Tencent Announces 2013 First Quarter Results

                 Tencent Announces 2013 First Quarter Results

PR Newswire

HONG KONG, May 15, 2013

HONG KONG, May 15, 2013 /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
first quarter of 2013 ended March 31, 2013.

Highlights of the first quarter of 2013:

  oTotal revenues were RMB13,547.6 million (USD2,161.1million[1]), an
    increase of 11.5% over the fourth quarter of 2012 ("QoQ") or an increase
    of 40.4% over the first quarter of 2012 ("YoY").
  oRevenues from value-added services ("VAS") were RMB10,666.1 million
    (USD1,701.4 million), an increase of 13.6% QoQ or an increase of 28.6%
  oRevenues from online advertising were RMB849.5 million (USD135.5 million),
    a decrease of 10.3% QoQ or an increase of 57.3% YoY.
  oRevenues from eCommerce transactions were RMB1,913.3 million (USD305.2
    million), an increase of 13.6% QoQ or an increase of 154.2% YoY.
  oGross profit was RMB7,593.8 million (USD1,211.3 million), an increase of
    10.4% QoQ or an increase of 30.7% YoY. Gross margin decreased to 56.1%
    from 56.6% last quarter.
  oOperating profit was RMB5,062.5 million (USD807.6 million), an increase of
    35.9% QoQ or an increase of 37.1% YoY. Operating margin increased to
    37.4% from 30.7% last quarter.
    Non-GAAP operating profit[2] was RMB5,060.9 million (USD807.3 million), an
    increase of 17.1% QoQ or an increase of 24.4% YoY. Non-GAAP operating
    margin increased to 37.4% from 35.5% last quarter.
  oProfit for the quarter was RMB4,071.1 million (USD649.4 million), an
    increase of 17.3% QoQ or an increase of 37.4% YoY. Net margin increased
    to 30.1% from 28.6% last quarter.
    Non-GAAP profit for the quarter[2] was RMB4,089.3 million (USD652.3
    million), flat QoQ or an increase of 23.5% YoY. Non-GAAP net margin
    decreased to 30.2% from 33.7% last quarter.
  oProfit attributable to equity holders of the Company for the quarter was
    RMB4,043.8 million (USD645.1 million), an increase of 16.8% QoQ or an
    increase of 37.1% YoY.
    Non-GAAP profit attributable to equity holders of the Company for the
    quarter[2] was RMB4,037.7 million (USD644.1 million), a decrease of 0.7%
    QoQ or an increase of 23.1% YoY.
  oBasic earnings per share were RMB2.204. Diluted earnings per share were
  oKey platform statistics:

       oMonthly active user accounts ("MAU") of Instant Messaging ("IM") were
         825.4 million, an increase of 3.4% QoQ or an increase of 9.8% YoY.
       oPeak simultaneous online user accounts ("PCU") of IM were 173.0
         million, a decrease of 1.9% QoQ or an increase of 3.3% YoY.
       oCombined MAU of Weixin and WeChat were 194.4 million, an increase of
         23.1% QoQ or an increase of 228.4% YoY.
       oMAU of Qzone were 611.0 million, an increase of 1.4% QoQ or an
         increase of 5.9% YoY.
       oPCU of QQ Game Platform were 9.2 million, an increase of 4.5% QoQ or
         an increase of 4.5% YoY.
       oFee-based VAS registered subscriptions were 104.6 million, flat QoQ
         or a decrease of 10.1% YoY.

[1] Figures stated in USD are based on USD1 to RMB6.2689
[2] See "Non-GAAP Financial Measures" section for more details on the reasons
for presenting these measures

Mr. Ma Huateng, Chairman and CEO of Tencent, said, "During the first quarter
of 2013, we saw broad-based growth in user engagement and revenue across our
key activities. This growth has enabled us to fund investments in longer-term
opportunities such as WeChat international user acquisition, online video
content aggregation, and eCommerce footprint expansion, while maintaining a
healthy expansion rate in earnings and cash flow. We saw both strategic and
financial benefits from our portfolio of investee companies, including a
further special dividend from Mail.ru. We will continue to invest proactively
in innovation and technology, and to cultivate our open platform, in order to
capture the mobile opportunities ahead and strengthen our position as the
leading Internet platform company in China."

