 2012 as compared with 26,000 shares repurchased for an aggregate consideration of approximately RMB4.3 million in the previous quarter. As at September 30, 2012, net cash position totaled RMB23,492.4 million which excluded short-term borrowings of RMB3,012.0 million, long-term borrowings of RMB2,219.4 million and long-term notes payable of RMB7,591.2 million. As at September 30, 2012, the total number of shares of the Company in issue was 1.846 billion. Business Review and Outlook Overall Financial Performance In the third quarter of 2012, we achieved solid year-on-year growth in revenues and earnings. oOur IVAS business benefited from the popularity of our online game titles in China and overseas, and from increased item-based sales within applications on our open platforms. oOur MVAS business continued to achieve year-on-year revenue growth. However, our primary focus for this business is maximising long-term user base and user engagement, rather than near-term financial performance. oOur online advertising business registered a significant year-on-year revenue increase, thanks to new platform contributions and continued expansion in traditional brand display advertising. oOur e-Commerce transactions business experienced a sequential revenue increase during the quarter, due to growth in transaction volume. Strategic Highlights In September 2012, we announced the completion of a USD 600 million senior unsecured notes offering. This is our second international bond issue, following our first such transaction in December 2011. We are grateful that our investors continue to display confidence in our business model and financial performance, and we remain firmly committed to maintaining our strong credit profile and investment grade credit ratings. Divisional and Product Highlights Communications Platforms For QQ IM, MAU registered 10% year-on-year growth and reached 784 million at the end of the third quarter of 2012. It's PCU for the quarter was 167 million, representing 15% growth as compared to the same period last year. The growth rate of PCU decelerated as the increased number of mobile users resulted in greater dispersion of time spent on QQ IM through different day parts. During the quarter, Weixin reinforced its position as the leading mobile community in China, exceeding 200 million registered use accounts in September 2012. Media Platforms QQ.com extended its lead among portals in China in terms of page views and unique visitors, and Tencent Microblog maintained a leading social media position in China with 507 million registered user accounts and 94 million DAU at the end of the quarter. Tencent Video gained popularity among Internet users due to content enrichment and user experience improvement. During the quarter, we leveraged our in-depth coverage of the London Olympic Games and our cross-platform sharing tools to enhance our media influence and brand recognition, especially in the sports category. IVAS Our social networks registered solid growth in the third quarter of 2012, with increased traffic and photos uploads from mobile users. MAU of Qzone increased by 8% year-on-year to 593 million at the end of the quarter. MAU of Pengyou increased by 27% year-on-year to 259 million at the end of the quarter. Our IVAS registered subscriptions count declined compared to the same period last year due to policies we launched in the second quarter of 2012 for cleaning up certain user accounts acquired through telecommunications operators, for whom fee collection was unlikely. We believe these measures should ultimately improve our subscriber base quality. The increasing adoption of mobile Internet activities is also impacting our IVAS registered subscriptions count, because at this stage the pace of our mobile user growth is faster than that of our mobile privilege development. Consequently, some of our IVAS subscription services are less appealing to mobile-oriented users as we have not yet extended all IVAS privileges from desktop to mobile devices. In future, we intend to enrich the mobile-related features and privileges of our IVAS subscription services to cater to this emerging user demand trend. On our open platforms, item-based sales within applications continued to grow due to more usage of such applications and increased social sharing traffic. We have generated material revenues for third-party developers, who can publish their applications across our multiple platforms to tap into our base of social and game-oriented users. Looking ahead, we are extending the reach of our open platforms from desktop to mobile with the implementation of open QQ account login on third-party mobile applications, in order to position for the emerging opportunities in the mobile Internet. To maximise user engagement, and thus the long-term development of our open platforms, we are incentivising developers of applications with large user bases but moderate or low per user revenue generation. This initiative is particularly focused on non-game applications as we aim to broaden the range of services that our users can enjoy. Our online game business achieved healthy year-on-year growth in users and revenues in the third quarter of 2012, with increased contribution from self-developed titles. Growth in revenues from China was driven by our established ACG and MMOG, as well as new titles, such as Legend of Yulong and Legend of Xuanyuan, which are both developed in-house. Revenue contribution from international markets, such as the US, Europe, and Korea, increased along with an expanded user base. QQ Game Platform's