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), 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% YoY. 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 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 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 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 RMB2.166. 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.  Figures stated in USD are based on USD1 to RMB6.2689  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 opportunities. 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 revenues. 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. VAS 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: 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 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) associates Share of (losses)/profit of jointly controlled (11,572) (12,410) (11,572) 1,380 entities 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 Company 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 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 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 tax: 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 period 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 OTHER FINANCIAL INFORMATION In RMB '000 (unless otherwise stated) Unaudited 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 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 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). CONSOLIDATED STATEMENT OF FINANCIAL POSITION In RMB '000 (unless otherwise stated) Unaudited Audited 31 March 31 December 2013 2012 ASSETS 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 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 LIABILITIES 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 RECONCILIATIONS OF IFRS TO NON-GAAP RESULTS Adjustments 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) (d) Unaudited three months ended 31 March 2013 Operating 5,062,518 280,720 116,942 38,784 - (438,074) 5,060,890 profit Profit for 4,071,128 280,720 116,942 58,628 - (438,074) 4,089,344 the period Profit attributable to 4,043,819 278,306 103,648 50,031 - (438,074) 4,037,730 equity holders Operating 37.4% 37.4% margin 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 Profit for 3,470,806 278,072 24,765 65,065 251,000 - 4,089,708 the period Profit attributable to 3,463,593 275,016 21,833 56,314 251,000 - 4,067,756 equity holders Operating 30.7% 35.5% margin 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 Profit for 2,962,330 206,662 29,894 111,692 - - 3,310,578 the period Profit attributable to 2,949,510 203,792 26,487 101,275 - - 3,281,064 equity holders Operating 38.3% 42.2% margin 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
Tencent Announces 2013 First Quarter Results
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