Financial Review for the First Quarter of 2013

VAS revenues increased 13.6% QoQ to RMB10,666.1 million and represented 78.7%
of our total revenues for the first quarter of 2013. Online games revenues
increased 19.3% QoQ to RMB7,472.1 million. This was primarily driven by
growth in revenues from China, where major titles such as Cross Fire, Dungeon
and Fighter ("DnF") and League of Legends ("LoL") benefited from the positive
impacts of Chinese New Year holidays, the winter break for students, and
favourably-received expansion packs, assisted by increased contributions from
certain new self-developed titles. Revenue from international markets and
mobile games also experienced growth. Social networks revenues increased 2.1%
QoQ to RMB3,194.0 million. This mainly reflected an increase in item-based
sales within applications on our open platforms.

Online advertising revenues decreased 10.3% QoQ to RMB849.5 million and
represented 6.3% of our total revenues. This primarily reflected the impact
of weaker seasonality on advertisers' spending. Performance-based social
advertising and video advertising registered sequential revenue growth.

eCommerce transactions revenues increased 13.6% QoQ to RMB1,913.3 million and
represented 14.1% of our total revenues. While the eCommerce industry is
seasonally weaker in the first quarter, our revenues grew sequentially due to
regional expansion.

Other Key Financial Information for the First Quarter of 2013

Share-based compensation was RMB397.7 million for the first quarter of 2013 as
compared with RMB302.8 million for the previous quarter.

Capital expenditure was RMB1,034.6 million for the first quarter of 2013 as
compared with RMB1,783.8 million for the previous quarter.

The Company repurchased 2,057,300 shares on the Stock Exchange for an
aggregate consideration of approximately HKD508.8 million. The Company didn't
repurchase any shares on the Stock Exchange in the previous quarter.

As at March 31, 2013, net cash position totaled RMB32,730.7 million which
excluded borrowings of RMB2,871.0 million and long-term notes payable of
RMB7,512.5 million.

As at March 31, 2013, the total number of shares of the Company in issue was
1.853 billion.

Business Review and Outlook

In light of the increasing integration between the PC and mobile Internet and
the latest development of our business, we have combined the IVAS and MVAS
segments into the VAS segment in our financial statements and adjusted the
revenue categories previously under IVAS and MVAS from the first quarter of
2013 onwards. We have also revised the disclosure of certain operating
information. Please refer to "Management Discussion and Analysis" in the
results announcement for further details on the changes in our financial and
operating information disclosure.

Overall Financial Performance

In the first quarter of 2013, we achieved healthy year-on-year growth in
revenues and earnings, while extending our communications and social
leadership from PCs to mobile devices and continuing to invest in new

  oVAS. The year-on-year growth of our VAS business mainly reflected the
    revenue expansion of our online games business in both domestic and
    international markets, and the robust revenue growth of item-based sales
    on our open platforms. Subscription revenues decreased compared to the
    same period last year.
  oOnline advertising. Our online advertising business registered
    significant year-on-year revenue growth, mainly driven by
    performance-based social advertising and video advertising. Traditional
    brand display advertising and search advertising also registered growth in
  oeCommerce transactions. We continued to develop our eCommerce
    transactions business. The quarter saw substantial year-on-year growth in
    revenues from principal transactions. Fees generated from transactions on
    our marketplaces also increased.

Divisional and Product Highlights

Communications Platforms

QQ enjoyed steady growth in the first quarter of 2013. MAU amounted to 825.4
million at the end of the quarter, representing a year-on-year growth rate of
9.8%. PCU for the quarter increased by 3.3% year-on-year to 173.0 million.
During the quarter, we continued to experience a significant increase in
mobile users as smart phone adoption expanded rapidly. Organisationally, we
aligned the product teams of PC and mobile versions of QQ to ensure unified
user experiences across different platforms.

Weixin enjoyed robust user growth in China, and we stepped up our marketing
investments for acquiring users for WeChat in Asian markets. At the end of
the first quarter of 2013, the combined MAU of Weixin and WeChat was 194.4
million, representing a year-on-year growth rate of 228.4%. Looking ahead, we
are integrating new services into Weixin to explore emerging business
opportunities on the mobile Internet. In addition, we will continue investing
in user acquisition activities for WeChat in international markets.