PCU increased to 9.4 million during the quarter, representing growth of 18% compared to the same period last year. As the Chinese game industry matures and hit titles within the industry face the law of large numbers, our game business revenue growth rate will depend in part on the popularity and monetisation of our new and future titles, and in part on the health of our existing titles. MVAS In the third quarter of 2012, our MVAS business delivered stable revenue growth compared to the same period last year, driven by our bundled SMS packages and mobile games. We continued to progress in building our long-term user base with different types of mobile applications. For example, our mobile security product achieved over 100 million activated users during the period. Our MVAS business is primarily focused on extending our desktop services to mobile, and on developing new applications for smartphones. As we are currently less focused on optimising monetisation, the near-term financial trajectory of this business may be uneven. Longer term, we believe growth in smartphone users, and in time spent online on mobile devices, should enable new business models to emerge which tap into the unique features of such devices. Online Advertising In the third quarter of 2012, our online advertising business achieved robust revenue growth on a year-on-year basis, supported by performance advertising on our social networks, video advertising, traditional brand display advertising, and search advertising. During the quarter, we utilised the London Olympic Games opportunity to better penetrate selected up-scale brand advertisers. Performance advertising on our social networks increased as we delivered greater impression volume, improved our click-through rates, and enabled new advertiser categories, such as education service providers, to participate in performance advertising. Looking forward, the absence of the Olympic Games event and decelerating economic growth in China may slow revenue growth rates for the online advertising industry as a whole, including our own online advertising business. e-Commerce Transactions The volume of our principal e-Commerce transactions increased sequentially in the third quarter of 2012 due to our own promotional activities, as well as increased public awareness of our long-established price leadership in the consumer electronics sector as a result of a widely publicised "price war" among other industry players. Our agency revenues also grew on a quarter-on-quarter basis, albeit from a low base, due to an increased number of transactions on our marketplace. About Tencent Tencent aims to enrich the interactive online experience of Internet users by providing a comprehensive range of Internet and wireless value-added services. Through its various online platforms, including Instant Messaging QQ, web portal QQ.com, the QQ Game Platform under Tencent Games, multi-media social networking service Qzone and wireless portal, Tencent services the largest online community in China and fulfills the user's needs for communication, information, entertainment and e-Commerce on the Internet. Tencent has four main streams of revenues: Internet value-added services, mobile and telecommunications value-added services, online advertising and e-Commerce. Shares of Tencent Holdings Limited are traded on the Main Board of the Stock Exchange of Hong Kong Limited, under stock code 00700. The Company became a constituent of the Hong Kong's Hang Seng Index (HSI) on June 10, 2008. For more information, please visit www.tencent.com/ir. For enquiries, please contact: Catherine Chan Tel: (86) 755 86013388 ext 88369 or (852) 31485100 Email: cchan#tencent.com Jane Yip Tel: (86) 755 86013388 ext 81374 or (852) 31485100 Email: janeyip#tencent.com 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 In RMB '000 (unless otherwise stated) Unaudited Unaudited 3Q2012 2Q2012 3Q2012 3Q2011 Revenues 11,565,556 10,527,244 11,565,556 7,496,157 Internet VAS 8,371,026 7,786,625 8,371,026 6,003,135 Mobile & Telecom VAS 946,218 929,007 946,218 844,900 Online advertising 1,015,266 879,691 1,015,266 600,572 e-Commerce 1,133,901 857,526 1,133,901 - transactions Others 99,145 74,395 99,145 47,550 Cost of revenues (4,787,093) (4,311,379) (4,787,093) (2,661,407) Gross profit 6,778,463 6,215,865 6,778,463 4,834,750 Gross margin 58.6% 59.0% 58.6% 64.5% Interest income 205,781 196,806 205,781 124,159 Other (losses)/gains, net (14,791) (3,219) (14,791) 9,200 S&M expenses (819,790) (609,672) (819,790) (507,252) G&A expenses (2,025,298) (1,862,165) (2,025,298) (1,469,278) Operating profit 4,124,365 3,937,615 4,124,365 2,991,579 Operating margin 35.7% 37.4% 35.7% 39.9% Finance (costs)/income, net (99,478) (115,256) (99,478) 43,097 Share of (losses)/profit of (21,188) 5,411 (21,188) (21,842) associates Share of losses of jointly (6,089) (9,375) (6,089) (59,926) controlled entities Profit before income tax 3,997,610 3,818,395 3,997,610 2,952,908 Income tax expense (756,465) (707,824) (756,465) (506,760) Profit for the period 3,241,145 3,110,571 3,241,145 2,446,148 Net margin 28.0% 29.5% 28.0% 32.6% Attributable to: Equity holders of the 3,218,693 3,100,075 3,218,693 2,446,437 Company Non-controlling interests 22,452 10,496 22,452 (289) Non-GAAP profit attributable to equity holders of the 3,551, 337 3,386,266 3,551, 337 2,769,143 Company Earnings per share (GAAP) - basic (RMB) 1.759 1.698 1.759 1.340 - diluted (RMB) 1.727 1.665 1.727 1.314 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME In RMB '000 (unless otherwise stated) Unaudited Unaudited 