Social Platforms

MAU of Qzone increased by 5.9% year-on-year to 611.0 million at the end of the
first quarter of 2013. As users shift their time spent online to the mobile
Internet, we have been enhancing the features of Mobile Qzone, which enjoyed
robust growth in DAU over the last few months, to extend our social leadership
from PCs to mobile devices. We are also leveraging Weixin Moments to build a
social network for smart phone users based on the social graph of Weixin.

Media Platforms

In the first quarter of 2013, our media platforms achieved solid growth while
we deepened our differentiation through cross-platform integration. QQ.com
continued to lead amongst portals in China in terms of page views and unique
visitors. Tencent Microblog achieved 81 million in DAU at the end of the
first quarter of 2013. Tencent Video enjoyed significant year-on-year growth
in users with enriched content and enhanced user experience.


In the first quarter of 2013, our open platforms achieved strong year-on-year
revenue growth, reflecting an expanded paying user base and increased users'
propensity to spend on item-based purchases. We believe we are the partner of
choice for third-party developers in China as such developers can enjoy access
to our large logged-in user base across multiple devices, the network effect
of our leading social platforms, our targeted advertising solutions, as well
as our proprietary cloud-based infrastructure support. We are enhancing our
open platforms by extending them to mobile devices and by broadening the range
of applications we make available.

Our VAS subscription count declined compared to the same period last year,
reflecting the impact of two key factors. First, the stringent measures
launched in the second quarter of 2012, which aim to improve the quality of
our subscriber base by cleaning up certain user accounts acquired through
mobile channels with low possibility of fee collection, continued to impact
our subscription base. Second, increased smart phone adoption of our users,
coupled with slower development of our privileges on smart phones as compared
to those on PCs and feature phones, resulted in lower paying user
penetration. We are addressing this issue by unifying product teams and
product experiences between PCs and smart phones, and by developing new smart
phone privileges. Based on healthy smart phone penetration for certain
products such as our Super QQ subscription service, we believe users will show
similar propensity to pay for privileges on smart phones as on PCs over the
longer term.

The quarter saw continued expansion of our online game business. While our
major established titles, such as DnF and LoL, grew revenue at a healthy rate,
some of our new self-developed titles, such as Legend of Yulong and Legend of
Xuanyuan, also contributed notably to our game user metrics and revenues. Our
mobile games achieved over 50% year-on-year revenue growth, thanks to
increased smart phones adoption and our enriched mobile game portfolio. QQ
Game Platform registered growth with its PCU reaching 9.2 million in the first
quarter of 2013. In international markets, we continued to enhance our
presence through the success of LoL.

Online Advertising

In brand display advertising, we achieved over 100% year-on-year growth in
video advertising revenue as advertisers responded favorably to the traffic we
delivered, and as we optimised the sales processes for our inventories from
first-tier cities. Traditional brand display advertising also achieved solid
growth, assisted by new inventories on our regional portals. In
performance-based social advertising, we enjoyed robust year-on-year revenue
growth. This growth flowed from our expanded inventories providing greater
impression volume and our enhanced click-through rates. During the quarter,
we launched a new advertising platform for Tencent Microblog to target small
and medium enterprises. In search advertising, we upgraded our infrastructure
to improve search results quality. We also redesigned search homepage and
result pages for PCs and mobile devices to enable faster search experience.

eCommerce Transactions

In the first quarter of 2013, our eCommerce transactions business achieved
strong year-on-year revenue growth. This reflected increased volume of
principal transactions mainly driven by improved user experience, widened
product range and geographic expansion in southern and northern China. Fees
generated from transactions on our marketplaces also increased from a
relatively low base.

For the rest of the year, we will continue to expand our geographic presence
in China and optimise our eCommerce infrastructure. We are also enhancing the
user experience of our B2C marketplace by working with selected premium
merchants to improve product selection and customer service.

# # #

About Tencent

Tencent uses technology to enrich the lives of Internet users.Every day,
hundreds of millions of people communicate, share experiences, consume
information, seek entertainment, and shop online through our integrated
platforms. Our diversified services include QQ, Weixin and WeChat for
communications; Qzone for social networking; QQ Game Platform for online
games; QQ.com for information; as well as our eCommerce open platform. Our
company was founded in Shenzhen in 1998 and went public on the Hong Kong Stock
Exchange in 2004. We seek to evolve with the Internet by investing in
innovation, providing a hospitableenvironmentfor our partners,andstaying
close to our users.

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:
Jane Yip Tel: (86) 755 86013388 ext 81374 or (852) 31485100 Email:

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.

In RMB '000 (unless otherwise stated)
                              Unaudited                Unaudited
                              1Q2013      4Q2012       1Q2013      1Q2012
Revenues                      13,547,554  12,153,053   13,547,554  9,647,858
 VAS                       10,666,080  9,389,812    10,666,080  8,295,463
 Online advertising        849,541     947,258      849,541     540,113
 eCommerce transactions    1,913,341   1,683,562    1,913,341   752,817
 Others                    118,592     132,421      118,592     59,465
Cost of revenues              (5,953,761) (5,272,571)  (5,953,761) (3,836,317)
Gross profit                  7,593,793   6,880,482    7,593,793   5,811,541
Gross margin                  56.1%       56.6%        56.1%       60.2%
Interest income               276,371     266,351      276,371     166,733
Other gains/(losses), net     350,863     (202,248)    350,863     (63,642)
S&M expenses                  (962,398)   (1,094,775)  (962,398)   (469,200)
G&A expenses                  (2,196,111) (2,123,735)  (2,196,111) (1,754,074)
Operating profit              5,062,518   3,726,075    5,062,518   3,691,358
Operating margin              37.4%       30.7%        37.4%       38.3%
Finance costs, net            (82,198)    (62,802)     (82,198)    (69,982)
Share of profit/(losses) of   131,381     (28,856)     131,381     (9,753)
Share of (losses)/profit of
jointly controlled            (11,572)    (12,410)     (11,572)    1,380
Profit before income tax      5,100,129   3,622,007    5,100,129   3,613,003
Income tax expense            (1,029,001) (151,201)    (1,029,001) (650,673)
Profit for the period         4,071,128   3,470,806    4,071,128   2,962,330
Net margin                    30.1%       28.6%        30.1%       30.7%
Attributable to:
 Equity holders of the     4,043,819   3,463,593    4,043,819   2,949,510
 Non-controlling interests 27,309      7,213        27,309      12,820
Non-GAAP profit attributable
to equity                     4,037,730   4,067,756    4,037,730   3,281,064
holders of the Company
Earnings per share (GAAP)
- basic (RMB)                 2.204       1.890        2.204       1.618
- diluted (RMB)               2.166       1.856        2.166       1.587


In RMB '000 (unless otherwise stated)
                                     Unaudited             Unaudited
                                     1Q2013    4Q2012      1Q2013    1Q2012
Profit for the period                4,071,128 3,470,806   4,071,128 2,962,330
Other comprehensive income, net of
Net (losses)/gains from changes in
fair                                 (606,216) 103,105     (606,216) 1,288,914
 value of available-for-sale
financial assets
Currency translation differences     (11,744)  (3,879)     (11,744)  6,076
Total comprehensive income for the   3,453,168 3,570,032   3,453,168 4,257,320
Attributable to:
 Equity holders of the Company    3,428,301 3, 564,351  3,428,301 4,244,489
 Non-controlling interests        24,867    5,681       24,867    12,831


In RMB '000 (unless otherwise stated)
                              1Q2013     4Q2012     1Q2012
EBITDA (a)                    5,157,462  4,362,868  4,254,547
Adjusted EBITDA (a)           5,438,182  4,640,940  4,461,209
 Adjusted EBITDA margin (b) 40.1%      38.2%      46.2%
Interest expense              98,304     103,536    67,578
Net cash (c)                  32,730,672 27,381,274 20,818,507
Capital expenditures (d)      1,034,598  1,783,830  662,130


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

c)Net cash represents period end balance and is calculated as cash and cash
equivalents, term deposits, and restricted cash pledged for secured bank
borrowings, minus borrowings and long-term 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 licences).