3Q2012 2Q2012 3Q2012 3Q2011 Profit for the period 3,241,145 3,110,571 3,241,145 2,446,148 Other comprehensive income; net of tax: Net losses from changes in fair value of (37,923) (530,203) (37,923) (491,093) available-for-sale financial assets Currency translation differences 125 7,743 125 (13,322) Total comprehensive income for the 3,203,347 2,588,111 3,203,347 1,941,733 period Attributable to: Equity holders of the Company 3,180,882 2,576,886 3,180,882 1,942,022 Non-controlling interests 22,465 11,225 22,465 (289) OTHER FINANCIAL INFORMATION In RMB '000 (unless otherwise stated) Unaudited 3Q2012 2Q2012 3Q2011 EBITDA (a) 4,591,603 4,331,322 3,403,665 Adjusted EBITDA (a) 4,784,020 4,558,963 3,581,786 Adjusted EBITDA margin (b) 41.4% 43.3% 47.8% Interest expense 86,104 69,344 14,759 Net cash (c) 23,492,375 19,631,631 15,654,534 Capital expenditures (d) 1,132,314 915,156 1,133,342 Note: a) EBITDA consists of operating profit less interest income, and plus other losses/(gains), net, 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 is calculated as cash and cash equivalents, term deposits with initial term of over three months, and restricted cash pledged for secured bank borrowings, minus total borrowings and long-term notes payable. d) Capital expenditures consist of additions (excluding business combination) to fixed assets, construction in progress, land use rights and intangible assets (excluding game and other content licences). CONSOLIDATED STATEMENT OF FINANCIAL POSITION In RMB '000 (unless otherwise stated) Unaudited Unaudited 30 September 30 June 2012 2012 ASSETS Non-current assets Fixed assets 6,707,460 6,201,179 Construction in progress 450,764 323,786 Investment properties 21,789 21,643 Land use rights 346,697 348,509 Intangible assets 4,739,476 4,194,417 Interests in associates 7,070,127 5,292,559 Investment in jointly controlled entities 47,819 53,908 Deferred income tax assets 172,590 184,608 Available-for-sale financial assets 5,504,415 5,320,869 Prepayments, deposits and other assets 1,991,043 3,877,451 Long-term deposits 8,591,724 - 35,643,904 25,818,929 Current assets Inventories 424,273 202,106 Accounts receivable 2,683,965 2,500,207 Prepayments, deposits and other assets 3,332,155 3,275,968 Short-term deposits 14,281,401 17,014,730 Restricted cash 2,192,256 2,317,431 Cash and cash equivalents 13,441,768 10,602,451 36,355,818 35,912,893 Total assets 71,999,722 61,731,822 EQUITY Equity attributable to the Company's equity holders Share capital 198 198 Share premium 2,651,800 2,488,779 Shares held for share award scheme (625,960) (609,657) Other reserves 518,860 532,264 Retained earnings 34,870,783 31,652,090 37,415,681 34,063,674 Non-controlling interests 876,950 650,698 Total equity 38,292,631 34,714,372 LIABILITIES Non-current liabilities Borrowings 2,219,350 948,735 Long-term notes payable 7,591,193 3,751,839 Deferred income tax liabilities 1,016,454 893,822 Long-term payables 1,530,080 1,441,920 12,357,077 7,036,316 Current liabilities Accounts payable 3,960,242 3,368,438 Other payables and accruals 5,403,161 4,872,613 Derivative financial instruments - 14,680 Borrowings 3,011,975 3,609,323 Current income tax liabilities 1,029,070 998,523 Other tax liabilities 468,738 256,781 Deferred revenue 7,476,828 6,860,776 21,350,014 19,981,134 Total liabilities 33,707,091 27,017,450 Total equity and liabilities 71,999,722 61,731,822 RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS Adjustments As Equity-settled Cash-settled Losses on Amortisation In RMB '000 Impairment Special Non-GAAP reported share-based share-based deemed of provision(d) dividend except percentages compensation compensation(a) intangible income(e) disposal(b) assets (c) Unaudited three months ended 30 September 2012 Operating profit 4,124,365 192,417 24,860 5,150 38,494 448,000 (390,472) 4,442,814 Operatingmargin 35.7% 38.4% Profit for the period 3,241,145 192,417 24,860 5,150 66,013 448,000 (390,472) 3,587,113 Net 28.0% 31.0% margin Profit attributable to equity holders of the 3,218,693 189,660 21,921 5,150 58,385 448,000 (390,472) 3,551,337 Company Unaudited three months ended 30 June 2012 Operating profit 3,937,615 227,641 28,081 - 28,137 - - 4,221,474 Operating margin 37.4% 40.1% Profit for the period 3,110,571 227,641 28,081 - 44,060 - - 3,410,353 Net 29.5% 32.4% margin Profit attributable to equity holders of the 3,100,075 221,817 24,643 - 39,731 - - 3,386,266 Company Unaudited three months ended 30 September 2011 Operating profit 2,991,579 178,121 24,294 - 184,212 - - 3,378,206 Operating margin 39.9% 45.1% Profit for the period 2,446,148 178,121 24,294 - 131,211 - - 2,779,774 Net 32.6% 37.1% margin Profit attributable to equity holders of the 2,446,437 176,934 22,397 - 123,375 - - 2,769,143 Company (a) Including put options granted to employees of investees on their shares and shares to be issued under investees' share-based incentive plans which can be acquired by the Company, and other incentives (b) Losseson deemed disposal of previously held interests in associates (c) Amortisation of intangible assets resulting from acquisitions, net of related deferred tax (d) Impairment provision for interests in associates and available-for-sale financial assets (e) Special dividend income from Mail.ru  Figures stated in USD are based on USD1 to RMB6.3410  See "Non-GAAP Financial Measures" section for more details on the reasons for presenting these measures SOURCE Tencent Holdings Limited Website: http://www.tencent.com
Tencent Announces 2012 Third Quarter Results
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