In RMB '000 (unless otherwise stated)                Unaudited     Audited
                                                     31 March      31 December
                                                     2013          2012
Non-current assets
Fixed assets                                        7,696,505     7,402,766
Construction in progress                             613,559       533,691
Investment properties                                21,591        21,674
Land use rights                                      828,042       794,439
Intangible assets                                    4,811,651     4,719,075
Interests in associates                              7,571,646     7,310,266
Investment in jointly controlled entities            23,837        35,409
Deferred income tax assets                           170,723       168,906
Available-for-sale financial assets                  5,118,893     5,632,590
Prepayments, deposits and other assets               1,267,922     1,236,129
Term deposits                                        12,621,000    10,891,718
                                                     40,745,369    38,746,663
Current assets
Inventories                                          629,286       568,084
Accounts receivable                                  2,622,579     2,353,959
Prepayments, deposits and other assets               4,984,125     3,877,800
Term deposits                                        15,469,139    13,805,675
Restricted cash                                      2,609,872     2,520,232
Cash and cash equivalents                            15,024,047    13,383,398
                                                     41,339,048    36,509,148
Total assets                                         82,084,417    75,255,811
Equity attributable to the Company's equity holders
Share capital                                        199           199
Share premium                                        2,841,393     2,879,990
Shares held for share award scheme                   (669,970)     (667,464)
Other reserves                                       224,620       815,697
Retained earnings                                    42,312,904    38,269,085
                                                     44,709,146    41,297,507
Non-controlling interests                            873,092       850,759
Total equity                                         45,582,238    42,148,266
Non-current liabilities
Borrowings                                           2,100,082     2,105,643
Long-term notes payable                              7,512,508     7,516,766
Deferred income tax liabilities                      1,456,988     1,311,562
Long-term payables                                   1,533,015     1,508,578
                                                     12,602,593    12,442,549
Current liabilities
Accounts payable                                     6,096,692     4,211,733
Other payables and accruals                          5,931,524     6,301,449
Borrowings                                           770,924       1,077,108
Current income tax liabilities                       871,868       419,872
Other tax liabilities                                373,396       540,095
Deferred revenue                                     9,855,182     8,114,739
                                                     23,899,586    20,664,996
Total liabilities                                    36,502,179    33,107,545
Total equity and liabilities                         82,084,417    75,255,811


                                                   Amortisation            Special
In RMB '000 As         Equity-settled Cash-settled of           Impairment
                                                   intangible   provision  dividend  Non-GAAP
except      reported   share-based    share-based  assets
percentages            compensation   compensation              (c)        income
                                      (a)          (b)
             Unaudited three months ended 31  March 2013
Operating    5,062,518 280,720        116,942      38,784       -          (438,074) 5,060,890
Profit for   4,071,128 280,720        116,942      58,628       -          (438,074) 4,089,344
the period
to           4,043,819 278,306        103,648      50,031       -          (438,074) 4,037,730

Operating    37.4%                                                                   37.4%
Net margin   30.1%                                                                   30.2%
             Unaudited three months ended 31 December 2012
Operating    3,726,075 278,072        24,765       40,267       251,000    -         4,320,179
Profit for   3,470,806 278,072        24,765       65,065       251,000    -         4,089,708
the period
to           3,463,593 275,016        21,833       56,314       251,000    -         4,067,756

Operating    30.7%                                                                   35.5%
Net margin   28.6%                                                                   33.7%
             Unaudited three months ended 31  March 2012
Operating    3,691,358 206,662        29,894       140,374      -          -         4,068,288
Profit for   2,962,330 206,662        29,894       111,692      -          -         3,310,578
the period
to           2,949,510 203,792        26,487       101,275      -          -         3,281,064

Operating    38.3%                                                                   42.2%
Net margin   30.7%                                                                   34.3%

(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 Group, and other incentives

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

(c) Impairment provision for interests in associates, jointly controlled
entities and/or available-for-sale financial assets

(d) Special dividend income from Mail.ru

SOURCE Tencent Holdings Limited

Website: http://www.tencent.com
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